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Washington Wheat Farmers Plow Through Challenges by Marisa Lloyd Daily Fly, April 7, 2022

Barging is the most cost-effective way to get wheat to ports for shipping.
Without that competition, rail prices could increase significantly.

Michelle Hennings, executive director of the Washington Association of Wheat Growers, said farmers are worried about a multitude of factors that will affect harvest levels this year.

She said their concerns are centered on the possibility of continuing drought, spiking fuel and fertilizer costs, delays in getting equipment, and an increase in global demand tied to the war in Ukraine.

"It's really putting farmers on edge," said Hennings, a rancher who also grows hay and wheat near Ritzville.

The International Monetary Fund reported that the global price of wheat increased 80 percent between April 2020 and December 2021 due to inflation and supply chain disruptions tied to the pandemic. Those high prices are expected to be driven even higher by Russia's invasion of Ukraine, which will decrease the availability of grains.

Hennings said many people assume that farmers realize huge profits when prices go up, but that is not necessarily the case. She explained wheat farmers are "price takers," so they can only sell at the prevailing market price. That means that a loaf of bread sold for $2 will return about 8 cents to the farmer. The remainder of the profit will go to flour mills, bakers, and others involved in production.

The war in Ukraine is putting pressure on farmers worldwide to produce more at a time when their overhead is at record highs. In addition, if the drought in Washington and neighboring states continues, yields may be down as they were in 2021, said Hennings.

"Farmers feed the world and that's something we're proud of," Hennings said. "We are still going to do that even though things now are about as bad as I've seen."

On the international front, Russia and Ukraine supply nearly 30% of the world's wheat from sprawling and fertile farmlands in the Black Sea region known as the "breadbasket" of the world. Wheat from the two countries is primarily sold to the Middle East and Northern Africa. Sanctions on Russian exports and a halt in exports by war-torn Ukraine to preserve its own supply for domestic needs are expected to create food insecurity in those areas.

Hennings said it is still too early to know how disruptions to the global wheat market from the war will affect Washington's farmers. The state exports 90% of its wheat, primarily to the Philippines and Japan. She said contracts to supply soft spring and soft winter wheat to Asia for noodles, crackers, confections, and other foods need to continue to be honored.

While the international picture is still fuzzy, Hennings said farmers are focused on continuing drought conditions that drastically reduced yields last year.

According to the U.S. Department of Agriculture (USDA), while overall wheat land sown in Washington during 2021 remained the same as in 2020 at just above 2.3 million acres, yields fell by nearly 50%. Production dropped from 166 million bushels to 87.1 million.

Glen Squires, chief executive officer of the Washington Grain Commission, said wheat output last year was the lowest in the state since 1964 due to the drought. Conditions on the ground were bad enough to make the combined crop output in Oregon, Washington, and Idaho the lowest since 1973, he said.

"It's still dry and we're hoping we don't have a heat dome-like what happened last summer, but it's early yet to say," said Squires.

He said subsoil moisture on most of Washington's wheat lands is far short of where it needs to be, which is not a good omen.

Most wheat farms rely completely upon the snowpack and rainfall for moisture, so having some wet weather in the next couple of months would be greatly beneficial, he said. Regardless of the weather, Squires said farmers in Washington will still produce a significant amount of wheat, even if it is not in the volume that they and the market would prefer.

Although the U.S. produces only about 6 to 7% of the world's wheat, it is the third-largest exporter. About 50% of the wheat produced in the U.S. is shipped abroad. Americans consume 36% of the remaining 50% as food, retain 4% as seed and use 10% to feed livestock, according to the USDA.

Hennings said fertilizer and fuel costs have tripled or quadrupled, which is going to affect production across the country. She said supply chain problems are making it difficult for farmers to readily get the machinery or parts they need in a timely manner. In some cases, she said growers are being told it could be weeks, and sometimes several years, before the equipment they need for harvest becomes available.

As if conditions on the ground and the global marketplace is not enough of a concern, Hennings said Washington Gov. Jay Inslee is gaining traction on his proposal to breach four dams on the Snake River to benefit salmon runs.

Although the idea has been bounced around for years by Inslee and other politicians, she said Congress is now looking into the matter. The dams are under federal control so Congress will have the final say, said Hennings.

Barging is the most cost-effective way to get wheat to ports for shipping, she said. Without that competition, rail prices could increase significantly at a time when wheat prices are already volatile. There are also enormous costs to constructing rail infrastructure in rural areas to match the availability of barging. And no guarantee that rail lines could be added in some areas, she said.

Trucks could also be used to ship wheat, but Hennings said thousands would be needed. That would increase carbon dioxide and the other harmful emissions that environmentalists want to curtail, she said.

There are 37.2 million acres of wheat land in the U.S., according to the USDA. More than 80 percent of the acres of major crops, such as wheat, are insured by federal crop insurance. Hennings said crop insurance relieves some of the stress of the job, although farmers wish it wasn't necessary.

"We want to be self-sufficient and run our businesses without relying on the government," Hennings said.

The program was established in the 1930s to cover yield losses from natural causes, such as hail, frost, or damaging wind. In the mid-1990s, revenue insurance was added to the program so that farmers were covered when gross receipts fall below a specified level. Farmers pay premiums for the insurance, which is available for more than 120 crops and to farmers of all sizes and in all 50 states. The federal program costs taxpayers $9 billion per year.

Hennings said crop insurance can mean the difference between a farm family making it through a tough year or having to throw in the towel. She said it provides security during a time when farmers are being increasingly regulated and can't control so many factors of production and the marketplace.

Less than 2% of the nation's population grows its food and many family farmers are selling because they can no longer make a profit in the heavily regulated industry, or their children don't want the long hours and uncertain pay, she said.

"In times of need, we do need support," Hennings said.