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.