Association Perspectives

Why should we care about wheat?

By Tracy Sayler

A mix of media and ag industry folks including myself are chatting around the dinner table on the eve of a Wheat Media Summit held earlier this year in San Antonio, sponsored by Bayer CropScience (yes, Bayer makes more than just aspirin; the company’s ag division makes crop protectants including the fungicide Folicur and herbicides Puma and Silverado, among others).

Then Jay O’Neil, an ag commodity consultant from Kansas, tosses out a candid, rhetorical question: “Why should we care about wheat?”

The first inclination to such a question, if you’re close to the crop like I am, having grown up in wheat fields and then covering it from seemingly every angle in newspapers and magazines for the past 17 years, is to become defensive. But with wheat seemingly stuck at a crossroads – beaten up by disease, seldom selling much beyond $4/bu cash price, yield potential that hasn’t increased much over the past 20 years, production costs (most notably fertilizer and fuel) that have increased dramatically in that same time span – O’Neil’s rhetorical question bears further contemplation.

If wheat acres continue to decline in the northern U.S., why indeed should we care?  Yes, wheat is tradition, wheat is the mother crop upon which northern plains agriculture was founded. But times change.  Agriculture has changed. If other parts of the world can grow wheat more cheaply than we can, why not let them?

Why should farmers care about wheat? More and more growers are finding they can make better money with less risk growing other crops. If that’s the case, why grow wheat?

What about crop rotation?  Good question – a cereal crop is needed to rotate with the broadleaf crops we grow, such as soybeans, canola, sunflower, dry beans, and field peas.  However, the best answer is a four-letter word: corn.  Better genetics combined with increasing demand for ethanol means corn acres will continue to creep west and north, with corn increasingly becoming a more viable cereal grain rotation option in traditional wheat growing areas. And it’s not like wheat will disappear from the northern plains completely.  Farmers will still be growing it for hay, on sugarbeet ground, and in other niche applications and situations, just like barley and oats. So there’s less wheat acres – big deal? That should just mean better market opportunities for the fewer remaining wheat growers who can’t or don’t care to grow corn.

What about grain elevators and grain handlers? If we’re growing other crops instead of wheat, they should still be able to make their margin and volume in handling other crops.  And if we’re growing less wheat, there may be niche market handling opportunities.

What about the grain transportation industry?  Just like grain elevators, truckers will shift to handling more of other crops and less wheat.  Same for the railroad – you can be sure the railroad companies will make their money, wheat or not.  The Port of Duluth? Sure, wheat traffic out of Duluth-Superior is always welcome. But the Port is so diversified that less wheat grown in the northern U.S. would hardly have an effect. In fact, less wheat grown in the northern U.S. could encourage more wheat acreage in Canada, some of which is shipped out of Duluth-Superior, meaning the Port would still handle it’s share of wheat if northern U.S. wheat acres continue to decline.

What about agri-business retailers and suppliers? How many of today’s agri-business retailers and suppliers are solely dependent upon wheat? Very few – if they are in business today, they are already diversified to sell/supply inputs and equipment for other crops.  Less wheat and more acres of other crops will just mean less wheat related inputs and equipment, and more related to other crops or commodities. For example, less wheat being grown in Dickinson, N.D. doesn’t necessarily mean the crop insurance agent who handles mostly wheat policies will go out of business, but it might mean a change in business.  Today he might be handling mostly wheat policies; 10 years from now maybe he’s still writing some wheat policies, but also a lot more corn, soybean, and livestock policies that used to be wheat.

What about the wheat organizations? Well, if wheat acreage would continue to decline, there’s no question the state (and likely national) wheat organizations would need to change, perhaps downsizing or diversifying their operations and programs (the executive director of the Minnesota Barley Council, for example, has diversified by becoming involved with issues relating to northern Minnesota turfgrass seed producers).  Or perhaps the wheat organizations would be prompted to consolidate or regionalize, such as the Red River Valley Potato Growers Association, which became the Northern Plains Potato Growers Association, or the North Dakota Dry Pea & Lentil Association, which recently approved going forward with the formation of a regional organization representing pulse growers from North Dakota and Montana.  Less wheat grown would mean less funding for lobbying on wheat issues, and for research and promotion.  But if it gets to the point where there’s less wheat grown in the northern U.S., then is the same lobbying presence or level of research and promotion even needed?

What about wheat end users and consumers? Here’s the point in the wheat chain that would be most affected by a continued decline in northern U.S. wheat acreage and production, particularly domestic wheat users.  It would become more difficult for users to source the type of wheat they want, especially if there are production problems. For high protein wheat, users may need to import over large distances, such as Canada or even Australia, paying much more in freight than if they sourced wheat from Bismarck or Billings.  Paying significantly more in freight would squeeze users’ profit margin, a squeeze which likely would be passed along to consumers.

So who should care most about the decline in wheat acres and production in the northern plains? In my opinion, it should be end users and consumers, yet by and large it seems that they are the most ambivalent and indifferent toward this trend. There are end users and consumers who don’t want farmers growing biotech wheat, and they don’t want to pay farmers a meaningful price premium to grow a particular type of wheat either.  So what should these farmers do? They’ll continue to turn to other crops.

Will biotech wheat and/or attractive premiums for IP (identity-preserved) wheat help stabilize future wheat acreage and production in the northern plains? Maybe. Maybe there are other ways to do it too. At any rate, it’s in the best interest of end users and consumers to become more engaged in the U.S. wheat industry’s soul-searching effort.