Supply and demand: Soft white wheat prices reaching 14-year high after slow production year

The historically poor wheat production year in Washington state has driven grain prices to levels not seen in nearly 15 years.

Soft white wheat was selling in Portland on Thursday for $10.64 a bushel, nearly double the price seen on the same date a year ago. That’s slightly down from this year’s highest price logged in early September, but the past month has seen cash bids on par with the highest wheat prices since 2007, said Glen Squires, chief executive officer of the Washington Grain Commission.

“It’s basically just we’ve got a low supply,” Squires said. “Our supply is just under what it was back in 2007, 2008, and that was another time when prices really went high.”

Production of soft white wheat was estimated at 87.1 million bushels in Washington state this year, down from 166 million in 2020. That’s led to a drop in exported wheat to other countries, with the U.S. Department of Agriculture projecting this week a 12% reduction in wheat exports this year compared to 2020.

That drives the price higher when demand stays the same, but doesn’t necessarily equate to higher revenues for farmers, said Michelle Hennings, executive director of the Washington Association of Wheat Growers.

“Right now, the price is great,” she said. “The problem with it is our crops weren’t great this year.”

Farmers hoping to maximize profits for the wheat they have grown may be tempted to hold out on sales in anticipation of the price continuing to rise, Squires said.

“Some folks just sell everything right during harvest, and others hang on and sell a little bit through the year,” he said. “After the first of the year, sometimes we will have a little bit more sold.”

Despite last year’s drought, Washington’s wheat farmers have stayed the course for next year’s crop. As of Monday, 96% of the state’s winter wheat had been planted, above the 5-year average for this time of year, according to the most recent U.S. Department of Agriculture crop progress report. Much of Eastern Washington remains short on precipitation, despite the week’s rainfall.

The drought also affected crop quality throughout much of the Pacific Northwest, which can have a negative effect on marketing soft white wheat to other countries. Customers are typically looking for wheat with a protein value below 10.5%, while the average soft white crop in 2021 measured at 11.3%, according to a crop quality report released this month by U.S. Wheat Associates.

Higher protein values mean more gluten and lower test weights, which limits the wheat’s use in making certain types of products, including cakes, cookies and snack foods, unless the wheat is milled with grain of a lower protein level.

Some countries, when faced with such data about a crop’s quality, will increase their allowable protein content in wheat when buying from America, said Hennings. Also competing for those customers are other countries, including Australia, which is anticipated to have its second-highest production year on record, just behind last year’s haul.

Equally high production in the United States led many growers to sell their white wheat for other purposes, Squires said.

“Last year there was a lot of the white wheat that went to China for feed,” Squires said.

The demand for wheat livestock feed is also contributing to an overall rise in its worldwide price, according to a United Nations report from earlier this year. Wheat prices worldwide rose 41% in September compared to the year prior.

What that means at the local supermarket, Squires noted, is a tough question to easily answer, with inflation and rising costs of other products used to make bread, transportation costs and other factors.

“The amount of the cost of wheat or flour in a loaf of bread, in the price of a loaf of bread is pretty small,” he said. “Most of the cost of the bread is transportation, baking, the handling. It’s not the wheat.”