Posted by: usset001 | July 20, 2011

Wheat Market Outlook – Wheat is not wheat

Next Monday (July 25) I get 20 minutes to present the outlook for the wheat market at the AAEA (Agricultural & Applied Economics Association) conference in Pittsburgh. I don’t so outlooks often, so I’ve been scrambling around trying to gather my thoughts on the current situation in wheat, from a world and U.S. perspective. Here are some of the thoughts I intend to share on Monday.

As a commodity, wheat is quite different from corn and soybeans. For starters, there are six different classes of wheat. Even though we look at the numbers in total as the “World Wheat Market,” I like to make the point that wheat is not wheat. Lumping it all together dismisses all of the wonderful nuances that make wheat a unique and important food grain. Rather than separate wheat by class, it may be informative to separate wheat in terms of broad quality characteristics.

Today I will discuss high protein vs. low protein wheat. Wheat can vary in protein levels from 8 to 16%. Flour is about 1% lower in protein than the wheat it is made from, i.e., wheat loses about 1% of protein in the milling process.

In the world of wheat, the terms protein and gluten are almost synonyms. The gluten in wheat is different from the gluten found in other grains because it can trap air and expand – gluten is what allows bread to rise. Bread flour demands higher protein wheat and, in general, the fancier the bread (multi-grain, whole grain, etc.) the more protein is needed. Think of any flour based product that does not need to rise much – crackers, cakes, cookies, pretzels – and you have products that generally use lower protein flours and wheat.

A story: In the 1960’s, my entire family (parents, me and four brothers – the station wagon was full) would travel to the Philadelphia and Long Island in New York to visit relatives every other year. This was my Dad’s side of the family – the Jewish side of the family – and we ate a lot of foods we normally didn’t eat in our home state of Minnesota. We got to know the bagel well, and we loved eating them for breakfast, lunch and supper (this preceded the popular bagel chains by two decades). After two weeks on the East Coast, we would return to Minnesota where bagels were scarce.

Fast forward 20 years – I am now a pit trader and wheat buyer for the milling division of The Pillsbury Company. Our office purchases hard red spring wheat for six different flour mills located in the eastern half of the United States. Pillsbury’s largest mill is located in Buffalo, New York and serves the dense population centers of Philadelphia and New York. We purchase a tremendous amount of high protein spring for this mill – about 25% of the flour ground at this mill is made with 15.2% protein wheat.

One day I’m talking on the phone with our Quality Assurance Manager about the different protein needs at the different flour mills. I’m thinking, in particular, about the large amount of 15% protein wheat used in Buffalo, an amount that dwarfs the usage of high protein wheat at all of our other mills. I asked a simple question. “Why does the Buffalo mill grind so much high protein spring wheat?” He answered my question with another question. He asked me, “Do you know what a bagel is?” Bagels are a product that demands a high protein wheat and flour.

I want to clarify one point about high protein vs. low protein wheat. There is a sense among producers that high protein = high quality and while protein is very valuable today (USDA Grain Market News from yesterday indicates about $2.50 per bushel premium for 15% protein vs. 13% protein wheat) it is more accurate to think of protein as one aspect of wheat and flour quality. For example, while it is true that you cannot make a bagel from low protein flour, it is also true that you cannot make a light, fluffy, melt in your mouth cake with a high protein flour. In other words, for some wheat based products, low protein is an important quality specification. The current premium for high protein simply reflects the scarcity of protein relative to the demand base.

Hard wheat (Hard red winter, hard red spring and hard white) is higher in protein than soft wheat.

Tomorrow I will continue the discussion of wheat, differentiating between red vs. white, hard vs. soft, common vs. durum and food vs. feed wheat.


Responses

  1. […] the course of several posts in late July, I was commenting on the outlook in the wheat market (see here and here). In the last of these posts (here), I offered my opinion on one particular aspect of the […]


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