barnceilingWe expect to buy a paper bag of flour from any local supermarket 24/7.   When was the last time you saw a shortage of flour?  A lot happens to create our 24/7 supply availability, especially during the holidays.  While wheat is a crop, like any other crop, the reality is -every year it’s a different crop, folks!

So, just like our love of produce, wheat changes with the seasons and does not remain static 365 days a year like the flour sitting on your shelf.  Lots of folks monitor the wheat market each day, each hour, monitoring the worldwide wheat supply and demand so we can put food on the table.  If you’re in the flour “worrier” category, here is a little 101 on flour availability and seasonality so you can sleep better at night.

2012 was a hot dry season and produced a higher protein wheat crop.  2013 was cool and wet, resulting in low protein winter crop.  Therefore, buyers that demand high protein crop will have to pay more for protein this year—therefore, pay more in basis (protein premium).

Winter wheat is planted each October and November and grown to the length of your front lawn (unless you’re the type to let it go long…).  In the winter, the wheat becomes dormant and in the early spring it sprouts back up and completes its growth cycle.  Harvest starts in the spring with Texas and moves north by July to Kansas, Colorado and Nebraska (it goes South to North). Hard red spring wheat, is of course, planted in the spring and harvested in August/September.

Every month, the USDA issues a crop report (woo hoo, for us bedtime readers).  It is just an update of supply and demand.  The critical periods where there is a lot of flour commodity chatter – thereby, dictating our flour commodity prices are these reports:

  1. End of March – perspective planting– estimate what farmers plan to plant
  2. June 30th – USDA issues “actual” acreage planted
  3. End of Sept – tell us  the estimated crop size (harvest mostly complete). During the Sept report, we also will have final numbers on what’s being planted in South America and Australia giving us a global perspective.
  4. End of January – how much winter wheat was planted in US and rest of Northern Hemisphere.

If you’ve been following politics, you know we are no longer isolated.  Commodity markets, including flour commodity, are very much global markets that reflect supply and demand issues on a global scale. The three biggest risks are:

  1. Global weather
  2. Global supply and demand
  3. Global political events that can disrupt markets

We might have an excellent growing season in US, but if say Australia or Russia has a crop failure, the impact on prices (higher) will reach US shores.  Pretty simple based on supply and demand. There are only a certain number of countries that can grow wheat (export) and certain number of countries that cannot grow wheat (import).  Emerging economies worldwide have significantly increased global demand for food. So a production problem among any of the exporting countries can have a significant impact on global prices. And that includes US prices reflected at the supermarket and in all goodies using flour.

For example, North Africa and Middle East typically buy from Russia, and if Russia does not have adequate supply, those countries then buy from the EU because of closer geography resulting in lower transportation costs.  Two years ago, Russia had total crop failure. Then much of North Africa and the Middle East came to the US.  Well, we saw prices go up and folks protecting supply.  – So, rest assured folks at Grit Work, like Bob Bresnahan and Dennis Collins are thinking about all of this when you purchase your bag of King Arthur.