Low-protein wheat challenge deflates US bakers

By Gill Hyslop contact

- Last updated on GMT

Inclement weather has played havoc on protein levels in US winter wheat, resulting in higher price of the commodity which is effecting bread producers. Pic: ©GettyImages/fotokostic
Inclement weather has played havoc on protein levels in US winter wheat, resulting in higher price of the commodity which is effecting bread producers. Pic: ©GettyImages/fotokostic

Related tags: Winter wheat, Wheat, Us

The $23bn US bread market is facing a crisis as low-protein levels in this year’s winter wheat crop have given rise to higher costs.

The US wheat industry has endured a poor harvest for the past two years, resulting in a scarcity of high-protein hard wheat.

The toll of weather, falling consumption

Inclement weather, falling consumption and the smallest winter wheat crop in more than a century are all putting a toll on the US wheat market.

This year saw wheat plantings fall to 7.6 million acres in Kansas, down from 9.4 million acres in 2012.

Hard winter wheat makes up about 40% of the annual $10bn US wheat crop.

The industry is also facing the challenge of dwindling popularity. Last year, per capita consumption of wheat flour fell to its lowest level in nearly three decades.

Heavy spring rains in Kansas – the largest producer of hard winter wheat in the US – have decreased the protein levels in a crop that thrives in arid conditions.

Meanwhile, farmers further north are selling high-protein spring wheat for a premium due to the tight supply.

This is hurting bread producers who have to absorb the higher costs to produce products with the same airy textures that customers demand.

Additionally, many bakers have had to resort to adding gluten to low-protein wheat flour to up its organoleptic qualities, but this, too, is coming at a cost.

The price of gluten has risen by 20% as a result of the surge in demand.

While millers have been able to pass on most of the higher costs in the sale of flour to bakers, bread producers cannot pass on the higher costs to retailers.

Consumer loyalty to bread would wane and sales would slide substantially if retailers raised prices.

Rob MacKie, president and CEO of the American Bakers Association, told BakeryandSnacks the challenge of low-protein wheat is a growing one for the industry.

"The availability of high-protein wheat that is essential to baking quality bakery products is shrinking and putting price pressures on bakers,"​ he said.

"Alternatively, bakers can supplement lower protein wheat by reformulating or changing their baking processes. Obviously, changing the formula and process has a cost implication. All of this is occurring during a time of massive disruption among the industry’s customers, which makes it difficult to pass along these additional costs.

"The long term solution is greater understanding and alignment along the entire wheat supply chain. ABA, the North American Millers Association and the National Association of Wheat Growers need to collaborate on solutions. We need to educate wheat growers on both the need and the benefits of growing higher quality wheat,"​ he added.

Lower price opens export markets

Meanwhile, the limited amount of high-protein wheat has caused the export market to ration demand, supplying countries willing to pay a premium and exporting less to price-sensitive markets.

It has also resulted in a surplus of low-protein wheat, which has seen a 60% drop in price since 2012.

However, the lower price has attracted Algeria – the world’s third-largest wheat importer.

The country purchased 120,000 metric tons of hard red winter wheat used to make bread earlier this week, its biggest US wheat purchase in nine months.

The US wheat contains 11% or less of protein, which is suitable for Algeria’s preferred baguette-style bread.

The country usually imports its wheat from France, but the US wheat costs as much as $6 per ton less than French future prices for January delivery, according to US Wheat Associates, which is partly funded by the US Department of Agriculture.

The low price could also attract purchases from Egypt – the world’s biggest importer – as it is now favorable against the price the country usually pays for Russian and Romanian wheat.

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