Wheat Farmers Cut Losses as Harvest Lags

By Ryan Hanrahan

Reuters’ Emily Schmall reported that “farmers cut their losses early this year across the U.S. wheat belt, stretching from Texas to Montana. They were choosing to bale the wheat into hay, plow their fields under, or turn them over to animals to graze. In Nebraska, wheat acreage is less than half of what it was in 2005.”

“For farmers with crop insurance, damaged or unprofitable wheat fields can still earn revenue. But many agree that chasing insurance payouts is not the best business model,” Schmall reported. “The Great Plains have long been celebrated for the ‘amber waves of grain’ in the popular hymn ‘America the Beautiful.’ The region’s states produce most of the U.S.-grown crop of hard red winter wheat, favored by bakers for bread. But with prices hovering around $5 per bushel, U.S. wheat farmers have reached an inflection point, with many forced to either lose money, feed wheat to cattle or kill off the crop.”

“Interviews with more than a dozen farmers and analysts across Kansas, Nebraska and Oklahoma, along with a review of U.S. Department of Agriculture data, revealed a vast disparity in profit for wheat compared to other crops,” Schmall reported. “This has led farmers to abandon more fields before harvest. In parts of the region, prolonged drought has lowered yields in recent years. Farm revenue has also suffered in years with healthy rainfall, as abundant global supplies have weighed on prices. Many have pivoted to corn, soy or livestock, often after generations of their family growing wheat exclusively.”

“‘They can’t sustain that,’ said [Dennis] Schoenhals, 68, who raises crops and cattle near Kremlin, Oklahoma, and is president of the state’s wheat growers association,” Schmall reported. “‘Eventually you either change to other crops if you’re able to, or you go out of business,’ he said.”

Wheat Harvest Behind Average and Last Year

Dow Jones’ Kirk Maltais reported on June 17 that “the USDA reported that the winter wheat harvest is behind schedule, with the Crop Progress report showing the U.S. harvest only 10% complete. That’s well off from the 25% completion reported at this time last year. It’s also six points below the average pace of completion over the past 5 years.”

“Excessive rain is the culprit, said Naomi Blohm of Total Farm Marketing in a note,” according to Maltais’ reporting. “‘Quality issues may also show up if the rain continues,’ she said. Blohm warns that lower-quality wheat may become an increasingly big pressure point for corn in animal feed demand.”

World-Grain’s Matt Noltemeyer reported Wednesday that “the southern Plains hard red winter wheat harvest is on standby. Enduring spring rains have kept farmers from collecting wheat that is ready for combining and contributed to lower wheat condition ratings in some areas.”

“Harvest has been sporadically active for a few weeks in Texas and Oklahoma, where new crop wheat has been sold off the combine into southerly lanes to Mexico or to the Texas Gulf for export,” Noltemeyer reported. “Harvest moved into southern Kansas around June 9. Crop progress numbers issued June 16 by the US Department of Agriculture [USDA] reflected a harvest that is behind the average pace in Kansas [3% harvested by June 15 compared with 11% as the five-year average], Oklahoma [30% versus 46%] and Texas [56% in contrast with 57%].”

U.S. Wheat Growing Declines as Farmers Switch Crops

Schmall reported that “U.S. wheat growing is on a steady decline, with farmers finding surer profits from corn, soybeans or cattle. On the wheat quality tour in May, weeks before Nebraska wheat is usually harvested, no wheat could be seen for miles around Red Cloud.”

“When Royce Schaneman joined Nebraska’s wheat board 19 years ago, wheat fields stretched for 2.2 million acres across the state,” Schmall reported. “Since then, acreage has shrunk to less than a million acres, he said. In Cheyenne County in southern Nebraska, the state’s most productive wheat-growing land, about one in five fields was abandoned this year.”

“‘It’s heritage, but there’s no profit,’ said Lon Frahm, the CEO of Frahm Farmland, a 40,000-acre operation in Colby, Kansas,” Schmall reported. “Surrounding Thomas County is now dotted with wind farms. Farmers there once grew wheat exclusively, he said, but they have started to diversify due to more frequent drought and global competition depressing prices.”

“Frahm himself now mainly plants corn. He irrigates, fertilizes and harvests the grain using multimillion-dollar machines, then stores it in gleaming, 80-foot steel grain bins. His 7,000 acres of wheat sometimes produce just 5 percent of his farm’s total output,” Schmall reported. ‘There’s certainly profit in corn,’ he said.”

Wheat Farmers Cut Losses as Harvest Lags was originally published by Farmdoc.