Montana wheat nears harvest in good shape, but with declining prices

2014-07-25T00:15:00Z 2014-07-26T00:35:06Z Montana wheat nears harvest in good shape, but with declining pricesBy TOM LUTEY The Billings Gazette

Montana’s wheat crop looks great, insiders say, but the sale price as harvest approaches is another story.

As combines begin cutting what’s sure to be another $1 billion wheat crop, farmers say a growing season light on hail has minimized damage. However, prices have been sliding for weeks because of abundant world supply and the plummeting value of corn.

“It’s getting down there where things are a little bit tighter than they have been in the past,” farmer Matt Flikkema said of the price slide. “But we’ve also had a good crop in the Bozeman area, which is 10 days to two weeks from harvest, both for winter wheat and some dryland spring.”

Flikkema, president of the Montana Grain Growers Association, said crop quality will have to make up for lower prices. Wednesday, the lowest cash prices for ordinary hard red winter wheat were less than $5 a bushel at some Montana elevators, a nearly 30 percent decrease from just two months earlier. High protein, hard, red spring wheat, often a Montana grain farmer’s best money maker, is in similar price decline.

Blame the falling price of corn and a global abundance of wheat for lower prices, said Anton Bekkerman, Montana State University agriculture economist. Wheat typically benefits from higher corn prices because livestock operations looking for cheap animal feed will turn to low-quality wheat when corn gets too pricey. When that happens, as it has repeatedly in the last six years, even prices for high-quality, high protein wheat, benefit. When corn prices decline, they pull wheat under like a pair of concrete shoes.

“If you look at corn and soy prices, those are dropping, too,” Becker said. “We are seeing a return to normalcy where wheat follows corn.”

Corn prices drove up the value of several commodities over the past six years as a federal mandate for ethanol blended gasoline increased the demand for the grain. But thanks to fuel efficient cars, U.S. consumers are buying less gasoline than expected, which means there’s less need for corn-based ethanol than the federal government had forecast. Corn prices are now falling with weaker ethanol demand and wheat prices are following suit.

It’s unclear how low the net value of Montana’s wheat crop will go as a result of the price decline. During the price ramp up, the net value of Montana’s wheat crop has exceeded $1 billion in six of the last seven years, according to the U.S. Department of Agriculture.

During some of those years, wheat prices resembled current values, but the high yields kept the net value in eight figures.

This year’s favorable weather conditions could mean more grain in the bin if crop losses are minimal.

There are farmers in Big Sandy and Fort Benton who are starting to swath winter wheat now, said Cassidy Marn, Montana Wheat and Barley Committee marketing program manager. The challenge Montana’s crop will face in the next few weeks is receiving the dry conditions needed to harvest winter wheat, while getting enough rain to keep the still not ready spring wheat crop from fading.

There is still 2013 wheat waiting to be shipped after months of rail freight delays related to weather, construction and oil. Through July 17, Burlington Northern Sante Fe Railroad had a backlog of 1,219 Montana grain cars delayed 27 days on average. BNSF is required to report its grain orders weekly to the federal Surface Transportation Board.

Copyright 2015 The Billings Gazette. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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