December 08, 2003
US' Montana Wheat Sales Influenced By China's Purchase
Last summer's sweeping drought caused the smallest worldwide wheat crop this year since 1995. The world's supply of wheat, the grain in storage, hasn't been this low since 1982.
But Montana farmers who had a good crop aren't enjoying record prices largely attributed to China not buying from the state.
That was the message from Kevin McNew, a marketing specialist at Montana State University-Bozeman delivered to about 40 farmers at the Montana Grain Growers Association's convention last Thursday morning.
Warm, dry weather across Europe withered crops, causing Spain, Belgium and Italy to step up their U.S. wheat imports this fall. But that wheat is shipped from the Gulf of Mexico or through the Great Lakes and across the Atlantic Ocean.
Montana's wheat exports are shipped largely from Portland, Ore. But U.S. wheat sales to countries buying wheat from that port, including the Philippines and Indonesia, are down.
Export markets are critical customers for Montana's wheat crop, which typically has the qualities needed for good baking flour and noodle manufacturing.
So what's the impact on local wheat prices in the future?
"It's a wild card," McNew said. "If China comes to the table like I think they need to, it will impact prices."
McNew said his hunch on China is based on the fact that the country does not produce enough wheat to feed its own population.
As always, weather is the other wild card that will affect how wheat prices play out in the future, McNew said. And so far, conditions are dry.
"I wonder when the name of this will change to the Dust Growers Convention," McNew quipped. "We're bad (in Montana), but so is everyone else."
In the short term, farmers might have some good opportunities to sell their wheat over the next couple of months at good prices, especially if China steps up imports, McNew said.
Chester farmer Charles Hull was among those trying to soak up McNew's report. He said he watches the markets, but stopped short of predicting grain prices.
"I don't have a clue what prices will be the next day, let alone next week," McNew said. "It's so dependent on the weather, on world markets, it's tough to make marketing decisions."
McNew conducts grain market seminars across the state, year round. Typically his audiences watch prices and export numbers religiously, he said.
"These farmers watch the grain market like investors watch the stock market, and they have to," he said. "It's risky and volatile, a one- or two-cent change in price can mean they can't make money."
Bruce Clark, the manager of Mountain View Cooperative, which has a grain elevator at Collins, said although the basis price for wheat in Montana is soft right now, cash prices aren't bad. On Thursday, a bushel of 13% protein winter wheat sold for $3.81 and a bushel of 15% spring wheat sold for $4.10.
A basis price is the difference between the local cash prices and what grain is being traded for on the futures market.
"The basis goes up and down depending on supply and demand," Clark said. "We had a good wheat crop this year in Montana, so we have a big supply. That will depress the basis. And exports off Portland are soft right now."
Given the alternative, Clark said most farmers would choose a soft basis price.
"This is our first decent crop in five to six years," Clark said. "Do you want a strong basis or bushels. I think most people want bushels."
About 350 people attended this year's Montana Grain Grower Association convention at the Heritage Inn. In addition to workshops, attendees wandered among the 55 booths at the convention's trade show.
The event wrapped up Thursday evening with the president's banquet.