With the end of the 2014 crop year rapidly approaching, market conditions for flour buyers have been the most favorable in years. Wheat futures prices last week sunk to new contract lows, pressured by numerous factors, including improved crop conditions in the southern portions of the hard winter belt, rapid progress in spring wheat plantings and aggressive offers from competitive exporters.
An improving transportation situation also has eased any upward pressure on flour prices while weaker millfeed has been an offset. The standard patent bakery flour price last week of $15.35 a cwt was down $1.50 from the end of December and off $6, or 28%, from a year ago. It has been five years since mid-May flour prices have been this low, and last week’s price compares with a five-year average of $19 and the 2008 peak of $23.65.
With continued favorable weather conditions, the potential for additional declines in wheat prices is undeniable. At the same time, ingredient buyers must remain mindful of market risks in the weeks and months ahead. The same dry conditions facilitating speedy planting of spring wheat pose a threat to the maturing hard winter crop in northern growing areas. Downward moves in corn have added to pressure on wheat, but the unpredictable story of the 2015 corn crop is only in its first chapter. Bakers have not missed the opportunity to capture price declines with forward coverage, an approach they may want to continue.