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Flat wheat price means storage ‘risky,’ economist says

Wheat prices are likely to stay within the $5.45-$5.50 per bushel range through the end of the year, making it “riskier” for farmers to store their grain, Washington State University small grains economist Randy Fortenbery says.
Matthew Weaver

Capital Press

Published on October 9, 2017 11:28AM

Last changed on October 9, 2017 1:30PM

Randy Fortenbery, a small grains economist at Washington State University, says storing grain is riskier for farmers this year with flat wheat prices.

Matthew Weaver/Capital Press

Randy Fortenbery, a small grains economist at Washington State University, says storing grain is riskier for farmers this year with flat wheat prices.

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Storing grain is a risky economic move for wheat growers this fall, a grain economist says, since prices aren’t likely to go up before the end of the year.

“I’m not expecting (farmers) to get rewarded for sitting on grain another two, three or four months,” said Randy Fortenbery, Washington State University small grains economist.

If prices don’t go up, farmers cannot be compensated for their storage costs, Fortenbery said.

Storage typically doesn’t pay off for farmers in fall and winter, he said, but it tends to pay off later in the spring, when challenges to planting a spring crop or a large reduction in spring wheat acreage can occur, he said.

“If you’re just sort of trying to hold your grain to get through the end of the year for tax purposes or whatever, I don’t think you’re going to get paid for that, given what the current market conditions look like,” Fortenbery said.

Asked if he’s recommending selling, Fortenbery said every grower’s situation varies, and some individual markets could offer a storage incentive. It depends on how much risk the farmer wants to take.

“This is one of the more risky years to speculate on storage,” he said. “If you’re not willing to be a high risk-taker, this probably isn’t a good year to store.”

Fortenbery expects prices on the Portland market to remain in the $5.45-$5.50 per bushel range through the end of December.

“That’s a pretty tough price” compared to growers’ cost of production, Fortenbery said. Some farmers may be near their break-even point.

U.S. wheat stocks recently were 2.25 billion bushels, down 11 percent from the same date in 2016. The reduced stock is part of the reason prices are higher than they were a year ago, but farmers shouldn’t expect it to mean prices will go higher, Fortenbery said.

A combination of lower production and domestic demand that stayed the same means some of that demand will be met out of inventory, Fortenbery said.

The USDA expects exports to be down by 75 million bushels compared to a year ago, from 1.06 billion bushels, but still higher than 2015-2016, which reached a low point, Fortenbery said. Even though exports are off, the total carryout of bushels in stock will be reduced.

While the wheat stock level by itself doesn’t suggest higher prices, other things could happen to boost them, Fortenbery said, such as a smaller Australian crop than expected and a weaker U.S. dollar boosting exports.



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