Tour to Estimate North Dakota Wheat Crop Shortage07/26/2017
Loaded in vans, a number of farmers, seed company representatives, wheat millers and more are touring the state this week to get a better idea of just how much wheat will be available.
Spring wheat prices have been enjoying a multi-week rally since drought conditions have taken a toll on about 50 percent of the Northern Plains, especially North Dakota where most of the nation’s wheat is grown. Other large wheat producers in Canada’s Saskatchewan and parts of Manitoba provinces have taken a hit as well as drought conditions creep further north and west.
This lack of a crop has left millers and bakers with a protein problem, and some are willing to pay a premium to get their hands on what little supply could be available.
The crop scouts will start in Fargo today, fanning out to cover western Minnesota, central North Dakota and possibly eastern South Dakota, before ending in Bismarck. On Wednesday, they’ll visit western and northwestern North Dakota, ending in Devils Lake. They’ll pick up northeastern North Dakota Thursday.
According to U.S. Wheat Associates, while winter wheat crops planted mostly in more southern regions of the nation had good quality and yields, protein levels in the fields harvested so far were low — almost a full percentage point below normal.
While the standard loaf of bread could be made sans spring wheat, it would lose those qualities that make it more moist and spongy, said North Dakota State University crop economist Frayne Olson. Cookie and cracker makers don’t really need it, but spring wheat is especially important for makers of bagels, pizzas, frozen doughs and other high-end products.
Meanwhile, according to in-field survey results for July released by the U.S. Department of Agriculture, the national average for spring wheat yields is estimated at 40.3 bushels per acre, compared to 47.2 bushels per acre last year.
North Dakota’s estimated averages are down from 46 bushels per acre to 38 bushels per acre, likely helped along by fields in the northeast corner of the state unaffected by the drought. And quality, according to the latest USDA numbers, is rated at 19 percent very poor, 20 percent poor, 29 fair, 29 good and 3 excellent.
Montana’s average is estimated to have dropped from 36 bushels per acre to 26 bushels per acre.
“I suspect in August they’ll be down even more,” said Olson, adding that farmers didn’t plant a lot of wheat this year with a poor price outlook and “comfortable” supplies. “We still had spring wheat in the bin,” he said.
Coupled with the drought, supplies are now dramatically lower, and many are surprised by how much less wheat was planted in the first place.
Cows or crop
Olson said he has a friend who is a medium-sized producer in central North Dakota. In the fields where he was able to plant early, his estimated yields are good — near 40 bushels per acre.
But in others, he might be lucky to get 10 bushels, and he has a small beef herd to consider.
Beef producers, especially those who rely on their herds as their main source of income, in central and western North Dakota are choosing instead to bale their wheat crops rather than combining and hauling the minimal yields to the elevator.
Those hard core livestock producers are doing whatever they can to maintain as much of their herd as possible, according to Olson. They’ve already culled their herds and some are selling calves early, but it’s still not enough for many to be able to feed their animals through the winter. So they’re making the decision to sacrifice what little crop they have to keep the cows.
“There’s no good answer,” Olson said. “The only choices they have are bad choices that are tough to make.”
So they choose the one that inflicts the least amount of financial damage.
Lincoln Roth, who raises cattle and backgrounds calves near New Leipzig, is selling down his 150-head cow herd to about 100. He usually backgrounds, feeding up 900 head, but this year he won’t be taking care of any animals but his own.
And he still doesn’t have nearly enough feed. So when he estimated his wheat fields, aside from one that produced 20 bushels per acre, were only going to bring 5 to 10 bushels per acre, he baled them up. He thinks about one-fourth of the acres planted in his area were baled.
One of his neighbors chose to bale a field of barley he knew wouldn’t make malting quality barley. And as the wheat scouts move through, Roth estimates everyone who planned to bale up crops rather than harvest will be finished.
Insurance helps some
What will provide Roth some relief is that he insured his wheat fields at about 60 percent to 70 percent of average production.
Crop insurance pays farmers for bushels they don’t produce, Olson explained. So a farmer, who, on average, produces 40 bushels per acre and insures for 70 percent, will start receiving safety net payments when their yield drops to 28 bushels per acre or less. In this instance, if the farmer only produced 10 bushels an acre, insurance would cover the 18 bushel per acre gap.
The farmer can then choose to feed those other 10 bushels or try to sell them at the elevator.
“Crop insurance is a big deal to those who have wheat,” Olson said, especially as the futures market that the insurance payments are based on move higher, expected to end at or above $7 per acre.
This doesn’t make the farmers whole, but it does bring them close to breaking even.
An eye on the Corn Belt
Aside from beef producers, the other group likely to struggle most are those with a lot of corn and soybean acres — which amounts to a higher portion of the population as wheat plantings are down.
It’s been hot and dry in the Corn Belt recently, at a time when rain is the most needed for corn and soybeans. Some rain in Illinois and Iowa has taken a bit of the pressure off, Olson said, while Missouri and Nebraska are expected to get drier.
“It’s going to be a weather market for the next two weeks,” said Olson, pointing to with market prices fluctuating with changes in the forecast.
But without a major dry spell, North Dakota corn and soybean producers suffering from the drought won’t see much help from crop insurance.
Source: Jessica Holdman, The Bismarck Tribune