Wheat prices spike on news from Russia, but will it last?

Farmers seeing high yields and high protein
2010-08-07T00:00:00Z 2010-10-02T11:15:08Z Wheat prices spike on news from Russia, but will it last?TOM LUTEY Of The Gazette Staff The Billings Gazette
August 07, 2010 12:00 am  • 

The gold rush was on in the grain fields of Montana this week.

Harvest of Montana’s winter wheat had just begun when word came that drought-stricken Russia was banning all wheat exports for fear that it didn’t have enough grain to feed itself.

The announcement sent the U.S. wheat market skyrocketing just weeks after grain prices hit dismal lows. Needless to say, for a fortunate few, it was a good week to fire up the combine.

“It’s nice to hit it just right,” said Dennis Jones of Broadview.

As Jones’ rolling relic Massey Ferguson 760 combine lumbered through his dryland acres, futures prices on the Chicago Board of Trade were hitting $7.85 a bushel, a price unseen since the later months of the 2008 wheat boom. By week’s end, it wasn’t clear how long farmers’ good fortunes would last, with some saying speculators were ratcheting up prices to unsustainable levels.

Locally, cash grain prices were $5.85 a bushel, a 60 percent increase from late June and a $1.14 a bushel more than the week before, according to the National Agricultural Statistics Service. Cash prices are the take-it-or-leave-it rates offered at local elevators for more immediate delivery.

“The futures markets are going crazy,” said Al Sternberg, of the Peavey Co. elevator in Billings.

Grain trucks rolling into Peavey were bringing in a quality crop, Sternberg said, with protein levels at about 11.5 percent and yields between 40 to 80 bushels an acre on dryland farms that normally average about 35. Annual rainfall levels 2 inches above average were behind those yields.

In Circle, farmers were reporting 11.5 percent protein and high yields.

“This spring started out with a lot more moisture than normal,” said Glenn Burbidge at Farmers Elevator Cooperative. “We have 40 to 45 bushels an acre, something in that range, which for us is a really big yield. You get out in these parts and I suppose we average 30 or someplace in there.”

But heavy rains were also driving down crucial protein counts for farmers who scrimped on fertilizer.

“I got 9.8 protein,” said farmer Bill Hickson, who was cutting his crop just west of Zimmerman Park. “That’d be the rain. I’m sure.”

Hickson said he was having a hard time finding an elevator to take grain with protein levels that in some parts of his field dropped below 9 percent. An elevator will take low-protein grain and mix it with higher quality wheat to create a more marketable blend, but that doesn’t usually happen until later in the season.

Operators of one local elevator told Hickson they wouldn’t know until later if his wheat would be needed and until they did, the farmer would have to pay rent on his crop if he left it at the elevator.

There was reason to think the rising grain prices peaked too soon for Montana farmers with grain still in the field. Those who didn’t lock in a grain price at midweek for future delivery or truck their grain to a local elevator saw the wheat payments take a steep slide Friday. Chicago futures prices fell 60 cents, the maximum drop allowed by exchange rules. Elevator prices fell by similar amounts.

Analysts pointed to several things behind the corrections, including other wheat-producing countries jumping to fill the void left behind by Russia’s export ban and a surge of American farmers rushing to unload their grain silos of both wheat left over from last year and grain harvested earlier this summer.

Wheat stockpiles were at 23-year highs when news broke that Russia’s harvest would be off 15 million tons.

“The market will go the way it wants to go,” said Bing Von Bergen, secretary-treasurer of the National Association of Wheat Growers. “We really don’t know. We didn’t see this coming about three weeks ago.”

With major grain buyers such as Egypt shopping for grain, it’s possible wheat prices will firm up, Von Bergen said.

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