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Energy Costs Drain Hope in Wheat Country by Scott Yates The Columbian, May 12, 2006

SPOKANE -- Randy Kulm, a wheat farmer near Lind, Wash., doesn't mince words.

"I don't know how we are going to operate with these high energy costs. What's going to happen when everybody switches to red wheat?" he said.

Kulm was referring to the current trend among wheat growers to plant or consider planting higher-value red and white protein wheats with the sort of gluten to make bread, instead of soft white, the cookie, cracker and cake class the Northwest's climate is known for producing in abundance. Rising costs are driving the decision. Many farmers are trying something new, rather than the same old thing -- and growing broke.

Farmers are being squashed on all sides by the rising energy market. They are not only paying for the higher prices for fuel, fertilizer and chemicals, but also they are enduring the transportation surcharges to have the inputs delivered. Making matters worse, they also pay transportation surcharges on the grain they ship out.

"Farmers really, truly can't win in this situation. There is no place for them to hand the rising costs off to the market. They are getting squashed on both ends," said Tammy Dennee, executive director of the Oregon Wheat Growers League.

Dennee said political gamesmanship in Washington, D.C., isn't allowing that message to be heard. She urged producers to deliver news of the devastation in the countryside to their legislators.

Producers hardest hit in her state have been among those who weren't able to participate in the Conservation Security Program. Oregon had one of the nation's most successful signups.

"Those who have applied for and received contracts because they had ground in the identified watersheds, they have been able to use those payments to offset fuel and fertilizer expenses that truly were unscheduled," she said.

Twenty-one farmers in Washington appeared to have understood the benefits of getting in the CSP too well. In what is reportedly the only occurrence of its kind in the nation, applicants in several Washington watersheds have been accused of cheating on the paperwork that allowed their participation in the program.

The Natural Resources Conservation Service won't release the names of those it identified until they've exhausted their appeals process. Of the 21, one has given back the government's money. All other cases are on appeal.

Elsewhere, wheat growers are looking for short-term relief from the government to "take a bit of the sting out of these energy prices." That's how Steve Johnson, executive director of the Idaho Grain Producers Association, refers to legislation that would provide growers with 30 percent of their direct payment, and 30 percent of their crop insurance indemnity if they had a crop loss.

Problem is, there's a lot of opposition in Congress to helping farmers this way. Johnson said passage will be a difficult struggle," but he suggested it does provide "some hope for the growers."

Gretchen Borck, issues director for the Washington Association of Wheat Growers, said growers appear to her to be in need of hope. She characterized them as cautious and frugal.

"Every time they turn on the tractor, every time they fertilize, it is costing them so much more money because of the fuel costs and natural gas prices," she said.

"For the first time in the 14 years I've worked for them, I've had guys say this year, ÔI don't know if I'll be here next year.' I never ask about their finances. For them to volunteer it, that's extraordinary."

Borck said she has heard of instances where bankers, whom she called "farmers' silent partners," have urged their clients to reverse course, away from direct seeding and back to more traditional tillage patterns.

"They are going for the sure thing. They are trying to confirm as much as possible that they'll have a solid crop and be able to continue farming until the price comes back up," she said.

Mark Sheffels, president of the Pacific Northwest Direct Seed Association, said reducing tillage does save money over acres, but "no matter how you do it, you have to produce decent crops -- that's what it comes down to."

Sheffels, who farms between a Wilbur, Wash., and a Reardan, Wash. ranch, said rising energy prices have changed the math about what's worthwhile to grow and is another reason farmers are looking to plant a wheat class they haven't worked much with before.

"Buyers are demanding a pretty good premium this year for it, and you just about have to try to do something else. Whether you're conventional or direct-seed, it's hard to sell $3 wheat and pay expenses nowadays," Sheffels said.

It's especially hard on ground that farmers lease from landlords who may be several generations removed.

Kulm, who farms about 10,000 acres southwest of Lind, said the thing that's killing him is his rental ground. A one-third/two-thirds split doesn't work with the price of fuel.

"We are losing money terribly. Come fall, I've got to re-evaluate if I'm going to keep leasing ground. I'm losing money on all of it," he said.

Mark Schoesler, a wheat farmer in Ritzville, Wash., who moonlights as a state senator during the legislative session, said even the best farmers are nervous. He thinks people will be standing in line to grow a hard red wheat, like Bauermeister.

"I've heard if you can grow good Eltan, you can grow good Bauermeister. With the spread so huge between soft white and hard red prices, the answer is obvious."

It is just that spread -- specifically soft white wheat's low price -- that perturbs Tom McCoy, a Ph.D. economist who farms near Wasco, Ore. He said current woes are not so much an issue of energy costs being so high as soft white wheat prices being so low.

"At those prices how do you make anything go? Everything hurts really bad, given the low prices for our product," he said.

Despite the obstacles, however, farmers somehow continue to operate. OWGL's Dennee said it's one of the things that makes her proud of the industry she works in.

"They aren't willing to roll over and say, ÔI'm done.' How many other business people would continue to be as persistent in their professional endeavors with the odds stacked against them?" she said.

She said she believes farmers will again find creative ways to cut their operational expenses. She envisions cooperative fuel production and fleets of tractors running on biofuel.

"I think we'll see some creative problem solving going on out in the countryside.

IGPA's Johnson agreed that farmers are eternal optimists, but even some of those guys are now worried about where agriculture's future lies this year.

"Even though there is eternal optimism, there is tremendous concern in these growers' thought process right now," he said. "We'd like to see these guys stay on the farm. That has not been the trend."