Like corn and soybeans, the U.S. wheat crop is huge, and prices will likely continue to slip. Unlike corn and soybeans, however, the wheat crop—after a 10- to 15-day delay—is now in the bin.
Several weeks of warm, dry weather have allowed most of the remaining wheat fields in the country’s northern tier to be harvested. As of Sept. 26, 94 percent of the nation’s spring wheat had been harvested, compared with the five-year average of 96 percent and last year’s 95 percent, according to USDA’s most recent Crop Progress report.
That harvest revealed some challenges with this year’s wheat crop.
"The yield was quite good, but there are some quality issues," says Ray Grabanski, president of Progressive Ag in Fargo, N.D. Not only is vomitoxin an issue in some locations due to the excessively wet season, but falling numbers, which indicate the amount of sprout damage within a wheat sample, are also high.
"Yieldwise, I’d give this crop a nine out of 10, but qualitywise, I’d give it a four or a five," says Grabanski. Typically between 5 percent and 10 percent of the hard red winter wheat crop is of low-quality. But this year, that percentage is closer to 15 to 20 percent, Grabanski says, and unless exporters can find a country that will accept it for baking purposes, it will all go into the feed channel.
Big Crops, Small Prices
"Prices of wheat are falling," says Grabanski. "Corn is the big dog in the grain markets. When corn and soybean markets bottom, wheat will start stabilizing and then rally, but it is very hard for wheat to rally when corn and soybeans are getting cheaper every day."
In terms of numbers, the USDA released its Small Grains Summary Sept. 30, showing an all-wheat production of 2.04 billion bushels. (That’s down slightly from August’s estimate of 2.13 billion bushels and 5 percent lower than 2013’s revised estimate.) USDA’s quarterly Grain Stocks report, also released Sept. 30, showed that wheat stocks as of August 30 were 1.91 billion bushels, up 2 percent from last year’s 1.87 billion bushels.
Hard Winter Wheat Hard to Get
But, due to a tight global supply of high-protein milling wheat, U.S. hard red winter wheat is commanding a premium. "If anyone wants quality milling wheat, we are the only one that has it," says Doug Werling, vice president of trading for Bower Trading, Lafayette, Ind.
But that’s tough to do.
In western North Dakota, wheat is piled on the ground because producers cannot compete with the demand for trucks and rail cars out of the Bakken reserve. Strong oil production in the Bakken has created a transportation crisis of sorts for agriculture. Not only is there a shortage of truck drivers nationally, but there is also a backlog of rail and truck orders because domestic oil production is so strong.
"If you can get wheat to Pacific Northwest ports, millers are paying a premium for it," says Werling. "Millers are bidding $8 to $9 per bushel for hard red winter wheat. You just have to get it there."
While storage has not yet become a problem for wheat farmers, the transportation issues in the Midwest could soon change that.
"Wheat is the first crop off, so we have lots of storage," Grabanski says. "But the prices we are getting are horrendous, and so is our basis. We still have carryover crop from last year, and we are going to have significant storage problems once corn and soybeans come off."