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Rising Price for Soft White Won't Offset Input Costs by Scott A. Yates Capital Press, September 1, 2006

Wheat farmers say higher fuel, fertilizer, equipment costs too much to overcome

SPOKANE - Prices for soft white wheat may be rising, but the overall mood of the Northwest wheat industry is not.

A recent run-up in prices points toward the possibility of growers actually pocketing $4 a bushel for their production. But with yield lower than hoped for, $3-plus diesel prices at harvest, double-digit increases in nitrogen prices over the last several years and rising equipment costs farmers are taking a sober assessment of the future.

Nicole Berg, who farms with her two brothers as Berg Farms LLC near Benton, Wash., said the increase in the price of a bushel of soft white wheat of about $1 a bushel is nothing to celebrate - not as fuel and equipment costs go through the roof.

"I remember three years ago, we could buy a tanker (of diesel) for 63 cents a gallon. We just bought one last week for $3, (a gallon)" she said. "Price and yield aren't compensating for the increases in fuel and steel."

Berg, who helps run a diversified dryland and irrigated operation, said under irrigation wheat pays for little more than the water and rent of the ground. The crop's primary benefit is as a soil-building rotation with potatoes, onions and grass seed. As for her dryland wheat acreage, Berg said she takes advantage of every government program available "just to keep us in business."

A program that has made a difference for a few growers this year is the Conservation Security Program.

Tom McCoy, a dryland wheat grower near Wasco, Ore., said without the influx of funding he obtained as a result of being in one of a handful of eligible watersheds, "It would be pretty bleak. Some of the pressure has been taken off of us. It was an awful nice boost."

"We've had lots of ups and downs in the past, but never such a long period of prolonged low prices without a good price," McCoy said.

In testimony before the Senate Agriculture, Nutrition and Forestry Committee on Aug. 17, Dale Schuler, president of the National Association of Wheat Growers, said his members have received "little or no benefit" from 2002 Farm Bill provisions that were supposed to cushion the boom-and-bust cycles of agriculture.

"Fuel and fertilizer prices are up an estimated 24 to 27 percent for wheat growers just from last year," he said, adding that the "current disaster situation... has been especially troubling for our members."

Schuler was referring to the $780 million disaster relief package recently announced by U.S. Secretary of Agriculture Mike Johanns. Of that amount, $700 million will go to farmers in the form of counter cyclical payments, a program that hasn't benefited wheat farmers since its inception. That's because, during negotiations on the 2002 Farm Bill, wheat's loan rate was negotiated below the level proposed by NAWG.

"If we had gotten the loan rate and the counter cyclical we proposed, we would be OK, but that was traded away at the last minute and we were only in a position to protect what we could," said Daren Coppock, chief executive officer of NAWG.

Although Congress didn't specifically target wheat to take the fall, Coppock said politicians "energetically protect the crops that are dominant in their state." From that point of view, he said, it is only necessary to look at who is in charge of various committees and influential posts to see which commodities were able to maintain healthy loan rates and which commodities lost ground.

Coppock said the Northwest's difficulty is a national dilemma. A paper addressing the competitiveness of wheat shows wheat's share of field crop receipts has fallen from 20 percent in the early 1980s to 11 percent in recent years as a result of loss of yield competitiveness, federal income support program bias and the 9 million acres of wheat ground that's gone into the Conservation Reserve Program

Although NAWG has not yet released its 2007 Farm Bill proposal, it has already called for "commodity neutrality."

The competitiveness paper argued that "free markets should give producers clear signals on future planting decisions and individual commodity loan rates or other farm programs should not interfere with those signals."

Hoping to build an industry coalition that will work for a more certain wheat future, NAWG has organized a wheat summit. The meeting will include growers, equipment manufacturers, millers, bakers, merchants, food companies and retailers. The goal is to turn around wheat's fortunes and ensure a reliable supply of product.

One of the approaches to be pursued is political. "We have to continue our efforts and redouble them to make friends on the agriculture committees and to get folks positioned when we can," Coppock said.