Low prices caused by glut of old wheat at county grain elevators puts damper on Kansas harvest

Low prices put damper on Kansas wheat harvest

WICHITA, Kan. — Dismal prices at country elevators that still have much of last season’s crop left in storage have put a damper on this year’s winter wheat harvest in Kansas.

Although cash prices, or the price farmers typically get when they bring their crops to their local grain elevators, usually drops during the harvest because of plentiful supplies, this year’s prices are unusually low because so much is leftover nationally and worldwide from earlier seasons, said Dan O’Brien, an agricultural economist at Kansas State University.

One telling barometer of the backlog is the Kansas City Board of Trade’s reports of “deliverable wheat stocks” at major elevators. On June 11, as the Kansas harvest was just beginning, those elevators were 41 percent full with the previous season’s wheat. That’s more than twice the amount that’s usually leftover at this time of year, O’Brien said.

While low prices are clobbering farmers across the nation’s wheat belt, the pain is especially bad in Kansas, which grows about one-third of the nation’s hard red winter wheat, the type commonly used to make bread.

“Our elevators are more affected than many others,” O’Brien said.

When farmers brought their winter wheat to country grain elevators in 2008, the average cash price nationwide was $6.78 a bushel, he said. Last year, during the recession, the average cash price was $4.85 a bushel.

For the 2010 crop, the projected average cash price nationwide is $4.40 a bushel. And, as the wheat harvest expands with the crops maturing northward from Texas and Oklahoma to Kansas, farmers are seeing prices in the $3.60 to $4 a bushel range in central Kansas, O’Brien said.

“The guys who are going to be hurt are the guys who figured the good times were going to be here forever,” said Vance Ehmke, who farms near Healy in west-central Kansas. But, he added, “Farmers as a rule are fairly conservative financially. They will be OK. They will just tighten their belt and go on.”

Troubling farmers almost as much as the collapse of cash prices is the growing difference between them and prices on futures contracts on the Kansas City Board of Trade and other grain exchanges.

Historically, the difference has been anywhere from 40 cents to 75 cents per bushel, O’Brien said. In late 2009, the difference was about 75 cent to 80 cents, and this year, it has been $1 or more. The difference is essentially the amount the elevators receive for storing and delivering the grain.

“It has a lot to do with the weakness we are seeing in our cash prices and the fact that we’ve had a difficult time moving the last two to three years of wheat crops,” O’Brien said. “Some of last year’s wheat is still sitting in these same facilities, so they are jam full. There is not a lot of room for this year’s wheat crop, so in a free market situation you are seeing lower prices being offered.”

The low wheat prices will have a ripple effect on rural economies, Ehmke predicted.

“Demand will go down wherever you are — whether you run a John Deer dealership or you sell certified seed or fertilizer of whatever,” he said. “This is just the beginning of some kind of lean times out there.”