BILLINGS (AP) — With a record-breaking wheat harvest and strong prices, Montana may have its third $1 billion wheat harvest in four years.
"I think everybody is in a fairly good mood," said Lola Raska, of the Montana Grain Growers Association. The state's largest grain group wrapped up its convention in Great Falls last week as prices shot up 60 cents a bushel over three days.
Prices much higher than predictions
Cash prices for wheat Monday ranged up to $6.49 a bushel for ordinary winter wheat to $10.15 for high-protein spring wheat, rates no one would have predicted six months ago when the average price was less than $5 a bushel.
Then Russia suspended grain exports because of extreme drought, Ukraine followed suit and Australia finished the year reporting a 1 million ton cut in wheat exports.
Montana's 2010 grain story was the exact opposite. With record rains across much of the state, wheat farms produced 215.36 million bushels of wheat, despite planting 80,000 fewer acres than the year before, according to the National Agricultural Statistics Service.
Strong exports of American farm products prompted U.S. Agriculture Secretary Tom Vilsack earlier this month to declare that agriculture was leading the country out of the recession.
Exports may set a record
Farm exports in 2011 are expected to total $126.5 billion, a new record, according to U.S. Department of Agriculture economists.
Foreign buyers are turning to Montana grain, despite rising prices and a strengthening U.S. dollar, which makes it more costly to buy and ship American wheat with a weaker foreign currency.
"Currently, people just need food," said Kim Falcon, Montana Wheat and Barley Committee executive vice president, "and need to maintain higher quality of their wheat products."
Montana high-protein content is a seller
The high protein of Montana's grain has been the state's strongest playing card when dealing with foreign buyers, especially in Asia where protein quality of local crops is considerably lower, Falcon said.
Foreign buyers blend in Montana grain to boost protein levels. Asian markets have been good for Montana, not only because of the need to blend, but also because their economies are growing.
"There are countries in Asia that are doing pretty well," Falcon said. "They don't have the huge unemployment. Middle class appetites are growing in other countries. That population is growing and so is the demand for wheat-based products."
Trade has been tricky this year because Montana protein levels are a bit lower than usual, a product of higher yields, wet, cool weather and the decision by some farmers to not to fertilize last spring when grain prices were dismal.
Quality is within range
But the quality is still in the range that buyers look for, Falcon said. Montana marketers have had to help foreign buyers change their blends to account for the slightly lower Montana protein.
Looking into next year, Falcon said foreign buyers concerned that the amount of available quality wheat could still be short will probably be visiting the state earlier than usual to get a jump on buying Montana grain. They'll tour farms to get a feel for what kinds of wheat Montana is planting and in what amounts.
Making predictions is heard
Predicting the global availability of wheat in the next year is as difficult as predicting what the price might be, said Gary Brester, an economist with Montana State University.
Wheat is the crop that's fairly easy to get into for farmers using similar machinery to plant small grain crops like barley. That ease of entry means the amount of acres planted in wheat can increase fairly quickly. That increase in wheat acres can drive prices down in a hurry.
Brester's advice to farmers is to lock in a futures contract now if they see a price they can live with, or sell their grain in the cash market if the profits are promising.
"I think these are good times," Brester said. "The only mistake would be to assume that this high price would be the norm."