December 1, 2008

Weak economy worries wheat industry, threatens research


Wheat, known as the crop with "nine lives" for its ability to withstand harsh weather conditions, may have a harder time surviving the weak economy.


Grain industry members are worried the financial crisis will lead to cutbacks in the already limited dollars available for wheat research. The majority of projects are publicly funded, so state and federal budget constraints will largely dictate which ones live and die.


Funding for wheat research conducted by units of the Agricultural Research Service, the main in-house research arm of the US Department of Agriculture, is already slated to be slashed in the coming year. The agency often faces reductions during the appropriations process but sees its funding restored.


However, officials are nervous this year's cuts may stick due to the economic slowdown, said Will Blackburn, the agency's area director for the northern Plains. Projects on the chopping block in Blackburn's district include one aimed at fighting a wheat fungus and one to improve farming practices, he said.


"The economy's getting worse; the budget's getting tighter," Blackburn said.


The ARS facility in Akron, Colo., could lose nearly US$700,000 of its US$2 million budget under a proposal to reduce funding for studies on dryland farming, Blackburn said. A facility in Manhattan, Kan. - near some of the country's best wheat-growing land - could lose about US$550,000 that had been budgeted for research on Karnal bunt disease, a fungus that can lower the quality of wheat, he said.


Agency officials hope to win back the funding or see it redirected elsewhere within ARS. They realize that "if our economy turns down, then the money to fund these federal programmes is going to be harder to get," Blackburn said.


In Minnesota, where farmers grow high-protein hard red spring wheat, researchers expect to suffer cutbacks due to a "major budget deficit," said Beverly Durgan, dean of the University of Minnesota Extension and director of the Minnesota Agricultural Experiment Station. Legislative analysts have estimated the state's deficit could reach US$4 billion for the coming two-year budget period, according to media reports.


Wheat's reliance upon public funding for research, as opposed to private dollars, may blunt the impact of the financial downturn. However, the golden grain will still feel the pinch.


"Minnesota and all other states in the wheat growing areas are facing major budget challenges," Durgan said. "The amount of money available for all research is going to go down, and that will affect wheat proportionally."


HRS wheat is grown throughout the northern Plains but has been pushed out of some traditional planting areas by farmers who see better opportunities in corn and soy. Private funding for research on corn and soy has increased their yield potential and resistance to disease.


US wheat harvested area has dropped off nearly 30 million acres, or nearly one-third from its peak in 1981, as farmers looked to more lucrative crops, according to the USDA. Wheat ranks third among US field crops in both planted acreage and gross farm receipts, behind corn and soy.


Additional research is necessary to make wheat more competitive in the battle for acreage, said Jim Bair, vice president of the North American Millers' Association. Government agencies spend "less than US$50 million a year on wheat research, compared with well more than a billion dollars (spent) on privately funded corn research," he said.


"Wheat yields are basically flat since 1970, whereas corn yields continue to rise," Bair said. "Relative to other crop options, like corn and soy, wheat gets further and further behind and becomes less attractive as a crop option. We'll get to the point where the only people that are growing food grains will be the ones that can't grow corn."


It is important for farmers to plant wheat to maintain food production and as part of a healthy crop rotation, Durgan said. Growers can also spread out their financial risks by not relying too heavily on corn, she said.


Wheat would be more competitive if studies lead to higher and more consistent yields, Durgan said. Producers may step up to fund more research by raising the amount of money they pledge to wheat associations through check-off programmes administered when they deliver grain to elevators, she said.


"The businesses that invest in research always seem to do better than the ones that don't," said Dave Torgerson, executive director of the Minnesota Association of Wheat Growers, which may alter its check-off formula to raise more money for research. "I think people realize that to keep wheat competitive, we've got to do more research."


Global crop failures last year help make the case for increased wheat research, said Dusti Fritz, chief executive of Kansas Wheat, a cooperative between the Kansas Wheat Commission and the Kansas Association of Wheat Growers. Poor weather slashed production, causing world wheat supplies to fall to historic lows and prices to skyrocket.


The global crop failures "put us in a position to realize that there is a demand out there that we're going to have continually consistently meet," Fritz said. "A lot of the buyers in the US and around the world, they took notice of that situation and how the whole market climate evolved in that situation. That really sets the stage for making some real progress."


Funding for research at ARS regional labs is "vital" for the wheat industry, Fritz said. Projects, such as developing a new wheat variety, can take years to complete.


At least one private company agrees wheat research is a worthwhile long-term investment, even in lean times. AgriPro COKER Associates, which says it runs the largest wheat breeding programme in North America, plans to spend 8 percent-10 percent more on wheat research in 2009 than it did in 2008, said Paul Morano, the company's national marketing manager.


AgriPro is able to increase its budget for wheat because it is owned by agribusiness giant Syngenta AG (SYT), Morano said. He declined to disclose how much AgriPro spent on wheat research in 2008.


"There's a great future in agriculture," Morano said. "That's the main thing. Obviously the economic times have worried everyone, but if you stop spending today then we're going to pay the price in three to five years."

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