There is both a global glut and shortage of wheat.
It depends on quality.
There’s a shortage of the high-protein hard red spring
wheats that make the best fluffiest breads. This is the quality for which the
Canadian Prairies is famous.
There’s a glut of lower-protein wheats which are
favourites of U.S. farmers because yields are higher.
Canada has steered clear of those varieties in a
persistent, but expensive, effort to retain its reputation for the best
high-protein bread-making wheat in the world.
The shortage of the good wheat hurts bakers and
millers who prize high-protein wheat, along with the farmers who grow it, says
a report in NewsMax Finance.
Wholesale bakers such as Grupo Bimbo, Flowers Foods
Inc. and Campbell Soup Co.'s Pepperidge Farms are feeling the squeeze on
margins, said Stephen Nicholson, senior grains and oilseeds analyst with
Rabobank.
All three companies have seen their stock prices fall
over the last two years, a period when the benchmark S&P 500 index gained
more than 26 percent.
Millers such as Archer Daniels Midland Co., Ardent
Mills and General Mills Inc. have been able to pass on much of their higher
wheat costs in sales of flour to bakers, he added.
But bakers have not been able to pass those costs to
grocers, who have been unwilling to pay higher prices because of increased
competition and price deflation.
Global wheat inventories have risen to record-high
levels due in part to heavy production from Russia.
Meanwhile, U.S. per capita consumption of wheat flour
in 2016 fell to its lowest level in nearly three decades, and U.S. farmers
planted their smallest winter wheat crop in more than a century.
Canadian farmers have been selling high-protein spring
wheat for a premium due to tight supply. Protein premiums in Manitoba have
reached their highest levels in at least five years.
Export markets are also affected. The limited amount
of high-protein wheat available has caused the market to ration demand,
maintaining shipments to countries willing to pay a premium, such as Japan, and
sending less than usual to price-sensitive markets such as Mexico, said Rhyl
Doyle, a wheat trader at Winnipeg-based Paterson Grain.
