By Heather Schlitz
(Reuters) – Profit is becoming increasingly unattainable for U.S. wheat farmers, with many not expecting to break even in 2024 due to abundant global supply keeping prices at their lowest in almost four years, while costs for equipment and transport remain high.
The current situation in the U.S. wheat market will have a significant impact on winter wheat farmers in the Great Plains. Despite having what appears to be their best crop in some time, after three years of drought reducing yields and forcing farmers to abandon wheat, they may still end up losing money.
U.S. wheat prices have dropped as cheap supplies from the Black Sea and Europe have replenished global stocks of the staple grain, and ample corn harvests worldwide have put pressure on the entire commodity grains market. U.S. winter wheat will be the first crop to be harvested in a year when U.S. farm income is expected to decline, indicating challenging times ahead for rural America.
Chris Tanner, a farmer in the top wheat-growing state of Kansas, stated that he would need to harvest 10 bushels more per acre than last year in order to break even.
“It’s difficult to express how that makes me feel without coming across as an angry farmer with a pitchfork,” Tanner said. “It makes me feel like I’m working tirelessly to produce a superior product.”
An analysis from Kansas State University revealed that Kansas farmers would require a yield of approximately 60 bushels per acre at a price of $6.26 per bushel to break even, a figure well above current cash prices in the state and July futures prices. Winter wheat is typically harvested in June and July in the Great Plains.
The International Grains Council, based in London, predicts a record global grain crop in the 2024-2025 marketing season, heightening concerns about a global surplus.
While the size of the U.S. winter wheat crop will become clearer in the following weeks, especially during the annual wheat tour in May, the U.S. Department of Agriculture reported on Monday that 55% of the crop is in good-to-excellent condition, the highest for this time of year since 2020.
Scott Born, a wheat farmer near Dallas, Texas, mentioned that he needs a price of at least $6 per bushel of wheat to break even, a price that exceeds the current cash price in his region.
The expenses associated with transporting and producing American wheat remain high compared to Black Sea and European wheat, raising concerns about the long-term competitiveness of U.S. exports.
The U.S. ranks as the world’s fifth-largest wheat exporter, having lost market share to top exporter Russia and other producers in recent years.
The global market is highly competitive, with American companies sometimes purchasing European wheat to take advantage of lower prices. The USDA estimates wheat imports in the current marketing year at 18 million bushels, the highest in a decade.
FEWER WHEAT FARMS
The USDA anticipates that farmers will decrease the number of wheat acres planted for the 2024 growing season, encompassing both winter and spring crops, by over 4% compared to 2023. The number of U.S. farms cultivating wheat has declined by over 40% in the last two decades as farmers have favored other crops.
Despite the collapse in wheat prices, farmers noted that costs for farm equipment, repairs, and labor have surged, leaving them with minimal profit after harvest. Farmers mentioned that crop insurance policies will only cover a portion of their financial losses, and payouts are insufficient to fully recover.
The USDA projects that U.S. farm income in 2024 will drop by nearly $40 billion from the previous year in nominal terms, following a decrease in 2023 as direct government payments decrease, production costs rise, and increasing supplies of grains and oilseeds drive crop prices to multi-year lows.
“Somewhere along the line, you have to make a living,” Born remarked. “If there’s anything left, I might have something to live on.”
Growers have cut back on purchases and equipment repairs to stay afloat, while continuing to plant wheat as an essential part of crop rotation despite low prices.
The USDA expects the number of acres planted with winter wheat, which accounts for about two-thirds of U.S. production, to have declined by 7% from 2023 to 2024. Conversely, the USDA foresees an expansion of 1% in spring wheat acres.
Wheat serves as a cover crop, leaving behind fertile soil where farmers can plant less risky crops.
“Rotation plays a significant role in the allocation of wheat acres. You feel compelled to sow it, but what other options do you have?” Ellis said.
Seeds for more profitable crops, such as lentils and peas, can be scarce and are only suitable for cultivation in specific areas.
“The rotation largely determines the allocation of wheat acres. You feel like you’re being compelled to plant it, but what other choice do you have?” Ellis remarked.
