Climate Change Is Coming for Your Oreos

(Bloomberg) -- The latest victims of climate change could be Oreos, as drenched fields across the U.S. make the wheat that’s a key ingredient a scarcer commodity.

Winter-wheat plantings fell to their lowest levels in more than a century as the grain got harder to seed. That was especially true for soft red winter wheat, with sowings in critical states like Illinois slumping 25%. And that might be bad news for snack fans—the variety is used in the flour that forms the base for crackers, biscuits and beloved goodies including Mondelez International Inc.’s Oreos and Kellogg Co.’s Cheez-Its.

The warming atmosphere is making the spring planting season a lot wetter and a lot muddier in the Midwest. Last year, things were so bad that record rains meant plantings were done at the slowest pace ever. That’s pressuring farmers to abandon a strategy known as double-cropping—when the same fields get sown in the spring with soybeans and then in the fall with wheat. Forced to choose just one, growers are giving up on wheat.

Changing weather patterns are wreaking havoc on traditional agriculture calendars all over the world. The U.S. is in the midst of what some measures are showing as the second-warmest winter in 70 years, prompting fruit plants to bloom weeks early across the South. In Vietnam, earlier-than-normal saline buildup in the Mekong Delta is threatening rice paddies, and timing for precipitation is fluctuating across the globe. That’s on top of other climate threats to food production like Australia’s wildfires and drought in Russia.

For America’s breadbasket, record rainfall in the spring of 2019 resulted in unprecedented planting delays that pushed harvests deeper into autumn, when farmers would normally want to sow winter-wheat seeds. 

“Weather dominated the decision-making process,” said Angie Setzer, vice president of grain at Citizens Elevator in Michigan, where plantings of soft red winter wheat fell 7%, U.S. government data show.

Illinois farmer Grant LaForge only managed to plant 75 acres of soft red winter wheat. That’s half of what he had hoped for after he was prevented from double-cropping.

“I wish I had more put in,” LaForge said by telephone.

Spring in the Midwest has been trending wetter for 100 years, according to Trent Ford, the Illinois State Climatologist, a position under the University of Illinois. Things are getting more acute as the warming climate allows the atmosphere to hold more moisture, which can then be delivered in fiercer and more frequent rain events.

“The increased precipitation trends in spring, including June, is a significant feature for our climate,” Ford said.

The drop for plantings is reversing historical price trends. Soft red winter wheat is usually less valuable than its hard red cousin, the variety used in bread flour. But with fewer acres, futures for the first type are now trading at a rare and historic premium to the latter.

Planting woes aren’t the only threat. With a warmer and wetter weather pattern continuing in the U.S., there are fears the soggy conditions could also mean a increase in fungus growth before harvesting starts around June.

Last year, fungus problems lowered crop quality and raised prices for supplies good enough to be used in food. Grain buyers at an elevator in Toledo, Ohio, were paying huge premiums, signaling higher costs for a nearby mill—one of the largest in the country and where Mondelez International grinds wheat into flour to make snacks. On an earnings call last month, Mondelez executives cited unfavorable commodity costs for the first half of this year, adding that supplies are covered for most raw materials in 2020.

“We have a high level of protection against the price inflation in wheat and are seeing global supplies remain comfortable,” Mondelez spokesman Tom Armitage said in a statement to Bloomberg.  

Kellogg in a statement said, “We do not anticipate any impact to our ability to produce foods that include soft red winter wheat.”

Luckily for cookie fiends, it takes a lot of commodity-driven inflation before companies generally raise costs for their consumer products. Given that overall American supplies of wheat are still relatively ample, there’s likely a big enough cushion to prevent any major prices spikes for now. That could always change if acres keep shrinking.

“The better producers are still raising wheat and can still make money from wheat,” said Phil Needham, agronomist at Needham Ag Technologies LLC in Kentucky. “The bottom segment of the market has been lost.”

--With assistance from Dominic Carey.

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi

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