Wheat prices surge after news of Russian drought

Lack of rain a half a world away kicked soft white wheat prices up a buck last week on Main Street in Colfax.

Portland’s offer for wheat surged just past $7 per bushel Aug. 5 after Russia’s Vladimir Putin announced his nation would stop exporting wheat through the end of this year. The country’s wheat crop has been hit hard by drought and a record heat wave.

Thursday’s $.60 price spike is a rarity during harvest, when prices typically hit their annual valley, said Glenn Squires, vice president of the Washington Grain Alliance.

“You definitely don’t usually see prices go up this time of year,” said Squires. “It’s odd to see, but it’s nice to see.”

Prices had climbed throughout July, topping $5 about the first of the month. After the initial reaction to Russia’s announcement pushed prices past $7, boards bounced back down to around $6.50 Friday. Wednesday morning’s board price was $6.45 per bushel.

Russia’s ban on exports leaves a gap in supplying wheat to Egypt, the world’s number one wheat importer. Egypt brought in 9.6 million metric tons of wheat last year. Japan, world number two and the primary U.S. customer, imported just more than four million metric tons of wheat last year.

Whether the Russian export ban opens a market to farmers here has yet to be seen.

Tom Fowler, merchandiser at Almota Elevator Company, said Egypt bought wheat from France and some hard red winter wheat from the U.S. in the wake of Russia’s announcement.

Squires said Egypt primarily buys wheat from Russia because of its low cost.

“It’s entirely a price thing,” he said. “No matter the quality, there’s just so much wheat in Russia and it’s so cheap that the Egyptians go crazy for it.”

So much so that the nations that made up the former Soviet Union last year topped the United States as the world’s top wheat exporter for the first time ever.

Squires said the developing world likes to blend Russian wheat with higher quality U.S. wheat to lower food production costs.

Russia has yet to develop much of a wheat research industry, said Squires. That lack of research has made the country’s crops less tolerant to insects and disease and has kept protein contents higher than desired by more sophisticated milling countries.

The price spike could pay off big for local farmers. The cool, wet spring was great for wheat, said Squires, leaving higher yielding crops for harvest.

The U.S. Department of Agriculture’s National Agricultural Statistics Service has predicted yields across the state will average 65 bushels per acre, up from the 59 bushels per acre in 2009.

The price could climb even higher this fall, too, as Australia’s large wheat crop has a long way to go before the November harvest.

“You never know what could happen to a crop,” said Squires. “We could have a drought here which could make our wheat a lot worse quality… knock on wood.”

Drought in Australia in 2007 and 2008 helped send wheat prices spinning above $15 per bushel.