Drought, demand push wheat prices higher
A combine and tractor work a wheatfield near Moses Lake. Wheat harvest is in full swing, with some areas done and others still to start.
RITZVILLE - Despite an extremely volatile market, prices for wheat have trended up during harvest 2012, and are close to historic levels.
"The market is all over the place, in general, (it's) up," said John Anderson, CEO of the Ritzville Warehouse Company.
"Right now it's about the highest we've seen coming off the combine. Above $8 a bushel to the grower everywhere," said Paul Katovich, assistant manager at Central Washington Grain Growers in Wenatchee. The company has a facility in Warden.
Growing conditions in the Ritzville area are very favorable for wheat, Anderson said, due to weather trends that traditionally mean low rainfall during the harvest period.
The favorable weather has continued in 2012. "I'd say (quality) is average to better than average," he said.
But even though the weather has not been a factor locally it's still had a decisive impact on wheat prices. "It's a weather market," Anderson said. Projections for the 2012 corn crop are "way below what it was two to three months ago," Anderson said, due to the severe drought affecting parts of the Midwest.
That has pushed corn prices' up, and in some places on some days the price increases have made wheat a more affordable alternative to corn, Anderson said.
"The rising tide of prices on corn and soybeans essentially raises all boats," Katovich said.
"Market volatility is really unprecedented, and that will continue. I've probably said that five years in a row," Katovich said. It's quite a ride. "People that have done it (sold wheat) for 40 years can't guess it (the market)," Anderson said.
Currently prices are high, but eventually wheat will get expensive enough that buyers will hesitate, Katovich said. "That's maybe the ultimate stopper. It (the price) will find its level."
As far as the wheat market is concerned, the drought's main impact has been Illinois and portions of Missouri and Iowa. "That is the market mover," Katovich said.
"Above that things look good," he said. The crop in North Dakota, South Dakota, Minnesota and the prairie provinces of Canada wasn't affected by drought, he said.
Australia is another major wheat producer, and its crop is "still a question mark. September will make or break the Australian crop and that's true every year," Katovich said.
Wheat from South America is filling some of the market gap left by the drought-stricken U.S. crop.