The growing cost of growing wheat
By Andy Porter of the Union-Bulletin
Saturday, September 24, 2005
Nobody's called it a ``perfect storm,' yet.
But between rocketing costs for fuel and fertilizer, low prices for their crop, increased shipping surcharges and worries over whether this will be another dry winter, local wheat farmers say the future is looking pretty grim these days.
``I'm not sure anyone is aware of it, but energy prices are quickly making the continuation of wheat farming questionable unless something begins to change soon,' said Walla Walla County farmer Nat Webb.
Over a relatively short period of time, fuel prices have tripled and the cost of fertilizer has doubled, Webb and others said.
At the same time, the price for soft white wheat, the type which accounts for 88 percent of the wheat grown in Washington state, is hovering slightly above $3 a bushel, ``a 20-year low,' said Harold Cochran, former national legislative chairman for the Washington Association of Wheat Growers.
The bottom line, as Washington State University farm management specialist Herb Hinman said, is the rising prices are ``cutting into (farmers') profit margins, and a lot of these guys are operating on a pretty thin profit.'
Fuel and fertilizer are two constants all farmers have to deal with year in and year out, Cochran said, and lately ``our core costs of production have gone up dramatically.
``Three years ago I paid 80 cents a gallon (for diesel) and now I'm paying $2.60 a gallon,' Cochran said. ``Fertilizer has gone from 17 cents a pound to 37 cents a pound, which has more than doubled in the past year.
``We've had incremental inflation for years, but when things are doubling and tripling all of a sudden, there's nowhere to turn,' Cochran said.
On his farm, Webb said tractors consume between 70 to 100 gallons of diesel per day and a combine can consume about 100 gallons a day.
``Energy costs that were once one of our lesser expenses have become a major item and threaten our ability to continue farming,' he said.
Brad Tompkins, past chairman of the Washington Wheat Commission, said fuel and fertilizer prices ``are weighing on everyone's mind.
``We're having to watch diesel fuel like the futures market...call one day and you get one (price), call the next and you get another,' he said.
The price for fertilizer, particularly anhydrous ammonia, which is widely used by growers in this region, has also climbed.
``Fertilizer prices are almost double what they used to be...it's a pretty sad situation,' said Jack DeWitt, past president of the Washington Wheat Growers Association.
His son, Jay DeWitt, voiced similar concerns.
``I guess the worst part of the problem for me is the natural gas prices. Nitrogen fertilizer is my number one expense item, (and) it's more than doubled over the past 30 months,' he said.
To cope with the increases, DeWitt said, ``we're having to make very serious and uncomfortable adjustments' in how they farm, most immediately in their crop and rotation patterns.
``What we like to do is grow wheat every two years, (but) the economics have changed to the point where that's almost impossible,' he said.
Consequently, they are looking to change to other crops, such as dried peas ``and we're using summer fallow, and I haven't had that on my farm in 15 years.'
For farmers who use anhydrous ammonia to fertilize their fields, the reason behind the price increases lies in the price of natural gas, which is used to make the fertilizer, Webb and others said.
``Just prior to (Hurricane) Katrina we received a price increase of about $40 per ton,' Webb noted. ``After Katrina came another price hike of (more than) $100 a ton.'
In addition, the timing of the increases have hit some farmers particularly hard.
``In past years this wouldn't have had the impact that it has now since most of the fertilizing for next year's crop would have been completed,' Webb said.
``However, with the advent of no-till seeding, the fertilizer is applied with the seed, so much of the fertilizer hasn't yet been applied. Any cost savings generated by no-till seeding have just been eaten up by the effects Katrina had on fertilizer prices.'
The uncertainty over costs and worry about weather are also coming at a time when farmers are trying to draw up their budgets and arrange lines of credit for next year's crop, said Mark Grant, manager of the Bank of Whitman in Walla Walla.
``Basically, fuel is up and people are going to have to budget 100 percent more than last year, and they pay sales tax on top of that,' Grant said.
But the biggest worry for farmers, Grant said, is ``the moisture is gone.'
Two successive dry winters have left soil moisture levels extremely low. In northern Walla Walla County, where Tompkins farms, ``we have the lowest soil moisture samples I've ever seen.
``What we're seeding into right now, researchers would say there's not enough (moisture) to grow...so if we don't get decent rains this winter, we're in trouble,' Tompkins said.
According to the National Weather Service's Climate Predication Center, at present there is no clear indication of how much precipitation to expect over the next three months.
While forecasts predict below-normal precipitation in the southwestern United States, the seasonal forecast gives the Pacific Northwest equal chances of above-normal, normal or below-normal precipitation in the coming three months.
But if the latter situation plays out, another drought year could be the proverbial last straw for farmers who are now just scraping by.
Or, as Jeff Emtman, president of the Washington Association of Wheat Growers said, ``People are going to be lucky to break even, and those who don't might go under.
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