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Published September 11, 2009, 05:26 PM

Wheat producers face obstacles

It’s one of the unfortunate effects of supply-driven markets: When everybody produces a good crop, prices plummet. That’s the situation this year. And in the Red River Valley, producers also are dealing with low proteins, thanks to heavy spring rains. Many of them say they are going store their wheat and hold out for better prices.

By: Matt Bewley, Grand Forks Herald

It’s one of the unfortunate effects of supply-driven markets: When everybody produces a good crop, prices plummet.

That’s the situation this year. And in the Red River Valley, producers also are dealing with low proteins, thanks to heavy spring rains. Many of them say they are going store their wheat and hold out for better prices.

Grain merchandiser Mitch Montag at Peavey Grain in Grand Forks said the world wheat crop is at the root of the lower prices.

“Right now, it’s just a huge world crop,” he said. “Nobody needs to import wheat, so it’s just creating a real surplus on the market. The world price is being driven down, and so that in turn is affecting the U.S. price.”

Low protein

It’s not that yields are a problem. Most reports indicate very good yields, often 70-plus bushels per acre. The problem lies in the protein quality of the wheat.

Grower Kevin Krueger of East Grand Forks took a sample load into his local elevator Tuesday. He says his wheat is testing at about 12 percent, while some of his neighbors are hauling in 10 percent protein.

“They offered me $3.25 a bushel for it,” Krueger said. “This summer, it was $7, and last winter, it was $15.”

Nitrogen also was expensive in the spring, so some producers cut back to minimal applications just to make a crop and not push protein.

“Plus, it was very wet this spring and a lot of the nitrogen leeched away,” Krueger said. “So it’s kind of a combination of the two.”

He bumped his nitrogen application up to help the protein, “but I’m still not, by any means, where I want to be.”

Discounts

Farther south, in Wahpeton, N.D., producer Jeff Leinen has finished bringing in his wheat. His yields have been up in the 60-bushel to 70-bushel range, and his protein content has ranged from 12 percent to 14 percent.

“We had a lot of rain this spring, so we had spots that were kind of drowned out,” he said.

In other areas, his wheat was coming off wet.

“It was cool in the morning, so it was wet when we got started,” Leinen said. “We combined about 900 acres. Probably five or six loads of that were dry, and the rest was 16 (percent moisture), down to 14 (percent moisture).”

He will dry and store it and wait for the discounts — now running at 50 cents to 60 cents a point — to ease off.

“Down to 12 (percent protein), that’s $1, $1.20 coming off of $4.50 wheat. That’s not enough,” Leinen said. “We’re going to hope these protein premiums at least come back.”

Robin Pratt farms near Northwood, N.D.

“In a few fields, were running in the 13s, and we’re running a few fields in the mid-14s, I guess. I’ve heard some real low numbers, but we haven’t seen that yet,” he says.

He soil-tested and fertilized all his fields for the same yield goals and said his protein results have been random, regardless of the variety.

“There can be a point-and-a-half or two-point difference in the varieties, just from field to field, so I’d imagine that’s just stress,” Pratt said.

Like others, though, he did get 70-plus-bushel yields. Pratt said he will store almost everything, including his dry beans and some soybeans, and expects to have room for it all.

The low prices also are pushing some growers’ bottom lines below the break-even point.

“Gross, we need $300 an acre to make our expenses,” Krueger said.

With current wheat prices, he’d earn just $227.50 per acre.

“That big yield definitely helps. It brings our cost of production closer,” he said. “But land rent is coming due, and we have obligations this fall, and we may have to say, ‘Give me what you can get for it,’ and maybe we can have our sugar beets take care of our fall expenses and obligations.”

He’s betting wheat prices will come back in the winter. Until then, Krueger said he’ll store it. He can hold about 40,000 bushels on his place, enough to keep his wheat.

“But then, I have no place for my soybeans, no place to put my pinto beans. I’m forced to haul that into town,” he said.

Beyond the valley

Farther west, where bumper crops like this year’s are markedly less common, storage —both on-farm and at some elevators — is becoming a serious issue.

Unusually, good yields have led to tight storage.

“I would say we’re running 10 to 15 bushels higher than the five-year average,” said Jeff Mehl, grain manager at South Central Grain in Sterling, N.D. “Farms around this area were running at half capacity already.”

Of South Central’s five locations, two are running at close to capacity and a third is at about three-fourths capacity, though Mehl said he expects to be unloading that terminal at the end of the month.

Rail transportation thus far is keeping up with demand. Mehl said he has not had trouble getting cars.

“The cars have been flowing pretty freely,” he said. “The problem is guys would just as soon put (their wheat) on delayed price obviously because of the low prices, and the elevators can’t continue to store grain. They’ve got to have cash flow, as well, so everybody in this area seems to be cash only, just to keep things moving.”

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