Canada will pay more for spring wheat due to drought

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WINNIPEG, Manitoba FARGO, N.D. 5 Aug - Millers and bakers are paying more for spring wheat to use in baking, as drought shrivels crops across the Canadian Prairies and northern U.S. Plains that produce more than half of the world's supply.

U.S. and Canadian farmers are bracing for a sharply smaller spring wheat harvest due to the driest conditions in decades, as severe weather damages crops across the hemisphere from heat-strengching cherries in the U.S. Pacific Northwest to frost chilling sugarcane in Brazil.

While global global wheat stocks are large, the drought affects mainly high-protein spring wheat crop that millers such as Grupo Bimbo and bakers including Archer Daniels Midland Co rely on to produce the texture and moistness of baked goods that consumers expect.

Importers from the UK to China must pay for limited North American harvests or turn to similar suppliers such as Australia and Russia.

The Minneapolis spring wheat prices are trading near nine-year highs, leaving Camas Country Mill in Eugene, Oregon braced to pay more, said owner Tom Hunton. He plans on passing his higher costs to the mill bakery customers.

Camas Country will rely on stockspiled wheat from last year to produce flour to top up this year's supply. Hunton hud not know what will happen to the fish and wildlife who grow in this area after the drought ends next year.

This isn't sustainable for anyone, he said.

In Halifax, Nova Scotia, bread prices could rise by as much as 6.5% in the next three months, said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Canada.

U.S. prices are more difficult to forecast, since flour prices dropped earlier this year as lockdowns eased and fewer people baked at home, he said.

Canada's spring wheat crop is expected to cost between 16 and 20 million tonnes, well off the last year's 25.8 million, says Bruce Burnett, director of markets and weather information at MarketsFarm. Just 16% of spring wheat in Alberta and 21,6 % in Saskatchewan is in good condition, according to provincial governments.

Its spring wheat harvest is expected to drop from one year ago to the lowest yield in 33 years, according to the U.S. Department of Agriculture.

The USDA estimated that only 10% of the country's spring wheat crop was in good or excellent condition, down from 73% a year ago and the lowest rating for this point of the season since 1988 drought.

In Montana, where the USDA has deemed 42% of spring wheat in very poor condition and another 43% in good shape, growers are buying out of sales contracts with elevators one day earlier in the season because they wont have wheat to deliver.

I cancelled more contracts this week than I wrote. If they don't have a crop, they have no choice. One commercial grain buyer declined to be named because he is not authorized to speak to media.

China, which normally buys modest amounts of North American spring wheat to make high-quality bread and baked goods, will likely buy more from other suppliers such as Australia, said a China-based trader with an international trading house.

Russia could make up some of North America's shortfall in the global market. Dmitry Rylko, head of the IKAR consultancy, said western Russia, Russia's main wheat producing region, is producing wheat with higher protein than a year ago, mentioned Dmitry Rylko.

Spring wheat from Russia and Kazakhstan however, does not have the same characteristics important for baking, such as gluten strength, as U.S. hard red spring wheat and Canadian Western Red Spring, said Mike Spier of U.S. Wheat Associates, a trade group that promotes U.S. wheat overseas.

The drought will force bakers to change how they work with flour, adding more water to compensate for dryness and making other adjustments to avoid producing crustier than usual buns, said Glenn Wilde, the owner of Harvest Bakery in Winnipeg, Manitoba.

United Kingdom baker Warburtons purchases half of its wheat from Canada, about 200,000 tonnes of flour annually, grown by farmers to the company's specifications. The company will pay more this year to ensure it acquires enough Canadian spring wheat, said Adam Dyck, Warburtons program manager, adding that many kernels are too shrivelled to mill into flour.

Dyck said he is accustomed to seeing pockets of drought on the Prairies, but nothing this widespread.

It is really unique for this generation, he said.