After climbing to seven-month highs earlier this month, wheat prices have crumbled by nearly 10%. The market had exploded higher on drought concerns in the Great Plains, where much of the American wheat crop is grown.
Unfortunately for U.S. farmers, our foreign competitors aren’t suffering from similar issues. Global wheat production is expected to rise by more than 5% this year, which will allow countries like Australia, Canada, and Russia to sell their crops at cheaper prices than U.S. farmers. Low-cost foreign wheat is an issue for American farmers, as they depend on exporting nearly 40% of their crop each year.
Despite the recent drop in prices, U.S. wheat is still expensive. May futures for Chicago soft red wheat, primarily used for pastries, was worth $4.72 per bushel, while Kansas City hard red wheat, typically used to bake breads, was valued at $5.06 per bushel.
These prices should allow many U.S. farmers to still turn a profit this year, but only if their winter crop survived the blast of frigid temperatures earlier this winter and is able to handle dry springtime conditions.