Monday, December 13, 2010

Wheat growers look for higher prices

by Brad Carlson
Idaho Business Review

Idaho wheat producers are finding their crops being held at the docks.

Four Portland exporters handle about half of Idaho’s wheat exports.

“They are so busy with corn and soybeans, we are having trouble fitting wheat into their loading schedule,” Idaho Wheat Commission Executive Director Blaine Jacobson said.

“That has tended to push the price of wheat up as well,” he said.

To make as much money exporting wheat compared to corn and soybeans, the exporter needs to raise the margin, Jacobson said. That portion does not go back to the grower but ultimately boosts the worldwide price.

High consumption of wheat worldwide is increasing prices, he said. Higher prices this year helped farmers cover fixed costs, Jacobson said.

The Kansas City Board of Trade nearby wheat futures contract price was $8.27 1/4 per bushel Dec. 8 compared to $4.62 June 8 and $5.20 1/2 per bushel Dec. 8, 2009, said Shelia Summers, marketing vice president for the board. The price is a benchmark for hard red winter wheat used to make bread, she said.

“Wheat prices are up, and have been up since August when Russia put an export ban into place,” Jacobson said. Russia banned wheat exports as drought, heat and fires cut the crop by one-third from a year earlier.

Prices were depressed early in the year, when wheat stocks were their highest in nine years, he said. Prices increased sharply after Russia imposed the export ban and now are up 71 percent from their low point in the past year, he said.

Russia wasn’t the only challenged wheat producer.

“The Canadian crop and the Australian crop had their own problems,” Jacobson said.

Canada’s planted area was the lowest in 40 years and harvest dropped about 17 percent from a year earlier, he said. Weather problems at planting and harvest reduced quality, he said.

In Australia, quantity was high but quality was reduced by rains at harvest, Jacobson. Quality problems reduced Australia’s exports to Asia, “so Asia will import more from the Pacific Northwest,” he said.

Recently high corn prices kept wheat prices high, he said. Corn prices usually are about $3 per bushel but now are about $5 per bushel, he said. About one-third of the corn crop is going into ethanol production, he said.

“The ceiling price on corn is the base price on wheat because a certain percentage of wheat can go into the feed channels,” Jacobson said. “As the price of corn goes up, it pushes the base price on wheat up.”

About 4 percent of this year’s wheat harvest will be fed in stockyards.

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