New York February 8 2023: The premium for hard red winter wheat, used for bread flour, over the soft variety extended its climb to the highest in more than a decade on US futures markets as dry weather threatens output in key growing areas.
The most active contract for hard red futures traded at a premium of $1.38 per bushel above the soft red contract on Wednesday. Hard red prices have advanced around 10% in about four weeks, compared with a gain of 2.7% in the soft variety, which is used in biscuits and crackers.
The dry weather in Kansas has pushed crop conditions in the largest US wheat-growing state to the poorest in at least 10 years. Just 21% of Kansas wheat is in good or excellent condition, according to government analysts.
The market worries about hard red winter wheat crops are bubbling up in the prices, said Tobin Gorey, strategist at Commonwealth Bank of Australia. Forecasters continue to expect the very dry south‑western regions to stay that way for another couple of weeks, he said in a note.
Wheat bulls are also finding support in the slow pace of grain exports out of the Black Sea as Russia’s war in Ukraine nears its one-year anniversary. Still, the market faces headwinds from a recovery in the greenback, which makes grain costlier in other currencies, and from an abundance of Russian supplies.
Traders are also adjusting positions as they prepare for closely watched supply-and-demand estimates from the US Department of Agriculture scheduled for release later Wednesday. The focus will likely be on data concerning South American soybean and corn supplies.