Flour coverage seen as heaviest in years

Prompted by steep price declines, flour buyers have booked flour far into the future, said Paul Meyers, chief agricultural economist for Foresight Commodity Services, Inc.

Mr. Meyers discussed the wheat situation and outlook June 1 at the 38th annual Purchasing Seminar sponsored by Sosland Publishing Co.

Since the last seminar in June 2014, wheat prices have declined from about $7.20 a bu to below $5.

“Prices have fallen about $2 in Kansas City and $1.50 to $1.60 in Chicago,” he said. “We have heard that flour coverage is much greater than usual for this time of year — somewhere between 70% to 80% of flour is booked through the end of the year.”

He reminded the audience that crop conditions this year, while imperfect, contrast with a serious drought in Kansas a year ago.

Three specific developments have been key to the price decline from a year ago, Mr. Meyers said.

First, the world wheat crop for 2014 was forecast in May of that year at 700 million tonnes but ultimately was 30 million tonnes larger.

“Two thirds of the increase came from major exporters, including Russia and the Ukraine, which added to the price pressure,” he said.

Other developments in 2014 that followed June and pressured prices were the record corn and soybean crops, largely unanticipated early in the crop year, a 50% drop in oil prices and a 25% jump in the value of the U.S. dollar.