Wheat prices below breakeven, stocks to exceed demand
Staff Writer |
Russia, Ukraine, Canada, Australia, Argentina and Serbia – nearly all the major wheat-growing regions on the planet – are reporting surplus production.
Article continues below
break]
According to the USDA-National Agricultural Statistics Service, global wheat production is expected to exceed 738 million tons this year, a mountain of newly harvested wheat to be added to the Himalayas of ending stocks already on hand.
The U.S. Department of Agriculture reports that global stocks of wheat will exceed international demand by more than a quarter of a billion tons this year.
That’s equal to a four-year total of all the wheat harvested in the United States. The end result is that wheat prices have crashed, leaving many Montana farmers to wonder whether they can sustain an operation showing little to no profits.
“From a financial perspective, the cost of production has not gone down nearly as much as the price of grain,†said Adrian Doucette, president of Stockman Bank for northcentral Montana.
Stockman Bank is Montana’s single largest private agricultural lending institution.
“An example we had the other day was someone who cut a phenomenal yield, but their inputs were $240 an acre,†Doucette said. “So when you work that backward to $4 wheat, you’ve got to have a pretty good yield to make a profit.â€
That means that if the farmer was lucky enough to get $4 a bushel, his crop needs to average 60 bushels an acre just to break even.
Figures from the Chicago Board of Trade show that between January 2011 and March 2014, U.S. wheat prices fluctuated between $5.77 and $8.67 a bushel.
But for the past two years, the price has consistently remained below $5 a bushel and has now slipped below $4. On July 14, NASS predicted the open market price for wheat will continue to fall, projecting a season-ending average price of around $3.70 a bushel.
At those prices, only exceptional harvests have any hope of showing a profit. ■