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Wheat’s Rise Bites Bakers

Higher Prices Force Bread Makers to Tighten Their Belts

By TOM POLANSEK

It is a bad spring for baguettes.

Wet weather is preventing farmers in the Northern Plains from planting the spring wheat crop, prized for a high protein content crucial for baking bread. Growers in the southern Plains and western Europe have had the opposite problem, as drought cuts output in the other major regions where high-quality wheat is grown.

The result is that bakers such as Joel Karinen, owner of the Luna Bakery in Colorado, are focused on cheaper items.

For Mr. Karinen, who is paying nearly 40% more than a year ago for a 50-pound bag of flour, gone are the specialty breads with cheese and fruit that he typically sells at farmers’ markets.

Baking More Buns

Instead, he is baking more buns and putting off plans to hire a new employee and buy a new oven.

“I just have to streamline my operations,” said Mr. Karinen, who has been making bread to order for restaurants and grocery stores for four years. He has raised his prices about 10% in the past year, but “it really hurts my customers so I don’t want to do [more than] that.”

The damp weather is keeping farmers from planting hard red spring wheat in Minnesota, North Dakota and parts of Canada. That is fueling specific concerns about global supplies of high-quality wheat that can be milled into bread flour.

Last week, futures prices for hard red spring wheat hit the highest point in more than two and a half years at the MGEX in Minneapolis, where that variety of the grain is traded.

Prices have surged for hard red winter wheat, which is also of the high quality needed to make bread flour, as a prolonged drought in parts of Texas, Oklahoma and Kansas damaged the crop.

Futures prices for hard red winter wheat at the Kansas City Board of Trade are about 90% higher than year-earlier levels and are climbing back toward the two-and-a-half-year highs reached in February.

Conditions for planting spring wheat look poor heading into June, as rains will keep fields soggy, according to meteorologists. Farmers in North Dakota, the biggest spring wheat-growing state, had only planted 34% of the crop as of May 22, well behind the five-year average of 85%.

Dave Clough, a farmer in central North Dakota, had only seeded a third of his crop by Thursday, when he normally would have been long finished. In an attempt to plant as much as possible during a brief break in the wet weather, he downed an energy drink for the first time and worked in the fields past midnight.

“I want to produce bushels. I will try, but there’s a point where you have to give up,” the 65-year-old farmer said.

Incentive for Farmers

The high prices give farmers plenty of incentive to sow as much land as they can. Yet, few believe the number of planted acres will expand 5% from last year to 14.4 million acres, as projected by the U.S. Department of Agriculture in March.

The North Dakota Wheat Commission projects at least 500,000 acres will go unplanted because of the weather, while some analysts predict that one million acres or more will be left idle or shifted to other crops.

Fears about tightening supplies around the world, in part because of bad weather in Europe and Canada, have increased foreign business for the U.S., the world’s top grain exporter. Exports of hard red spring wheat are estimated at a 15-year high, while domestic use is forecast to be the second highest in the past decade.

“If you look at the prices, that definitely indicates there is a shortage of supply,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission.

In other commodity markets:

CRUDE OIL: ICE Brent crude for July delivery declined 35 cents, or 0.3%, to $114.68 a barrel. It was the second decline in a row and the largest in both percentage and dollar terms since May 23. U.S. commodities markets were closed on Monday in observance of Memorial Day.

Write to Tom Polansek at Tom.Polansek @dowjones.com