U.S. flour millers scramble for high-protein wheat on quality fears

 

By Michael Hirtzer and Julie Ingwersen

CHICAGO/MANHATTAN, Kan., May 5 (Reuters) – U.S. flour millers were scrambling to find high-protein wheat supplies remaining from last year’s harvest amid fears the developing crop, some of which was hit by snow in Kansas this week, could produce lower-quality grain, buyers said on Friday.

Wheat plants in Kansas, where farmers grow the hard red winter variety used primarily for bread, showed signs of nutrient deficiency. The worst-hit fields in the western part of the state could be plowed over due to extensive crop damage.

An annual crop tour of the top-growing U.S. wheat state wrapped up on Thursday, predicting better-than-average yields. But some fields in the western half of Kansas were still covered by snow or had plants that were knocked down, making them difficult to assess.

“There will be fewer bushels around. There are a lot of unknowns, and there is a fear of unknowns,” said a milling company employee on the crop tour who was not unauthorized to speak to the media.

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Millers on the tour included employees from Archer Daniels Midland Co, Bay State Milling Co, and Ardent Mills, a joint venture between Cargill Inc, CHS Inc and ConAgra Foods Inc.

The tour estimated Kansas wheat output at 281.78 million bushels, down sharply from the U.S. Department of Agriculture’s estimate in 2016 of 467.4 million bushels. USDA will make its first forecast for U.S. winter wheat production next week.

K.C. July HRW wheat futures surged to seven-week high of $4.74-3/4 per bushel after the weekend snowstorm. But during the week the market fell back and the contract closed Friday at $4.50 per bushel.

Protein premiums in the Kansas City cash wheat market soared, allowing holders of wheat containing 12 to 14 percent protein to sell at prices of $5.50 per bushel or more. Premiums for 12-percent wheat on Tuesday gained 53 cents per bushel, the largest such spike in at least nine years, according to CME Group data.

Specific protein requirements are demanded by flour makers to ensure consistency in baked goods.

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“I am certainly concerned about protein,” said Dave Green, executive vice president of tour organizer Wheat Quality Council.

Buyers already were asking for specific protein bids for December, led by international milling demand for shipments out of the U.S. Gulf Coast export market, a Kansas wheat trader said.

Existing wheat supplies in U.S. elevators remained robust, and abundant global stocks of lower-quality wheat continued to drag on prices.

“Everything sitting in warehouses is generally low-protein. So if we have back-to-back years of low-quality HRW wheat, that’s a huge concern,” said Tregg Cronin, an analyst at Halo Commodities.

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  • James

    Why is the price we received for Canadian High protein wheat so low ? We should have kept CWB.

    • Bruce

      You got that point right!

    • Stephen Daniels

      No you should move on to soybeans corn or canola can’t keep living in the past.

      • Bruce

        Have you a problem with $12.00 a bushel for wheat? Whether with the single desk Canadian Wheat Board or not. The only reason grain farmers are seeding canola and soybeans is because of the price. The reason the price of wheat has been ruined is because of grain farmer overproduction. It has nothing to do with living in the past.

        • ed

          The $12.64 net at the farm gate for #2 red spring wheat thru our cartel like CWB single desk from the 2007/08 crop year does seem pretty sweet. Now with much lower volumes of wheat being grown and the demand coming on we are lead to believe other magical factors are keeping the price artificially depressed. No amount of beans or corn will fix that. Those high volume crops are destroying our roads all year round and the costs of the rebuilds alway down loaded to the city tax payers. Higher risk and volume crops cause higher crop insurance and agristability payments, two thirds covered by the tax payers at the provincial and federal levels, higher road damage, fixed predominantly by the city tax payer, higher agriinvest withdraw levels, 50% tax payers money and now the Manitoba farm group KAP is asking for towns and cities to help pay for the land taxes that farmers are incurring on their land. A lot of tax payer abuse and no one looking for solutions. The “Free Market” is the awnser, now what was the question again??

          • Bruce

            Some very good points ed. Grain farmers trying to grow their way to profit end up causing problems with roads because of the high volumes of grains. Tax payers are paying probably hundreds of millions of dollars or in the billions every year for programs like crop insurance and agristability and agriinvest. Prairie grain farmers should be making their living from the market place just as they did for decades before grain prices like for the crop wheat were ruined because of overproduction.

          • Harold

            There is no such thing as a “solution” per say: there are only trade-offs. A solution more so in a true sense is to leave things as they naturally are; a position of neutral. (Such as an undiscovered area of the planet) From neutral, all things that we create which are thought to be good are shouldered by the bad the good created in a trade-off. For example; the problem- travel – The good- invention of automobile, roads, bridges, intersection road signals and signs, and so forth. The bad: Maintenance tax, Auto maintenance costs, fuel, accidents, fees and fines, insurance, theft, and so forth. Was this all a “solution” to travel or is it trade-offs for the enjoyment of an automobile. The trade-offs are what we grudgingly but willfully shoulder for the good of the automobile. (All of the money comes from our earnings one way or the other) Another example of trade-offs is the comment that you wrote. The trouble that we have always had with the Academic and the Politicians is their belief in “solutions” but within them they lack the intellect to fully understand the bad that their so called “solutions/good” hold. Ever hear a Politician or Academic speak of the bad caused by their good when they are selling to the public? If they did, the government “solution” swamp could never have been created and tax payers would have more money in their own pockets.

          • Stephen Daniels

            Wow lot of baseless claims nothing to do with reality and nothing you can prove with studies.

          • ed

            I think I like Bruce’s, “Some very good points Ed”, comment a bit better actually. But here is what we know, when we had the CWB the price of RSW at our farm gate ended up being on an average over the years of between 89-92% of the port price. Since some allowed or stupider yet advocated for the CWB single desk cartel to be removed, the return at the farm gate has been massively reduced to as low as 40% of the port price and has been running as of late in the 50-60% of port price returned to the farm gate. According to very credible economists that lose has been in the 4 Billion dollar range annually for Western Canadian farmers and totally blew away the worst case scenarios that were presented by all those in the know. Now this has got to be embarrassing for farmers, but being a rather proud lot, they are quite silent on the matter. No matter how much wonderfulness, kindness, generosity and prosperity that good old Uncle Buck (CWB) brought to the family, it will soon all be forgotten and we are back to not being able to connect the dots even when they are numbered. Long story short, many farmers will be growing many acres of corn, beans, sunflowers and lentils for a lot less now than if they had of left the CWB intact. Stupid is as stupid does as Forrest Gump would have said.

          • Bruce

            I enjoy your posts also ed. Always interesting and factual when it comes to the port price the CWB paid to prairie grain farmers.

          • Stephen Daniels

            The booming farm economy of the last few years say otherwise.

          • ed

            You may want to do a little bit of homework before you put pen to paper. The latest Statistics Canada data released just recently pegged the farm debt at a staggering 92 billion $$dollars. That has been going up very fast in most recent years. Stats Canada thinks it is OK, maybe, because farmers land is worth more??? That land is being driven up by cheap money and the belief that when faced with a very low margin environment, you have no choice but to get bigger OR get out. With several young aggressive farmers in each individual area thinking the same thing, the expansion pressure artificially drives the price of land up. That fictional equity is what is for the most part backing most of the $92,000,000,000 of farm debt in this nation. That is called a bubble and is often mistaken as a booming economy, however it is not often mistaken as such when it is this blatenly obvious.

          • Stephen Daniels

            Western Producer noted debt to asst ratio lowest in ten years.And doesn’t matter anyways just more of your red herring arguements debt greatly increased in some years when CWB was around too .Sorry I farm and know how the ag economy is doing not retired and blow smoke at the coffee shop.

          • ed

            Thank goodness for the asset side of that debt to asset ratio thing, cause the operation side of things keeps driving the total aggragate debt up at record speeds and to strataspheric hieghts. Can you imagine the NHL getting away with not paying their players because the players homes and cottages were going up so much. I will still farming for quite awhile yet as well. I remember the tough times in the 80’s pretty well yet. Those times were rough but I think if operating loans were 21 3/4 % and you had back to back droughts, $3world wheat prices and a land price drop of 66%, like we did then, these times would be even tougher. The casualties then were devastating. We lost many nieghbors and the sense of caring and community. It does show. Some are too young to remember or even know why it is concerning. That is sad.

      • ed

        Wheat and rice are the two biggest in the world and that will probably never be in the past. The days of a fare price for them presently is however due to some ill conceived short term thinkers. That has happened before and eventually those guys ride into the past, which isn’the such a bad thing. But until they do stay tuned.

    • ed

      Yes. We will need it (a cartel) back on all commodities to keep the bleeding red ink tax payer from accepting all the abuse from the corporates towards agriculture in Canada. It will come when the abuse towards the tax payee gets high enough. The farmer can not incur constant free market loses and then access all the tax payer money they can get their hands on to float their boat. If we have a true free market, all tax payer inputs should cease.