Slumping market dulls wheat outlook


Issue Date: November 23, 2016
By Ching Lee
Solano County farmer Ian Anderson stands in a field that he is planting to wheat. California farmers are expected to plant less wheat this fall because market prices remain depressed.
Photo/Ching Lee
Most California farmers plant wheat as a rotational crop, but some growers who farm on land without access to irrigation, such as this field in Birds Landing, grow wheat as a cash crop.
Photo/Ching Lee

With the wheat market still in a slump, California farmers report little enthusiasm for planting the grain this fall, even as some of them struggle to find other, more-profitable alternatives.

California farmers grow wheat largely as a rotational crop, but at current low prices, Claudia Carter, executive director of the California Wheat Commission, said the state's wheat acreage may decline again, falling slightly from the 470,000 acres planted last year.

The last two years, acreage dropped below 500,000 for the first time since 1991. Of the wheat planted, farmers harvested just 210,000 acres in 2015 and 220,000 acres in 2016—the lowest on record.

"Wheat acreage in California is extremely sensitive to the price," said Roy Motter, an Imperial County grower. "My guess is that the amount of wheat acres in California is going to be similar to last year because the price was down last year."

There is "some limited strength" showing in the world wheat market, he noted, adding that "we may have seen the bottom of the market."

Carter pointed out that even though there is a lot of wheat in the world right now, there are limited quantities of high-protein wheat that millers and bakers desire. Weather problems in other wheat-producing regions have led to poor-quality crops this year, she noted. Canada, in particular, has seen high disease pressures affecting its durum wheat, she said, noting recent high demand for Desert Durum, which is produced under irrigation in the Imperial Valley and Arizona and receives a premium price because of its quality.

Demand for higher-protein and higher-quality wheat "could contribute to producers still planning to plant wheat in California," Carter said.

Solano County grower Ian Anderson said although millers may still want quality wheat, they're not putting much value in it, noting that there hasn't been a significant price difference this year between milling-quality wheat and wheat sold for feed.

"The fact is that the price that growers are getting today for good-quality protein wheat is still extremely low," he said.

Unlike farmers who plant wheat on rotation, often after tomatoes, Anderson farms wheat as a dryland crop on the hills of Birds Landing, where there is no access to irrigation and few viable short-term crop options exist aside from grains and legumes.

Even so, with market prices so low, Anderson said he's reducing his wheat acreage this year and dialing back on fertilizer and other inputs for the crop "to try to make do." He's growing more barley, which he said has a better market regionally. He's also expanding his sheep herd and potentially adding safflower and canola to his crop mix.

"I'm planting (wheat) with the optimism that something will happen to make the value go up, maybe another 10 or 20 percent, to make it a profitable enterprise," he said.

Having lost a well on his property, Yolo County farmer Bill Cruickshank said his one option is to grow dryland wheat on that ground. At current prices, he said he expects to break even after covering his growing costs and property taxes.

Some growers, he noted, are experimenting with growing garbanzo beans, the price of which "has been pretty attractive" compared to wheat.

He said though protein content is very important to millers, the price incentives for achieving high protein levels are quite small compared to what growers could make with higher yields.

"That's still true even in this terrible market," said Cruickshank, who is vice chairman of the California Wheat Commission.

For Colusa County grower Jeff Miller, who rotates wheat, safflower and corn with tomatoes, vine seeds and sunflowers, wheat is still a good choice because of its relatively low production costs compared to corn, which he noted uses more water and fertilizer, and prices of which have also dropped. With wheat, he said, "you might not make as much, but at least you're going to make something."

Other grains such as barley, which is grown largely as a feed crop, haven't figured into his rotation for years because of their low price point, he said.

California farmers are not the only ones growing less wheat. Imperial Valley grower Motter noted that for the last 15 to 20 years, U.S. farmers have been shifting their acreage away from wheat toward more corn and soybeans, which have improved varieties that yield better and net higher returns. He said he expects U.S. wheat acreage will drop further due to depressed prices.

"If you factor in inflation, wheat's probably at its lowest price per bushel that it's ever been," he said.

Even with the higher premiums for Desert Durum, Motter said it's hard to justify growing it now, because he would not be able to cover his production costs with the current price.

But he has time to decide, he said, noting that his planting window for wheat runs from the end of November to the end of January, typically following lettuce harvest in January. In the past, he's planted as much as 1,200 acres of wheat, but lately he's been growing 300 to 400 acres. This year, he may grow only 70 acres.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.