For the fifth time in six years, Montana’s wheat crop is valued at more than $1 billion, a rarely reached benchmark that has some farmers anxious about what could be next.
Analysts have put the 2012 wheat crop value at $1.7 billion, a continuance of a $1 billion streak that began in 2007 and was only missed once since, according to the Montana bureau of the National Agricultural Statistics Service.
Farmers harvested 194.7 million bushels of wheat from 5.5 million acres in 2012. The acres harvested were the most in a decade. The bushels harvested were the second most since 2001. The crop value was the most significant. Before 2007, the highest value for Montana wheat was $693 million.
Wheat and cattle, each valued at more than $1 billion, are the biggest single components of the Montana economy. Their strong performance during and after the recession helped most Montana counties weather tough financial times.
That $1.7 billion gets divided many ways, with everyone from fertilizer and farm equipment salesmen to the local Costco getting a share as farmers pay their bills.
People sometimes associate crop value with net farm income and forget about a farm’s business costs, said Lola Raska, Montana Grain Growers Association vice president.
“That’s the story that needs to be told,” Raska said.
For example, in 2010 gross farm income for Montana agriculture of all kinds was $3.64 billion. After paying the bills, farmers kept $445 million, according the Bureau of Economic Analysis for the U.S. Department of Commerce.
Initially amazed that Montana's wheat could be valued at over $1 billion for more than a couple of years, farmers are now wondering how long the trend may last.
“There are growers concerned about how long we can maintain this,” Raska said. “I think they’re cautious. I think they’re expanding and improving their infrastructure and equipment in the years that are good."
The average price for all wheat was $8.45 per bushel, the highest average recorded and up 77 cents from 2011, according to NASS. Production costs being what they are, farms would not be profitable if the per-bushel price fell to even $5, which is the sixth-highest average in the past 10 years.
Several things are buoying the price of wheat, including global weather, corn production and global demand for grain, said Gary Brester, Montana State University economist.
Weather has played a significant role in strengthening demand for U.S. wheat, as other wheat-producing countries like Russia and Ukraine had limited or banned wheat exports in response to drought. Foreign wheat buyers have turned to the United States to buy grain as weather-affected nations have backed off.
The high price of corn has driven up the value of wheat used for feeding livestock. Corn prices have set records in the years when wheat prices were strong. In the United States, the federal government mandate for ethanol in fuel has both driven up the corn price and limited the number of wheat acres planted as farmers switch crops in states where corn grows well.
As economies have improved in areas like India and southeast Asia, consumers with more money have added more protein to their diets, including grain protein, which increases wheat demand.
“These high wheat prices are going to last until we get a really great global weather outcome,” Brester said, meaning most wheat countries have a good crop year. “If we continue to have, let’s say average weather, we’ll have high prices. We’ll have high prices until we quit putting 40 percent of our corn into ethanol.”
U.S. wheat is about 9 percent of the world market, Brester said. So, losing some wheat acres to corn in the United States has some influence but isn’t a big factor.