Drought and wildfires in Russia and bad weather in Canada could be good news this summer for Washington wheat farmers.
Those calamities are driving wheat prices higher at the same time weather conditions are producing a bumper crop in Washington, reports the Washington Grain Commission.
Across the wheat-growing regions of the state, yields are up 10 percent to 50 percent over last year, said Tom Mick, the commission’s chief executive officer.
The Washington harvest is running about a week to two weeks behind schedule because of a moist spring, Mick said Monday.
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While that cool moisture generated potential problems with diseases for the crop, the higher yields are expected to more than compensate for any crops lost, Mick said.
Harvesting began July 10 in some parts of the state. That harvest will likely extend through September.
Meanwhile prices for soft white wheat delivered in Portland were running at about $6.70 a bushel, he said, about $1.50 a bushel over last year and $2 a bushel over earlier this year.
On the world market, wheat prices opened August with another big jump, hitting a 2-year high Monday as worsening weather conditions ravaged Russia’s grain crops.
Wheat prices soared 42 percent in July, the biggest monthly gain in at least 51 years, as a severe Russian drought destroyed one-fifth of Russia’s wheat crop. Fires are now raging in the fields of the world’s No. 3 wheat exporter, hurting more crops and increasing expectations that Russia will have to curb or even stop its exports.
Estimates from Russian grain growers’ unions and economists range from a 30 percent to 44 percent drop in exports this year from 2009.
Canada, another major exporter of wheat, expects the lowest wheat yields since 2002 because of crops that were destroyed by heavy rains or left unplanted.
That is great news for American farmers, who expect a strong yield from U.S. wheat crops. They will likely sell more of their wheat for higher prices to meet the shortfall from abroad. Washington’s wheat crop is the fifth largest among U.S. states.
Washington wheat farmers are particularly mindful of that export market. Some 85 percent of Washington wheat is exported, most of it through Columbia River ports, but a growing amount is moving through export facilities in Tacoma and Seattle. The value of Washington wheat exported last year was some $800 million, said the grain commission.
“This is a rare opportunity when they can enjoy rising prices for a good crop,” said Dan Manternach, wheat analyst with agricultural consultancy Doane Advisory Services. “I expect prices to continue rising until the extent of drought losses in (Russia’s) Black Sea region are known. This is classic panic buying for fear of the unknown.”
The rising cost of wheat also makes it likelier that U.S. shoppers will pay more for bread, crackers and pasta at the grocery store come fall, however.
That could change. If the huge rally in market prices continues in August, U.S. shoppers could pay 5 percent to 10 percent more for products made of wheat at the grocery store starting in fall, said Ephraim Leibtag, an economist with the USDA’s economic research service.
For bread alone, wheat costs make up about 30 percent of its retail price at the grocery store, said Jonathan Feeney, food and beverage analyst for Janney Capital Markets. If retailers can pass on higher costs to consumers, grocery chains such as Kroger Co., and cereal makers, such as Kellogg Co., also could benefit, Feeney said.
Expectations for an increasingly smaller world stockpiles of wheat helped push prices for September delivery up 31.75 cents, or 4.8 percent, to settle at $6.9325 Monday. It’s the highest wheat close since September 2008.
Prices earlier Monday touched above $7 a bushel for the first time since September 2008, which was the tail end of a record-busting run-up in commodity prices that began in spring 2007. Wheat prices topped out at an all-time high above $13 a bushel in February 2008.
The Associated Press contributed to this report.