Chafing at the high price of U.S. wheat

Sprinklers water a wheat crop south of Bakersfield, California.

Farmers across the Great Plains are watching their corn and soybeans ripen. Their winter wheat is mostly already in the grain elevators. Winter wheat in the Pacific Northwest is still coming off the fields. 

Half of the wheat grown in the U.S. will be exported. And right now, the price of U.S. wheat is a little high in some import markets.

A few weeks ago, farm reports were speculating on what big overseas customers -- like Egypt, the world’s largest importer of wheat -- would do. The news came this week: Egypt purchased 120 metric tons of wheat from Romania and Ukraine. Iraq purchased 150,000 tons from Canada and Australia. Jordan has also recently shunned U.S. grain tenders.

Vince Peterson at U.S. Wheat Associates, a farmer-owned marketing cooperative in Washington, D.C., is not surprised. “The wheat coming out of the Black Sea at this time of year is frankly so cheap,” says Peterson, “that it’s cheaper than anything else -- from France, or Germany, or the U.S. -- going into those markets.”

Farmers’ costs in Eastern Europe are much lower than farmers’ costs in the U.S. for land, labor, and infrastructure. Peterson calls it a “rush-to-market cash crop” that sells well in geographically adjacent markets where transportation costs are low.

What the U.S. can and does compete on, says Peterson, is quality, purity, and consistency of its wheat varieties.

“We don’t compete generally on price,” says Peterson. “If we’re not essentially the Cadillac of the marketplace, we probably aren’t competitive.”

Where the U.S. has proven very competitive with other major grain-growing countries, is in exports to Asia and South America. Compared to the Middle East, freight costs for U.S. producers are lower. China will likely import a record amount of U.S. wheat this year, Peterson predicts. After a brief halt in trade with Japan and South Korea due the discovery of genetically modified wheat in an Oregon field, those countries are now accepting U.S. imports of soft white wheat (used primarily in noodles) again. Brazil and Mexico are also lucrative and growing markets for U.S. wheat.

Wheat prices are down about 15 percent this year compared to last. That’s partly a result of high global production overall, and partly a reflection of competition with corn. Corn yields are up this year, and surplus corn flows into the feed market, creating a glut, in turn driving down demand for wheat for feed.

But since wheat yields across much of the grain belt and Western states are expected to be pretty good this year, USDA analyst Lance Hoenig says he doesn’t think many U.S. wheat farmers will be complaining about their returns this year.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...