(Bloomberg) -- Wheat prices posted record gains in Chicago on Monday as the U.S. winter crop faced substantial losses from snow and high winds that slammed into four Midwest states including Kansas, the top grower.
More than 12 inches (30 centimeters) of snow fell on ripening wheat in parts of Kansas, Colorado, Oklahoma and Nebraska in the past 24 hours, David Streit, the senior lead forecaster at Bethesda, Maryland-based Commodity Weather Group LLC, said in a telephone interview. While it will take several days before the damage can be assessed accurately as the snow melts, early estimates suggest losses could exceed 50 million bushels, according to Pira Energy.
“The depth and weight of yesterday’s snow has certainly caused irreversible damage to some of the Kansas crop, given the advanced stage of development,” Peter Meyer, a senior director at PIRA Energy, a forecasting and analytics unit of S&P Global Platts, said in a telephone interview. “We probably lost 50 million bushels in the area, and it may reach 100 million bushels depending on the weather the next month.”
For hard red winter wheat, a variety of the grain used to make bread, futures for July delivery surged 6.5 percent to close at $4.6575 at 1:20 p.m. on the Chicago Board of Trade, the contract’s biggest gain since it started trading in 2014. July futures for soft red winter wheat, which is used to make cookies and cake, jumped 5.5 percent to $4.56, also a record, while corn prices climbed 3 percent in active trading.
There were many reports of snapped wheat stems, and for a crop in the early stage of forming grain, that suggests there could be “substantial” production losses, INTL FCStone chief commodity economist Arlan Suderman said in a note. Heavy rain also fell over the southern portion of the Midwest over the weekend, and floodwaters need to recede this week to assess how much of the crop needs to be replanted, he said.
About 25 percent of the Kansas crop was forming grain as of April 23, up from 20 percent a year earlier and above the 17 percent average in the previous five years, U.S. Department of Agriculture data showed. About 23 percent of this year’s winter-wheat acreage was planted in Kansas in the autumn, making an accurate assessment of losses days -- or weeks -- away, Meyer at Pira Energy said. The warm weather in February and March pushed the crop further along, leaving it vulnerable to damage from the heavy snow.
“It was a pretty nasty storm,” Streit of Commodity Weather Group said. “It is probably the most snow I can remember for the region” for this time of year, he said.
In 2016, Kansas, Colorado, Oklahoma and Nebraska combined to produce almost half of the U.S. winter wheat crop. Right now, the snow has crushed many plants in the western third of Kansas, Aaron Harries, a vice president of research at Kansas Wheat in Manhattan, said in a telephone interview. The crop in the Plains, where hard red winter wheat is primarily grown, has been more advanced than normal following a mild winter.
“The wheat was a little bit taller than it might normally be,” Harries said. “In a lot of places, the stems actually snapped or kinked over. If that’s the case, it can’t get nutrients to the head anymore, and it’s done.”
The snowstorm followed a freeze late last week that also threatened the state’s crop. According to a map from Kansas State University Extension, wheat in more than 20 counties throughout central Kansas was at “high risk” of freeze injury on April 27.
On Tuesday, the Wheat Quality Council will start its annual hard red winter wheat crop tour.
Click here for a preview of the crop tour
(An earlier version of this story was corrected in the fourth paragraph to show which kind of wheat is used for bread.)