After a record-breaking 2007, Kansas wheat producers, already fearful of falling prices, are facing some stiff competition from farmers in the north and from exporters far to the east.

Following a couple of off-years, growers in Russia and Ukraine now are setting some records of their own, while North Dakota took advantage of a weather break and outpaced Kansas' output.

According to a report in Monday's Wall Street Journal, "The U.S. won't lose the title of world's biggest wheat exporter, but countries such as Ukraine and Russia are expanding their influence on the world market, analysts said. The region is now one of the top-five world exporters, a group formerly limited to the U.S., Canada, the European Union, Australia and Argentina."

Aaron Harries, director of marketing for Kansas Wheat, told Kansas Liberty the increased volume of wheat production from the Black Sea region would have some effect on the Kansas wheat industry, since a large amount of Kansas wheat is exported to the Middle East, a part of the world adjacent to Turkey, which occupies most of the sea's southern and western shores.

The paper attributed the increased exports to lower costs of production and high levels of government capitalization. Output has doubled in some areas, the Journal reported. In the region as a whole, production is projected to rise by 28 percent to 63 million metric tons, a record.

“The Black Sea region has not had a very good harvest in terms of volume the last couple of years, but this year they did have a larger harvest in terms of volume,” Harries said. “However, the bread-making quality is fairly poor so a lot of that wheat is going to be used for livestock feed.”

Harries said that while a significant portion of the Black Sea region’s wheat would be used as feed, Kansas wheat is of a higher quality and therefore is worth more.  

“What we export from Kansas is largely, with a very small exception, high milling-quality wheat,” he said. Milling-quality wheat is ideal for baking and bread-making.

However, Harries said the large wheat harvest from the Black Sea region would only exacerbate the problem the world’s large wheat supply is having on the price of wheat.

“Exports are going to be down from last year in large part because there is a record global wheat harvest and that’s a dramatic change from a year ago when there was a tight supply,” he said. “So the fact the Black Sea market has had a larger harvest presses down the price of wheat the Kansas farmer receives, but it won't have necessarily as much impact on the exporting as millers across the world are still looking for bread-making quality.”

Harries said there were several factors that will continue to help maintain the United States' position in the global wheat industry.

“Because the United States is the only free and open market for wheat in the world we don’t have any government restrictions on exports," he said, "so the cupboard doors are always open." 

According to a U.S. Department of Agriculture report, Kansas wheat production in 2007 was 283.8 million bushels, down 3 percent from 2006.

Citing USDA figures, the Journal said, "The U.S. in 2008 is projected to export about 27 million tons of wheat, accounting for 22% of world exports. That is down from about 27% a decade ago. Exports from 12 countries in the former Soviet Union are projected to account for about 23% of the world's wheat exports this year, up from 3.4% in 1998."

An August 2008 National Agriculture Statistics Service report said the total U.S. farm production expenditures increased 9.3 percent over the last two years, and almost 30 percent over the last five, with a record $260 billion in farm production expenditures for 2007.  

According to the NASS report, "average production expenditures per farm increased 10 percent nationwide, from $114,186 in 2006 to $125,648 in 2007. On average, U.S. farm expenditures for fertilizer, lime and soil jumped 26 percent to $8,070; feed costs rose 22 percent to $18,412; fuel costs increased by 15 percent to $6,137; and agricultural chemicals climbed 12 percent to $4,832.”

The increasing price of fuel was listed as a reason for the increased costs. Wheat farmers spent $12.7 billion on fuel in 2007.

Lisa Taylor, director of communications for the Kansas Department of Agriculture, said the increasing fuel prices had a strong effect on all farmers, including Kansas wheat producers.

“You just can’t get a crop in the bin without burning some fuel,” Taylor told Kansas Liberty.

Taylor said that while the $1.7 billion value of wheat production in 2007 was higher than the state’s average $1 billion in wheat production, Kansas did lose its number one ranking in wheat production to North Dakota.

Taylor said Kansas was generally ranked first in wheat production in the nation, but that a late spring freeze had affected the crops.

While high gas prices has affected the farming industry in Kansas, Taylor said she thought the agriculture industry has fared better than other sectors of the economy throughout the nation’s recession that started last December.  

Kansas was not alone in its impressive wheat production numbers. In fact, the large production of wheat worldwide drove the price down.

Rep. John Faber, R-Brewster, and last session’s chair of the Agriculture and Natural Resources Committee, said he hoped the price of wheat would go back up this year, after last year’s plunge.

“I think crops in Kansas are in pretty good shape so far,” Faber told Kansas Liberty. “The weak dollar actually gives us more exports and I think over the past few months the dollar has gotten stronger, but whether that will continue I don’t know.”

Harries said he was optimistic about the upcoming wheat harvest in the United States, which starts in May.

“We are in good shape, better shape than in the last couple of years,” he said. “Weather-wise the wheat crop in Kansas is very conditional and we need some moisture during the winter as some parts of western Kansas are starting to get a little dry, so whether we like it or not we need a few snow storms for the wheat crop.”

- Holly Smith

Resources:

• Read the Wall Street Journal's report, "Black Sea Region Wheat Exports Surge"

The Week in Review