Crash in Low Carb Craze Bright Note for Wheat Industry

If there’s one thing to cheer about in the wheat industry these days, it’s the crash in the low-carb diet craze, which lost steam as consumers lost interest in strict Atkins-style high protein, low/no carb diets.

It was a bright note discussed at the North Dakota Wheat Commission’s annual Outlook Forum, held recently in Minot.

Bart Bender, Horizon Milling, Wisconsin, said that with the end of the Atkins Diet, wheat flour demand has rebounded, and wheat mills are “running harder.”  John Griffith, VP of Commodities for the American Italian Pasta Co., adds that low carb pasta products have dropped off in sales “dramatically,” and would not look for many of these type of products to survive on retail shelves over the long-term.

An offshoot of the end of the Atkins Diet is a move toward foods that are more nutrient-dense, with higher fiber and lower fat, and when it comes to grains, a greater emphasis on whole grains products.

The region’s spring wheat crop generally had extremely variable yields along with higher proteins and DON damage in 2005, says Jim Peterson, NDWC marketing director.  The crop had above average test weight (60.2 lbs/bu.), although it was down from the past two years.  Protein came in at 14.6%, above the 5-year average.  This reduces the protein premium, Peterson suggested, causing “no incentive for the market to go out and find higher proteins.”

For end-use quality, Peterson said dough mixing strength is below the 5-year average.  “It’s one of our weakest mixing crops in recent years,” he said, due to scab damage in the eastern HRS region.  As mixing time and tolerance is reduced, Peterson thinks bakers will have to adjust the water added and mixing times.  Bread loaf volumes are better than the 2004 crop but below the 5-year average.  Comparing the U.S. HRS crop to Canada’s, Peterson felt the U.S. spring wheat grade is better, with better protein.

Bender says that although this years’ spring wheat crop has higher protein, baking and mixing scores are lower than previous years, although this should be manageable for end-users. And he says end users are more sensitive to DON in spring wheat this year. Although DON can be reduced during the milling process, this does not alleviate the problem when making whole grain bread products. The FDA guideline is a maximum 1 ppm in finished food products.

Mike Jones, N.D. State Mill and Elevator logistics manager, feels the 2005 spring wheat crop has good quality, despite lower test weight and higher dockage from previous years.  He says that conversely, the mill is finding that protein and falling numbers are better than 2004. The N.D. Mill, which draws mostly from the northern tier of North Dakota, Minnesota, and Montana, will have to reduce milling extraction to account for higher DON and ash content. He reported they are accepting wheat with up to 3 ppm DON, but will not be able to make whole wheat products from that grain.  Jones suggested that their customers will have to pay for higher protein crops, add gluten , or simply adjust their processes to use the current crop quality.

Leland “Judge” Barth, NDWC marketing specialist, says that while world wheat production is down about 3% from 2004, it is still the third highest crop on record (22 billion bushels).  Harvested acres are the same, but yields are slightly decreased. The European Union is suffering a major decline due to drought, along with Argentina which is expecting a decrease with drought conditions as well. But the Former Soviet Union is well above average with a 7% increase from 2004.  Australia is also expected up. Barth says quality concerns exist this year for the Canadian, EU, and U.S. crops. 

Worldwide wheat stocks are 18% below the 10-year average.  Worldwide demand is forecasted up 2%, following a 4% increase a year ago.

For the 2006/07 marketing year, Barth reports that acres in the FSU are expected to decrease by 20% due to recent drought conditions during planting.  However, he notes that U.S. winter wheat plantings are up about 1.5 million acres, and dry conditions have improved in some areas.

According to Barth, the average return per acre for N.D. wheat is at $120 per acre (price x yield), down from the previous two years but above five and 10 year averages.  He expects N.D. spring wheat acres to decrease about 5-10%, to around 6.5 million acres in 2006.

Durum plantings expected to decline
U.S. durum production in ’05 increased by 10%, with slight increases in Canada as well, says Barth .  He suggests that the price spread compared to spring wheat, along with higher fuel and fertilizer costs, will put pressure on durum plantings. Barth expects desert durum plantings (Arizona, California) to drop 10-15% due to energy costs, water availability and competing crops like cotton and alfalfa.

Peterson says the U.S. durum crop had well above average yields this year but lower proteins (13.4 %).  Semolina yield and pasta color should be good.  Peterson believes gluten strength will be an issue in the future as millers are looking for more mixing strength. Comparing the U.S. durum crop to Canada’s, Peterson says the proteins were about even, but that the Canadian crop has better grade distribution. 

Tom DeSmet, CHS Cooperative, indicated that U.S. durum exports of durum have been lagging behind average, and points to aggressive worldwide competition, high freight costs, the availability of railcars and limited post-harvest farmer selling as reasons. He reported that ocean and rail freight price has skyrocketed, and blames some of this on hurricanes Katrina and Rita. He noted that during September and October, CHS sold no durum because of increased freight costs, and that the short availability of railcars forced CHS to turn down business out of Duluth, as CHS wasn’t able to guarantee shipment on time. 

DeSmet feels the U.S. durum crop is average as it compares to the worlds’ this year, as it lacks gluten strength, appearance, size and milling extraction.  He added however that U.S. durum semolina from the ’05 crop has very good color and protein.  DeSmet suggests that future demand will focus on gluten strength and sourcing durum by specific regions.  High “gluten may not get you a premium, but will allow you to participate in the market,” DeSmet said, adding that about half of CHS durum sales over the last few months have been sourced from specific areas for gluten strength.

Hank Thilomony, Mayco Export, Minneapolis, says the 2005 durum crop is much better than 2004 for test weight, color and kernel size, and DON levels have not been a problem.  But like DeSmet, Thilomony is disappointed with the gluten strength, and that some buyers have expressed disappointment in ’05 U.S. durum gluten strength as well. 

Thilomony is optimistic about pasta demand increasing with the decline in low carb diets, but isn’t optimistic about a substantial recovery of post-harvest durum prices, in part because of a large Canadian durum crop. A sluggish durum price, he notes, points to a decline in planted acres in both the U.S. and Canada next spring.