In business, when revenue can’t cover expenses, it isn’t uncommon for entrepreneurs to say they’ll have to “eat it.” But in farming, as Lochiel Edwards recently explained, they really mean it.
A Montana wheat farmer, Edwards is experiencing some of the lowest grain prices wheat producers have seen in years. Some farmers will turn a profit this year, but others will be paid less than the cost of growing the crop. Friday, the sobering economic conditions had the Big Sandy farmer thinking about an old and undesirable prairie recipe: crockpot wheat.
“I do not like crockpot wheat,” Edwards said, recalling the chewy concoction made by slow cooking grain for a few days. The dish is kind of like hot cereal, but with a dash of disappointment in grain markets.
Edwards said he won’t be eating any, but that he’s even thinking about the meal of last resort says a lot about where wheat prices are.
Cash prices of wheat Aug. 14 were as low as $3.62 cents a bushel for hard red winter wheat in southeast Montana, as low as $3.72 cents a bushel for hard red spring wheat in the northeast corner of the state. The best price on the board was $5.66 for high-protein spring wheat in Great Falls. Monthly cash prices haven’t been that low since 2006, according to the National Agricultural Statistics Service.
At those prices, Montana’s wheat crop is likely to be valued at less than $1 billion for just the second time in eight years.
“There would be very few people who aren’t growing it for free this year,” Edwards said. “If I had a big yield this year, there would be some money it, but at these prices, with drought, sawfly, hail, a 90 mph wind on July 4.”
Lola Raska, Montana Grain Growers Association executive vice president, said grain prices are down and for several reasons will likely stay that way for the foreseeable future. World wheat supplies are abundant, which drives down price. The U.S. dollar is also strong relative to the currencies in other wheat producing countries, which means buyers are paying a pretty penny for U.S. grain.
There are a few future events that could push prices upward ever so slightly. Farmers who can wait to sell probably should. Edwards is waiting to see what the North Dakota wheat crop does. Montana’s neighbor to the east is expected to have a strong yield, which often means it protein levels will be off. A shortage of higher protein levels in North Dakota would be good for Montana grain, which is known for higher protein levels, but hasn’t seen a premium for the trait lately.
Protein is what makes Montana wheat valuable to foreign buyers looking to blend it with ordinary wheat to create flour good for making pasta. Montana farmers normally receive a premium payment for high protein levels, which aren’t usually found in wheat from other parts of the country.
Mike Bernhardt, who farms in Park City, said he looked at the price of wheat last fall and decided that in 2015 he would skip the crop, which is by far Montana’s most common. Malt barley contracts were too good to pass up.
“It would have had to have been at least $7 a bushel to compete with malt barley,” Bernhardt said. “I really enjoy raising wheat. It’s a nice crop to raise, but they have to pay you for it.”
(Source – http://www.agweek.com/news/montana/3819295-10-year-low-wheat-prices-are-hard-swallow)