Wheat Prices Are Down. What Does That Mean For You?

The USDA report is primarily a guess at how much of any given crop the country’s farmers will be able to produce in the agricultural year 2015-2016 (roughly summer to summer), as well as a guess at how much of that crop the world will consume in that time. On that very basic level, things aren’t looking great for wheat producers – the USDA raised its estimate of how much the U.S. wheat industry will produce from 718.93 million tonnes to 721.55 million tonnes.

Doesn’t sound like a huge deal, but the USDA also estimated that the global market size is 719.56 million tonnes, which means the USDA is predicting that wheat producers are going to produce more wheat than they can sell.

This is the latest in a discouraging trend for American wheat growers; a Bloomberg report from January 2015 dove into the problems that have led the U.S. share of the global wheat market to its lowest place since 1960. Other countries, notably Russia, Brazil, and Canada, have had a string of banner years, and even though American wheat is projected to have a large harvest, it’s more expensive than in most other countries. Other countries don’t buy as much exported American wheat as they used to. And why would they? U.S. wheat is pricey, and supplies are high, so buyers can shop around for the best deal.

In the U.S., livestock ranchers are sometimes seen as a possible market for domestic wheat; when corn prices are high, wheat and other crops become more tempting as feed for cattle. But corn prices aren’t particularly high right now – the same USDA report pegs their price sliding down 2 percent – so that market isn’t much good either.

For the everyday consumer, the effect is likely to be small, but not unnoticeable. From the Wall Street Journal:

[mf_blockquote layout=”left”]Low wheat prices aren’t likely to result in a noticeable reduction in the cost of bread in grocery stores compared with a few months ago, though consumers can expect bread to be less expensive than last year, said Dan Manternach, director of operations at Doane Advisory Services in St. Louis, an agricultural information provider.[/mf_blockquote]

But the trend of stiffer competition and a flooded market are bad news for the hundreds of thousands of American wheat farmers.