Pacific Northwest farmers diversify to deal with wheat prices that are a dollar or more below the cost of production.
Matthew Weaver/Capital Press
Mark Sheffels doesn’t plant as much wheat as he once did.
Sheffels, who farms west of Spokane near Davenport and Wilbur, Wash., started reducing his wheat acreage several years ago in favor of winter peas.
He made the move because of low wheat prices and the high costs of raising it.
“Even when markets suggest we ought to do something else, agronomically it’s pretty hard to find replacements,” Sheffels said. “But we’re getting there, little by little.”
Colfax, Wash., grower Larry Cochran spreads his risk by planting alternative crops, including dry peas, lentils, chickpeas and barley. But wheat is still his primary crop.
“Because that’s what we do,” Cochran said. “We’re wheat farmers.”
Growers have reacted in a variety of different ways, from switching to new primary crops to diversifying what they raise, as they look for ways to wait out wheat prices that are lower than the cost of production.
Farmers estimate the cost of production at roughly $5.50 to $6 per bushel, said Glen Squires, CEO of the Washington Grain Commission.
The market price hovered between $4.50 and $4.65 per bushel this week. The export price is typically 60 to 80 cents lower than that, because farmers have to pay to get the wheat to Portland to ship it overseas.
“That’s why you hear guys saying they’re at $4 wheat, or a little below,” Squires said.
Cochran said he’s planting the same amount of wheat despite lower prices.
“I’m trying to raise a wheat crop as cheaply as I can,” he said. “Our input costs have come down some. I just hope I get a good, big crop that makes up for some of the loss of price.”
U.S. winter wheat acreage has dropped to one of the lowest levels ever, according to USDA. The USDA projects 50.2 million acres of wheat planted this winter, down 8.7 percent from 55 million acres in 2016.
Spring wheat acres are still to be determined, but Dan Steiner, grain merchant for Morrow County Grain Growers in Boardman, Ore., expects them to be relatively high.
“Wheat acres in the United States are definitely down, but wheat production across the world is going to be higher,” Steiner said.
Several factors have contributed to the burgeoning world supply, including more Russian production and China boosting production through farm subsidies, further depressing prices.
“Supply has been related to great weather around the world for four years in a row, which is unusual,” said Steve Mercer, vice president of communications for U.S. Wheat Associates.
The global stocks-to-use ratio would be significantly lower if China is factored out, and is declining, Mercer said.
“If we see a reduction in planting, weather and yields that are more normal or weather problems anywhere, we’re going to start cleaning out that supply pretty quickly,” he said. “There should be a correlated increase in demand, and therefore prices.”
In the meantime, Cochran will continue to spread his risk by diversification.
“All it takes is one disaster in the world somewhere and the price can change,” Cochran said.
Sheffels has a couple thousand acres of winter peas and 1,300 acres of winter wheat this year. He grows a rotation of winter wheat, fallow, winter peas and fallow under direct-seed production.
Sheffels says his fields look good, with a good snow cover easing his concerns about any problems caused by the cold winter.
He plans to maintain his rotation for the foreseeable future, and doesn’t think he’ll go back to wheat as his primary crop.
“It’s unlikely that’s going to happen, honestly,” he said.