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Wheat growers face tight margins as prices hit multi-year lows.
As of August 5, 2024, the nationwide winter wheat harvest is 88% complete, in line with the five-year average. Spring wheat harvest is at 6%, behind 2023’s 8% and the five-year average of 10%, but conditions are good with less than 4% of spring wheat in poor or very poor condition. Barley harvest is slightly behind the five-year average. In Oregon, timely rains have benefited the wheat crop, while in Washington, winter wheat yields are generally good to average despite some drier conditions in the eastern part of the state. Overall, yields across the Pacific Northwest are ranging from average to above average. Some regions including central Washington are setting record yields. However, protein levels in the crops are lower than usual. In Montana, some producers have experienced challenges with sawflies and lower protein.
Warm weather and better moisture conditions have increased hard red winter (HRW) wheat production by 27% year-over-year. However, HRW wheat has struggled in the export market due to a large Russian crop and lower prices. With a larger crop this year, it will be challenging for U.S. HRW prices to rebound. Spring wheat prices rallied in May after frost damage in Russia, but this was short-lived as the U.S. spring wheat crop is expected to be larger. Overall, wheat prices are down year over year, reaching their lowest levels in the last 3.5 years. Typically, this is the time of year when prices bottom out and then stabilize. Lower prices have boosted exports, with wheat export sales up 50% year over year. However, low prices continue to pressure already tight margins for wheat growers.
March 31, 2024
Small grain producers are in a tight financial position and profitability will hinge on diligently managing production costs. Prices for Portland freight on board wheat have softened nearly 25% year over year while elevated operational costs remain sticky. Futures prices for new crop wheat contracts have softened substantially. There is still a significant amount of wheat in storage left to sell. Wheat prices may decline further in 2024 to compete globally, impacting producer margins that are already tight as lower commodity prices and sticky input expenses weigh on profitability.
Despite the many headwinds, producers are navigating the recent challenges better than expected. Some fallow rotation producers have seen slight erosion of their working capital and are looking at break-even returns or slight losses. However, producers in continuous cropping regions remain profitable, mainly due to pulse crops. Canola profits are marginal. Current canola prices are above $0.22 per lb, indicating potential profitability for the upcoming season. While the current outlook is a mixed bag, concerns are rising for the 2025 growing season. Producers are anxious about their debt and uncertainties in crop insurance valuations. Working with crop insurance agents and creating a grain marketing strategy may alleviate some of the challenges ahead for small grain producers.
12-Month Profitability Outlook
View the latest AgWest Small Grains Industry Perspective
Learn moreOct 3, 2024, 11:00 AM
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