Chicago | Reuters — Drought conditions in the northern U.S. Plains that have propelled spring wheat prices to a three-year high worsened in the past week and there are forecasts for more hot and dry weather that could crimp the harvest.
As the world struggles with a glut of grain that has filled inventories to record highs and cast a wet blanket over the corn and bean markets, the shortage of high-quality spring wheat has taken markets by surprise. The drought in the U.S. has propelled prices for the high-protein grain that is prized by bread makers to three-year highs.
The weekly U.S. Drought Monitor, produced by a consortium of climatologists, on Thursday showed that 25 per cent of North Dakota was classified as being in “extreme drought,” up from 7.7 per cent a week earlier.
MGEX spring wheat futures jumped another 5.1 per cent on Thursday, hitting a peak of $7.59-3/4 a bushel (all figures US$). Prices have risen for six days in a row, gaining more than 14 per cent during the streak.
“The top has been taken off,” said North Dakota State University extension agronomist Joel Ransom, referring to the crop’s harvest potential. “We are kind of fixed that we cannot get back to trend line for sure.”
Some North Dakota farmers were asking questions about cutting their crop for hay and using it for animal feeding, indicating that they have already given up on their wheat fields turning out profitable yields, Ransom said.
Ransom added that the next 10 days were critical for determining how far below expectations the crop will fall below expectations.
Much of the crop will be in its grain filling stage of development, when it needs water and cool temperatures to maximize harvest potential. “Going forward, it looks pretty dry,” said Kyle Tapley, an agricultural meteorologist with MDA Weather Services. “I really do not see much rain at all coming up over the next seven days. Conditions are going to be deteriorating once again across that area.”
Temperatures also were expected to rise, Tapley added, and will likely be above normal for the next 10 days.
The drought has been devastating to hardest-hit ranchers in the regions reeling from rising hay costs and withered grazing pastures, said experts.
The average price of grass hay has skyrocketed to around $100 per ton from roughly $60 since April, forcing cattle and sheep producers to either cull their less productive animals, and those that required the most feed, by sending them to packing plants or trucking them to neighbouring states where grazing conditions are much better, said North Dakota State University livestock economist Tim Petry.
— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Julie Ingwersen and Theopolis Waters.