Wheat prices take another wild ride

WATERVILLE -- A year ago, a lot of wheat farmers kicked themselves for selling their wheat too early. This year, they’re kicking themselves for selling too late.

Fueled by a worldwide wheat shortage, prices were climbing last year after 30 years in the range of $3 to $4 per bushel. Many farmers in Douglas County sold wheat on the front end of the boom, when prices were $4 to $5 per bushel.

By November, the Waterville price had hit $9 a bushel, but farmers had already sold 80 percent of their crop. The Waterville price kept climbing, peaking at $15.12 a bushel on Jan. 28. Farmers wished they had more wheat to sell.

Through spring, prices declined some. Farmers, not wanting to sell too early again, held back on advanced sales of the 2008 crop. They held back during harvest in August and September only to see prices drop like a stone in September.

The Waterville price slid from $8 in August to under $5 by the end of September, says Kevin Whitehall, manager of Central Washington Grain Growers Inc. in Waterville.

The Waterville price bottomed at $4.08 on Oct. 23 and was $4.78 a bushel last Monday, he said.

At of the end of October, members of the cooperative had sold just 39 percent of their crop compared with 80 percent a year earlier, he said. The 80 percent was a record high and the 39 percent is a record low, he said.

Prices fell around the world because of a glut of wheat caused by over-planting in many countries and a return to a normal crop of 20 million metric tons in Australia after two years of drought, Whitehall said.

The world supply is 2.5 billion bushels more than a year ago, he said. The U.S. crop was also 2.5 billion bushels, up from a normal 2 billion, he said.

“I would hope for market recovery but I’m pessimistic about that happening because of the huge world crop,” Whitehall said. “But things can happen. Something comes down the pike and changes everything. I’ve seen that happen a number of times.”

A lot of farmers are waiting but eventually may have to sell at less than desirable prices to pay loans, he said.

“They feel bad that they’ve seen a market slip away from them and I feel bad for them too,” he said.

Gary Polson, a Waterville wheat farmer, said he sold about 40 percent of his crop in advance of harvest at better than $7 a bushel. With a lot of agonizing, he sold the rest in the mid to high $6 range as prices fell, he said.

Prices dropped as much as 30 cents a day in September which caught people by surprise, he said.

“Most guys are tight-lipped about what they’ve done,” he said.

Douglas Young, a Washington State University agricultural economist, said well-capitalized growers can break even at $4.50 a bushel but that many will be $2 to $3 per bushel below production costs if they sell in the $4.50 to $5 range.

He said banks are less inclined to stretch loans given the current economy and that growers may have to sell at less than breakeven prices to pay off loans.

“We have crop revenue insurance that should hold us over for another year,” Polson said, “but two years from now, who knows?”

Michel Ruud, executive director of the federal Farm Service Agency in Chelan and Douglas counties, said the agency has granted more low-interest loans for cash flow for Douglas County wheat farmers this fall.

As prices have fallen, farmers have taken out more loans to help meet expenses and are buying more insurance to protect themselves against low prices on the 2009 crop.

The FSA awarded nine commodity loans, totaling $307,937, to wheat farmers from harvest 2007 through March 31, 2008, Ruud said. That was a low number of loans because of high prices, she said. So far this season there are 27 loans totaling $1.17 million but farmers have until March 31 to apply, she said.

Ruud’s husband, Jim Ruud, Douglas county assessor and a crop insurance sales agent for Dorsey & Sutor Insurance Inc., Waterville, said there’s been a significant increase this fall in farmers buying expensive revenue crop insurance for their 2009 crop that guarantees a certain return per acre.

“More guys are buying because the per-acre guarantee was high,” he said.

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