Minneapolis spring wheat futures hit 9-year high at $10/bu

22 Oct 2021 | Tim Worledge

Minneapolis spring wheat futures for December have surged to a nine-year high as the hangover of extreme heat and drought conditions across the Pacific Northwest and Canada is augmented by renewed fears over potential demand and further weather disruption.

The December contract headed into the market close on Friday at $10.05/bu, a contract record high and the highest recorded price for the contract since 2012.

Much of the strength stems from recent conditions that have hugely reduced production of the spring wheat crop, with 2021/22 hard spring wheat and durum wheat production almost halving year-on-year to 297 million bu (8 million mt) and 37 million bu (1 million mt) respectively.

That compared with previous yearly production of 531 million bu and 69 million bu, while Canadian wheat production was also slashed from 35.18 million mt in 2020/21, to 21 million mt in 2021/22.

However, fresh weather-related worries that could spell trouble for new crop plantings and a pick-up in demand have raised fresh fears over ending stock levels and strong pressure on limited supply.

“La Nina threat… could reduce precipitation for the southwestern Great Plains this winter,” Terry Reilly of Futures International said of supply side fears, referring to the recent confirmation that a second consecutive La Nina weather pattern could renew dry conditions for the region.

The phenomenon was active in the previous year, and affected South American production and logistics amid the dry conditions, but Reilly also highlighted the impact of anticipated demand on the complex, amid a raft of tender-based buying from major importers and domestic interest.

“Global demand for high protein wheat has been very good over the last few months and also US interior wheat demand for flour milling has been good… some wheat across the Great Plains is a little harder to source,” he said.

Wheat futures across the US and Europe have pushed towards contract highs in recent weeks, held aloft by the impact of the dry conditions in the US and amid fears over Russia’s imposition of a duty and quota system.

In the Black Sea, the government of the world’s biggest wheat exporter has imposed measures as it battles to limit the impact of high global prices on domestic prices and wheat-based food producers, while the Argentinian government has implemented similar measures.

Update: This article was updated to correct the reference to US wheat production in million mt. The unit should have been bushels.