Wheat market on a wild ride

In Bickleton, wheat grower Neal Brown has finally replaced his 30-year-old truck.

In Selah, bakery owner Larry Buhrmaster is paying three times last year's cost for flour.

In Sunnyside, restaurant owner Gabriel Garcia is trimming the hours of his employees to make up for higher food costs.

"My employees, they need to pay their rent, too," says the owner of El Valle Mexican restaurant. "I try to pay the best, fairest way I can."

Whether it's credit or blame, place it on drought in Australia, price controls in Russia and futures investors in the Midwest.

Worldwide supply and demand for wheat, a staple of the human diet since the days of Abraham, is taking the local food economy on a wild ride.

"We're looking at something that has never been seen before," says Keith Burkhart, a fourth-generation wheat farmer south of Prosser. "It shoots up like a rocket and it freefalls. This is unnatural."

As part of a global increase in food costs, wheat prices are up all over the world because of lower production and higher demand.

Washington is the nation's fourth-highest-producing wheat state, and nearly all Northwest growers barge their wheat to Portland for the international market. Average prices at the Portland docks have more than doubled in the past year and tripled from five years ago.

Most of the state's crop is soft white wheat used in pastries and noodles, but Central Washington growers raise both white wheat and hard red winter wheat, used in breads.

Prices for both recently began to dip slightly as agricultural experts predict more global production in the next few years. The Portland average went from near $12.50 per bushel in February to $10.50 for soft white and $11.30 to $11.60 for hard red winter wheat Friday.

For their part, Washington wheat growers plan to plant 150,000 acres more spring wheat than last year, according to the National Agriculture Statistics Service.

Simple supply and demand causes most of the turmoil.

A two-year drought cut Australia's production in half, while weather problems in Russia and Argentina and across much of Europe have dropped world supplies to a 30-year low. Meanwhile, growing middle classes in China and India want more wheat.

Oil prices contribute, too, in the form of higher fuel and fertilizer costs. But they also increase demand for ethanol, prompting federally subsidized U.S. farmers to plant more corn. That pushes the demand for wheat even higher.

Politics plays a part, too, as Russia and Argentina -- typically large wheat exporters -- have imposed limits on their shipments to protect their own stocks. Meanwhile, investors in the Midwest have dumped millions into wheat contracts, expecting them to go even higher.

In Klickitat County, which has about 46,000 acres of wheat, growers are reacting cautiously to the good news.

"I'm not going to run out and buy a new combine," says Gary Moore, a Prosser-area wheat farmer.

But some are. Vendors have had trouble keeping machinery in stock, says Delbert Olson, store manager for RDO Equipment, a heavy farm equipment dealer in Sunnyside.

"Some folks have never had combines before," Olson says. They've always rented or pooled equipment with neighbors.

Brown, a soft white wheat farmer near Bickleton, used the windfall from his August crop to purchase a 2001 Freightliner, his first big equipment upgrade since the 1970s. The truck's power steering, air conditioning and stereo make his three daily 50-mile round trips to the barge dock in Roosevelt during harvest more comfortable.

"Now it's actually kind of a pleasure to haul wheat down there," says Brown, the Klickitat-Yakima president of the Washington Association of Wheat Growers. "It was something that we didn't consider a year ago."

Neighbors have upgraded sprayers, while others are eyeing new cars, says Brown, 47.

But his favorite perk is that his three children may become fifth-generation wheat farmers someday. His oldest son, 12-year-old Taylor, likes farming so far. He wouldn't have wished it on them six years ago.

Good news for the people selling wheat is bad news for people buying it.

The price of flour and bread, here and throughout the world, has soared. Grocery stores, restaurants and bakeries are paying more and either passing the costs onto customers or trimming costs somewhere else.

Buhrmaster, who owns a Selah bakery, now pays nearly triple what he did a year ago for flour. To adjust, he has notched up the price of his pastries and bread.

"It's going to drive some of us out," Buhrmaster says.

Changing prices is not so easy for Garcia, who has owned El Valle for eight years. He would have to reprint all his menus.

Instead, he trimmed the hours of his 16 employees.

Grocery prices are doing the same. Grocery stores operate on a low profit margin, so increases show up on shelves almost right away, says Chris Brown, president of Wray's Food and Drugs in Yakima.

So far, he does not know if shoppers are buying less. His customers typically tighten their belts in January, February and March anyway.

But sooner or later, they will have to cut back.

"The price of goods are going up faster than people's income," says Brown, unrelated to the wheat grower. "There is a day when that is going to come."

* Ross Courtney can be reached at 930-8798 or rcourtney@yakimaherald.com.

Wheat facts

Acres of wheat planted in 2007

* Benton County 90,900

* Klickitat County 46,200

* Yakima County 17,000

* Washington state 2,170,000

Source: U.S. Department of Agriculture

Rising prices

* Last year, Selah baker Larry Buhrmaster paid $8 for a bag of flour. Last week, it was almost $23. He uses up to 50 bags per week, adding $39,000 to his annual flour cost. He has bumped his prices by 25 cents for pastries and 50 cents for bread loaves to compensate.

* Sunnyside restaurateur Gabriel Garcia pays $1 more per case of flour tortillas than he did five months ago. He goes through 24 cases a week, meaning an extra $1,248 per year, just for tortillas. Meanwhile, meat is up $2 per pound. Cheese has gone from $1.40 to $3 per pound. Tomatoes have jumped from $8 to $18 per case.

* Chris Brown, president of Wray's Food and Drugs, says bread prices from his larger distributors rose 5 percent to 7 percent in November and will do the same in May. A 3 percent annual increase was typical.

* Partially due to high wheat prices, self-propelled combines have seen a 12 percent spike in sales nationwide, according to the Association of Equipment Manufacturers. Northwest farm equipment dealers reported a 10 percent to 15 percent sales increase in the past year, says Delbert Olson, store manager for RDO Equipment in Sunnyside. He declined to reveal figures specific to his own shop.

* Global food prices in 2007 were 23 percent higher than in 2006 and 35 percent higher than 2005, according to the United Nations.

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