Too much wheat hurting prices, and the growers who depend on them

Wednesday, September 14, 2016

The old cliché that too much of anything is not a good thing is certainly proving true for wheat growers trying to turn a profit.

“The reason wheat prices remain so low and continue to drop is simply because we have too much wheat,” said Kim Anderson, Oklahoma State University Cooperative Extension emeritus grain market specialist.

Worse, the problem is being compounded by a large corn harvest coming down the economic pipeline. Grain elevator operators are reporting they no longer have available space to store other grains coming in.

In order to get the grain moving and potentially help prices recover, Anderson said the price needs to come down low enough to make wheat an attractive commodity for use in livestock feed.

“The grain in storage is best suited for feed use,” he said. “On the other hand, the current crop that has come in is particularly good for milling, albeit low in protein. If some high-protein wheat could be acquired to blend with it, that wheat supply could potentially be pushed through the food supply.”

Unfortunately, Anderson and other industry analysts expect his will prove to be difficult as high-protein wheat is currently difficult to find, and with a large corn crop on the way, it will be difficult to convince farmers to feed wheat to livestock rather than corn.

“You hate to say it but the best bet is to hope for a crop failure in a foreign production area so our region could export excess stores,” Anderson said. “The sad truth is farmers will be unable to make a profit as long as prices stay this low and grain stores remain in excess.”

As of this writing, Oklahoma Department of Agriculture, Food and Forestry data indicates bids for no. 1 hard red winter wheat per bushel to be Davis $2.51; Keyes $2.76; Manchester $2.82; Alva, Buffalo, Cherokee, Clinton and Weatherford $2.84; El Reno, Geary, Okarche and Watonga $2.87; Okeene, Perry, Ponca City and Stillwater, $2.88; Banner and Hooker $2.89; Frederick, Hobart, Lawton and Temple $2.91; Medford $2.92; Eldorado $2.96 and Shattuck $3.08.

Trent Milacek, OSU Cooperative Extension area agricultural economist for the state’s Northwest District, added that local basis bids will help move excess wheat supplies in his part of the state.

“Several locations are currently paying less for wheat than they are for corn,” he said. “Wheat being priced under corn is a strong signal to livestock feeders that this market is trying to move wheat into the feed supply.”

Many producers in northwestern Oklahoma have begun planting wheat for forage. Planting wheat early reduces yields but increases fall forage, which will help producers spread risk across multiple enterprises.

“This could also help alleviate some of the pressure on local basis bids in 2017 by lowering wheat production in the area,” Milacek said.