Wheat futures prices soared more than 3 percent on Friday as drought worsened in a key growing region.

“Wheat conditions are at some of the lowest ratings in over a decade,” said James Cordier, president and head trader at Optionsellers.com in Tampa, Florida.

A major drought in the Dakotas has caused spring wheat crop conditions to decline sharply in the past four weeks. That has lowered expectations for the spring wheat, a high protein grain used in artisan wheat foods like hearth breads, rolls and even pizza crust.

The U.S. Drought Monitor said Thursday that “much needed rainfall was unfortunately scarce over the [High Plains] region during the past week” and noted that a heat wave caused conditions to worsen in many areas. The monitor also showed “extreme drought” conditions expanding across the Dakotas and into Montana, which last year was the nation’s third-highest state for planted wheat acres.

“Wheat conditions in the United States started deteriorating in May and the beginning of June, and that began the rally,” said Cordier. “The chance for wheat conditions to improve in July and August seem very slim.”

September hard red spring wheat, which is traded on the Minneapolis Grain Exchange, rose about 3 percent Friday, a day after adding surging 5 percent. It is sitting at a three-year high and has soared more than 30 percent in the past month.

The Chicago-traded September soft white winter wheat, meanwhile, jumped more than 4 percent on Friday and reached a one-year high. For the week, the soft wheat contract is up about 9 percent.

“We’ve seen the small speculators coming in and buying Chicago wheat,” said Ted Seifried, chief marketing strategist with the Zaner Group in Chicago. “You also had a fairly large fund short position there, which they’re starting to cover a bit more aggressively now that we’ve broken out to the upside on the chart.”

A new crop progress report is scheduled for release Monday by the U.S. Department of Agriculture and could be another catalyst for higher prices, traders said.

“We’ll probably [see] conditions deteriorate again on Monday,” said Cordier. “So then the market rallies a little more next week, … but Thursday and Friday you probably might look to take profits on it.”

According to the June 26 USDA report, the ratings for spring wheat crop conditions were worse than analysts expected.

“Spring wheat crop conditions have dropped about 40 percent in the last four weeks,” said Seifried. “The crop is burning up and it’s not going to produce anywhere near what we were expecting.”

Still, Seifried said the fundamentals on wheat are still “pretty bearish from a global scale on Chicago wheat and even Kansas City wheat for that matter.”

Indeed, there’s still a big carry-over of unsold wheat from previous harvests, with the vast majority of it Chicago wheat, according to Seifried.

“Our carry-over is about half of what we plan to grow next year,” he said. “So we have about 50 percent of a normal crop in waiting just sitting there.”

By comparison, Seifried said there’s “just not a whole lot of very good quality wheat like the Minneapolis spring wheat. That wheat can really gain value very, very quickly and might have more upside potential.”

Wheat is the nation’s third-largest crop, after corn and soybeans, and the globally ranks as the second-most used crop for food, after rice.

Spring wheat is planted in April and May in the U.S. and typically harvested in August and September. The crop is most vulnerable to stress during its pollination stage in June and July.

Clearly, the continued ongoing drought conditions could represent further downside risk to yields at harvest. And experts don’t see any let-up in the unfavorable conditions.

“The heat continues to build across the nation’s midsection, and the prospects for rainfall across the drought areas of the Dakotas and Montana do not look very good over the next two weeks,” said Brad Rippey, a meteorologist at the USDA. In addition to above-normal temperatures, he said the outlook also is for below-normal rainfall for the next few weeks.

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