Lunar New Year treats will cost more this year due to wheat drought in the Northwest

February 1, 2022, 6:06 PM UTC

Lunar New Year treats like sponge cakes and pineapple tarts are more costly to make than ever after drought in the U.S. slashed harvests of a specialty wheat that’s a key ingredient. 

American farmers reaped 37% less soft white winter wheat this season, mostly due to excessively hot and dry conditions in the Pacific Northwest where the variety is grown. Prices are up more than 50% from a year ago.

The shrinking crop comes on top of supply chain issues that have caused hikes for food and other consumer goods, contributing to the worst inflation since 1982. 

Soft white wheat is an important ingredient for Lunar New Year celebrations because it’s prized by flour millers in Asia for its low-protein content that’s ideal for cakes. Also, its light color doesn’t alter the appearance of foods like the titular amber waves of the soft red winter wheat variety traded on Chicago’s futures exchange.

In Chicago’s Chinatown neighborhood, expensive flour is among the reasons Chiu Quon Bakery is curtailing production and raising prices. Meat that goes into buns is also seeing inflation, and other items like red beans, winter melon and durian are scarce, said owner Joyce Chiu. Meanwhile, cold weather and the ongoing pandemic have limited customers, so it may be a quiet holiday.

“We can get everything for the most part, but it’s more expensive,” Chiu said by phone. “We don’t have a lot of wiggle room in the first place as our items are mostly low-cost.”

The U.S. is the top exporter of soft white wheat, shipping about 80% of output abroad. Asia is the biggest buyer, with rising wealth in the region boosting demand for the grain. Consumption goes up around Lunar New Year, celebrated in early February this year, as families and confectionery shops bake festive treats from almond cookies to tarts and soft flour cakes. 

“It’s not easily replicated with other products,” said Augusto Bassanini, chief executive officer of United Grain Corp., one of the biggest U.S. wheat shippers. United Grain operates the largest grain-export elevator on the U.S. West Coast in Vancouver, Washington. It’s an “inelastic commodity.”

Soft white winter wheat prices jumped recently to $454 a ton from $298 a year ago, according to Commodity3 data. In China, wholesale flour prices tracked by the commerce ministry are near a record high. Wheat is generally on the rise as tensions between major shippers Russia and Ukraine pushed prices to around the highest levels since 2012. Benchmark futures in Chicago rose as much as 2% Tuesday. 

To take advantage of the price hikes, farmers have increased plantings for crops that could be harvested in about six months. Casey Perkins, a grower in northeastern Oregon, sowed about 500 more acres of wheat late last year, after his previous crop fell sharply. Some rainfall and snow has boosted prospects for the now-dormant plants.

“If we have normal weather from here on out, we can still grow an average crop in this region,” Perkins said. “Buyers are paying close to double what they have been and it’s got to affect them greatly.”

—With assistance from Alfred Cang.

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