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Farmers amazed at record grain prices

DETROIT LAKES - As anyone who keeps track of U.S. grain markets can tell you, the price of wheat has been reaching record highs of late.

But while that might appear to be good news for area farmers, most of them have been prevented from taking advantage of the situation for the very reason why the current price is so high: There is very little wheat left to sell.

"A lot of people had sold their wheat really close to when it was harvested, so they weren't able to capture the present high prices," noted Jim Velde, who works as a farm loan manager at the USDA's Farm Service Agency.

"It's all pretty well picked off," echoed Chuck Morrison, manager of the Audubon Co-op Elevator. "A lot of farmers sold (their wheat crop) when the market started climbing up in October. They'd never seen prices that were at $7 or $8 a bushel (the rate at that time), so a lot of wheat was sold then."

Bruce Hein, a rural Audubon farmer, agreed.

"Most of our wheat was contracted in the spring, and sold at harvest or a little later," he said. "For the most part, farmers don't have any wheat to sell -- the wheat that's left is in hands other than farmers."

Hein also doesn't expect the current high prices to continue -- which is borne out by the fact that they have already fallen off about $4 a bushel in the past couple of weeks.

"We were paying $21.65 one day for cash wheat," Morrison said. "That was our high point. Right now we're at $16.50 a bushel -- normally, I'd say we should be looking at around $6."

Morrison believes that only around 10 percent of the area's total wheat crop was held in reserve after the harvest.

"Right now, you'd have to look pretty hard to find enough bushels (left) to amount to anything around here," he said. "There's still a shortage of wheat worldwide, compared to a year ago."

Morrison feels that once another part of the U.S., or the world, puts in a good wheat crop, the market prices will "back off" from the current high rate.

Hein agrees, noting that while the current high prices will still be around for a month or two, they will eventually begin to level out to a more "normal" rate. But he disputes the notion that the current prices are higher than they should be.

"The problem I think we face in the wheat industry is that prices have been too low, and the rest of the world has passed it by," he said. "Wheat stayed at $3.50-$4.50 a bushel for almost 35 years.

"For a long time, we've been operating in a world where there's been a nickel's worth of wheat in a loaf of bread or a box of cereal," he continued. "Right now, there might be 25 cents worth of wheat in a box of cereal... the farmer's share of a loaf of bread or box of cereal may actually be costing the millers more than the packaging of the product.

"That's probably the first time in history that's happened."

So does that mean area residents should be prepared to see local corn and soybean fields replaced by wheat? Hein, for one, doesn't think so. At a recent marketing meeting he attended, the speaker asked the farmers in attendance to raise their hands if they were planning to plant more wheat.

"Not one person raised his hand," Hein said. The reason is that while wheat prices look very good right now, so do corn and soybeans -- and there are fewer deductions made for those crops.

"When you bring in a bushel of wheat, there's a deduction for this and a deduction for that, and pretty soon you've taken $2 or $3 off that high price."

Deductions are made on the price of a wheat crop for factors such as a low test weight, protein content that is too low or too high -- yes, Hein said, sometimes deductions are made for wheat being too high in protein -- and other factors. By contrast, there are far fewer restrictions placed on corn and soybean crops.

"You contract to deliver a crop (of corn or soybeans), and that's the price you get," Hein said.

Hein also feels it is a basic failure of the marketing system itself that has led to the current high price placed on wheat crops.

"One of the reasons wheat prices are so high is a failure of the market to anticipate what's been happening in the wheat industry," he said. "There's been a real failure to indicate to farmers that the world needs more wheat, and that's a critical factor in the wheat shortage we face today."

Vicki Gerdes

Staff writer at Detroit Lakes Newspapers for the past 16 years, currently editor of the entertainment and community pages as well as covering city council and the Lake Park-Audubon School Board. Living in DL with my cat, Smokey.

(218) 844-1454