Improved wheat market has farmers eyeing fall planting

Issue Date: July 13, 2022

By Ching Lee

After years of languishing prices, the mercurial rise of the wheat market this year may inspire more plantings in the fall, but don't expect California growers to go gangbusters on the grain.

Wheat harvest is mostly wrapping up in the state, with farmers on track to deliver 80,000 acres of winter wheat, the same amount as last year, according to the U.S. Department of Agriculture's June forecast. California farmers were also expected to harvest 24,000 acres of durum wheat, an increase of 4,000 acres from 2021.

Despite record-setting prices for wheat, many farmers contracted their crop before the surge and locked in prices that were "way lower," said Claudia Carter, executive director of the California Wheat Commission. Though prices have moderated in recent weeks, farmers could take advantage of the overall strength in the market by locking in prices for next year's crop, she added.

"The positive side is that for next year, we could see more wheat being planted and harvested—not significantly more, but slightly more than this year because the prices are still OK," she said. "But things can change."

Wheat prices, which have been climbing since 2020, spiked to record levels this year driven in large part by disruptions from the war between Russia and Ukraine, two major producers of the grain. In the U.S.—a top wheat producer and exporter—production is forecast to be the second lowest in 20 years, according to USDA.

Wheat remains largely a rotational crop for California farmers, most of whom plant it in the fall to take advantage of the rainy season to germinate the seeds. They typically grow wheat to promote soil health in between more lucrative crops such as tomatoes.

Too much rain last fall led to unfavorable planting conditions, causing delays, oversaturated fields and lost plantings. Dry conditions during the growing season then forced some growers to irrigate the crop, increasing production costs. Farmers who grow dryland wheat saw yield reductions.

Yolo County grower Larry Hunn described a "frustrating" season in which he had to "muck" in the crop after storms that flooded his fields and killed his plantings. He replanted some of it in January, which he said he had never done before.

Because of the late planting, his harvest is also late; he expects to finish sometime next week. He described yields so far as average to below average. He blamed much of it on weather conditions and his late start in irrigating the crop, as "we were all hoping and praying to get some rain."

Because he presold most of his crop last year, Hunn said he missed out on "the super-duper prices that maybe some of the guys got when this Ukraine war started." Even so, he said, his contracted price is much higher than what it had been in the past three to four years.

"This totally turned around in the last 12 months," Hunn said. "Who would've known that Putin would invade Ukraine? You couldn't have bet on that."

Hunn said he assumes wheat prices will hold strong through next spring, though "maybe not as high as what we saw." He said he also expects more wheat will be planted in California this fall. His concern, he said, is with Russia dumping wheat on the world market, causing a potential market crash. He noted the price of corn and wheat already is "settling out a little bit."

Because where he farms is susceptible to seepage from the Sacramento River that could wreck yields, Sacramento County farmer John Perry tends not to presell his crop until April. This year, that strategy paid off—big time. He said he sold 30% to 40% of his wheat "almost at the top of the market."

Perry finished harvest at the end of June. He said he plans to market the rest of his crop on the spot market. Though prices have dropped since April, Perry said they are still "substantially higher than they've been in the last 15 to 20 years."

"If we'd known what the price was going to be, we probably would've planted a little bit more," Perry said.

Even though he had to irrigate his crop twice this year, which he said is unusual, wheat still requires less water to grow than other field crops such as rice and corn. Besides being a good rotational crop, wheat also is "not a real high input crop" compared to tomatoes, rice or corn, all of which use more fertilizer and fuel to run tractors, Perry added.

Having presold a portion of his crop last summer, Yolo County farmer Jeff Merwin won't reap the more recent higher wheat prices. He was plagued by difficulties during planting due to rain and lost about 40% of what he planted.

He replanted two fields in February—the latest he had ever planted wheat—so he could deliver on his contract. Though the crop "turned out fine," he said, the dry spring meant he had to irrigate to make the crop, "knowing full well we were going to lose money on it."

"For those that hung on and waited (to sell their crop), they might have hit a home run this year," he said. "The problem was they had the same kind of weather issues we did."

Looking to 2023, Merwin said he's "constantly thinking about what's next year going to look like" and when to contract his future crop. He noted the price of wheat being offered a few weeks ago stood at $360 a ton, higher than what it was in late April. With conditions not looking good in a few wheat-producing regions and the market seemingly unstable, Merwin said "the chance of it spiking just for a moment is pretty good."

For Imperial County farmer Ralph Strahm, how much durum wheat he'll grow this winter will depend on water and how much rain and snow is in the Colorado River watershed. Regardless of the higher price, he said he won't be growing more wheat than what he grew this year. He said he will also plant it on some of his less productive ground, as he wants to devote his water and better soils to his cash crops, which are carrots, onions, alfalfa and melons.

Even with rotational crops, Strahm said he has options. Wheat in his region is usually planted in December and harvested in May. He can plant sudan grass, for example, in April, at which time he will know what his water situation will be.

"It remains to be seen what price it is going to be at and if it's attractive enough for us to take that price," he said.

(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.