With baking ingredient prices rising steadily in recent months, the challenges facing purchasing executives have been escalating. The degree to which buyers will experience a pressure-cooker of an environment in the weeks and months ahead was laid bare in a commodity roundtable.
While prospects for the 2021 US wheat crop may be increasingly favorable, wheat prices have been pushed higher largely in sympathy with surging corn and soy complex futures. Corn futures touched $6 a bu last week, and soybeans have traded above $14.50. An analyst interviewed for the feature story faulted the US Department of Agriculture’s small corn carryover projection for not being small enough. For soybeans, the Department’s projected ending stocks of 120 million bus would result in a stocks-to-use ratio below 3% meaning the crop-year carryover would equate to about 10 days’ supply. Meanwhile, meteorologist Drew Lerner is cautioning of an elevated risk this summer of excessive dryness in US growing areas, despite the dissipation of the La Niña.
In addition to weather, a key driver in the market will be export demand from China for soybeans, corn and wheat. Trade with China has been unpredictable in recent years, and long-term weather forecasting always carries considerable uncertainty. In the case of a severe drought or continued heavy buying by China, prices invariably will move higher. Still, at current price levels, bakers also must remain mindful of the increasing downside risk in markets.