King wheat?Wheat on the Northern Plains has been on the defensive in recent years. Pressure from competing crops, particularly corn and soybeans, has led many farmers to quit growing wheat, or at least reduce how much they raise. Interest in corn and soybeans is strong again this spring, and wheat acreage could continue to decline.
By: Jonathan Knutson, Agweek
Wheat is a big part of Brian O’Toole’s life.
The Crystal, N.D., farmer grows it, handles it in his family seed business and promotes it as a member of U.S. Wheat Associates, which develops export markets for the crop.
So O’Toole takes a strong interest in a powerful trend that’s reshaping agriculture on the Northern Plains. Wheat, once the region’s dominant crop, keeps losing ground, literally, to corn and soybeans.
“I’m not panicking yet,” O’Toole says. “But there are challenges.”
Wheat — so important in the Upper Midwest that for generations it was referred to as “King Wheat” — is tottering on its throne, if it hasn’t fallen off already.
Area farmers on balance increasingly prefer corn and soybeans to wheat because of greater potential profit from the former. Corn’s popularity, in particular, is rising because of attractive prices and new varieties that allow the crop to be grown in areas where it once was considered too risky.
In 2012, North Dakota farmers raised 422 million bushels of corn and 339 million bushels of wheat. Fifteen years earlier, farmers in the state raised 269 million bushels of wheat and only 58 million bushels of corn.
In other words, North Dakota in 1997 produced roughly five bushels of wheat for every one bushel of corn. Last year, the state raised roughly four bushels of corn for every three of wheat.
Don’t underestimate wheat’s importance. It remains a big deal in most of North Dakota, South Dakota, Montana and northwest Minnesota. The crop continues to be a good fit for the region’s soil and climate, and most farmers in the region have a long history of growing it successfully.
North Dakota typically ranks first or second in U.S. wheat production; the state vies annually with Kansas for the top spot. Montana, South Dakota and Minnesota normally are in the top 10.
What’s more, wheat generally remains profitable for farmers who grow it, particularly in the past few years, says Jim Peterson, marketing director for the North Dakota Wheat Commission.
“Farmers have had good returns on wheat,” he says. “They’ve made a good profit on wheat the past couple of years.”
But as he and others note, corn and soybeans have been even more profitable, encouraging area farmers to grow those crops instead of wheat.
Arguably the most popular topic of conversation at area farm show meetings and conferences this winter was the extent to which corn acres will increase again this spring.
The North Dakota State University Extension Service’s projected crop budgets for 2013 illustrate corn’s appeal relative to wheat. Keep in mind that the numbers are only estimates, and producers’ profits ultimately will depend on actual yields and prices.
In northwest North Dakota, traditionally a stronghold for wheat, corn is projected to provide a return to labor and management of $149.09 per acre, compared with a return to labor and management of $33.86 per acre for wheat.
In southeast North Dakota, an area where corn is well established, corn is projected to provide a return to labor and management of $176.20 per acre, compared with a return to labor and management of $85.85 for wheat.
Though raising corn generally involves more work and expense than growing wheat, the huge gap in potential profit inevitably will encourage farmers to produce corn, wheat supporters say.
“People have a bottom line (financially),” O’Toole says.
Corn likely will continue to become more widespread on the Northern Plains, says Randy Englund, executive director of the South Dakota Wheat Commission.
But ultimately, if too much corn is produced, its price will decline, making wheat more attractive, Englund says.
“I think wheat will rebound some as the economics take over, on the supply and demand side,” he says.
A ‘battle,’ but pluses, too
Wheat’s staunchest backers acknowledge that their crop faces tough competition from corn and soybeans.
“It’s an uphill battle,” says Erik Younggren, a Hallock, Minn., farmer and president of the National Association of Wheat Growers.
He lives in Kittson County, in extreme northwest Minnesota, an area where late springs and early falls historically made corn too risky. But corn’s popularity is growing in Kittson County, similar to what happened there with soybeans in the mid-1990s.
Even in Montana, where wheat remains dominant, dryland corn acreage is expected to rise sharply this year, says Ryan McCormick, a Kremlin, Mont., farmer and president of the state Grain Growers Association.
“There’s competitive pressure” on wheat, he says.
But wheat retains a number of advantages, including:
• Promoting soil health and improving pest and weed control as part of an annual crop rotation.
• Spreading out the workload. Spring wheat typically is harvested from late July to early September, with soybean and corn harvest beginning in late September.
• Holding up relatively well in drought.
• The ability to be planted relatively late and still be harvested before fall frost becomes a major danger.
Wheat versus corn prices
Corn typically yields two to three times as many bushels per acre as wheat. Traditionally, higher prices for wheat have helped offset that yield disadvantage, encouraging farmers to continue growing wheat.
In recent years, however, wheat’s premium over corn has been relatively small. That’s particularly true after massive drought in the heart of the U.S. Corn Belt hammered corn yields and pushed up the crop’s prices.
In late March, for instance, the average price of old crop wheat at area grain elevators surveyed weekly by Agweek was $7.81 per bushel, only 71 cents more than the average price of old crop corn at those elevators.
But expectations that U.S. corn production will rally this year have caused new crop prices to tumble. New crop wheat prices have declined, too, but not nearly as much as corn.
In late March, the average price of new crop wheat at the grain elevators surveyed by Agweek was $7.30 per bushel, $2.02 per bushel more than the average $4.98 per bushel for new crop corn.
The larger premium for wheat over corn will encourage some farmers to plant more of the former, wheat advocates say.
But if wheat’s average price should again fall to within a dollar of corn’s, “Then there’s no question that wheat acres will continue to decline,” Peterson says.
His best guess is that spring wheat acreage will hold steady in North Dakota this year. He thinks wheat could draw acres from specialty crops.
Also boosting wheat’s outlook this year is improvement in the price at which area producers can insure their 2013 crop under yield and revenue protection policies.
Wheat can be insured at $8.44 per bushel, up from $7.86 per bushel in 2012.
In contrast, the price at which corn can be insured this year fell to $5.65 per bushel from $5.68 per bushel a year ago.
A long, storied role
Wheat was first planted in North Dakota in Pembina, in the extreme northeast part of the state, for the Selkirk colony of what’s now modern-day Winnipeg, Manitoba.
Wheat farming became easier in the mid-19th century because of several inventions, including the McCormick reaper, the steel plow and the treadmill thresher, according to an article in Prairie Grains magazine, the official publication of the Association of Wheat Growers, the North Dakota Grain Growers Association and South Dakota Wheat Inc.
The Homestead Act of 1862 and the western expansion of railroads also led to greater emphasis on wheat in the Upper Midwest, with the crop’s popularity expanding north and west over time, according to Prairie Grains.
New wheat varieties introduced in the late 19th and early 20th centuries enhanced the crop’s popularity, too, especially in arid sections of the Northern Plains.
Historically, wheat acreage has risen and fallen through the years, depending on crop prices, weather and government farm programs. In recent decades, the western and northern push of soybeans and corn has cut into wheat acres.
In Minnesota, a record 4.1 million acres of wheat were planted in 1976.
South Dakota farmers planted a record 4.3 million acres in 1993.
In Montana, a record 6.6 million acres of wheat were planted in 1996.
North Dakota farmers planted a record 12.7 million acres of wheat in 1996.
Wheat may never return to those record-setting days, advocates say.
“We realize that with the improved agronomics in corn, unless wheat prices are double those of corn, we’re probably not going to go back to those kinds of levels,” Peterson says.
But new research, including work in biotech wheat, holds considerable promise, boosters say.
“There is still tremendous demand for the wheat we grow here in North Dakota,” Peterson says.
Wheat remains a vital player in northern areas because of the short growing season, O’Toole says.
Though wheat’s brightest days may be in the past, its future is encouraging, advocates say.
“I don’t think we’re going to see mile after mile of waving amber fields (of wheat) anymore,” Younggren says.
“But wheat still has an important place.”