The United States Department of Agriculture estimated an all-time high for wheat carryover at the beginning of this year — surplus wheat around the globe.
Greater supply than demand drives down prices. Then Kansas wheat had a rough year, suffering drought, freeze damage and more.
But that hard red winter wheat may have come with a silver lining.
“Hard red winter wheat in our area had some problems,” said Dan O’Brien, extension agriculture economist with Kansas State University. “But it was higher in protein, which allows Kansas grain elevator operators to mix this year’s high protein wheat with wheat lower in protein from last year’s harvest and move it into the market.”
Wheat harvested across the state had between 12 and 13 percent for protein content, with some truckloads as high as 15 percent, according to harvest reports from the Kansas Wheat Commission.
Brad Wedel, manager of Mid-Kansas Cooperative in Moundridge, estimated the area’s average protein content at 13 to 14 percent.
"In the previous few years 13 was considered high," Wedel said in the report. "This year, that will be a bit lower than average. In 30 years in the business, I think this is the highest protein crop I've seen."
Mixing high protein wheat with carry-over wheat lower in protein raises the protein percentage of the whole batch, making it more attractive to mills. Wheat with a protein level 12 percent or higher brings better prices because it can be used to make bread.
The average protein content for Kansas wheat was 11.6 percent last year, down from 11.7 percent in 2016.
“Last year it was awful,” Reno County farmer Cameron Peirce said of protein content. “This year we had one field come off at 14.5 percent, and we’re getting a premium for that.”
O’Brien said demand for higher protein wheat has supported local cash bids, evident by basis levels — the difference between cash bids and certain futures prices.
“Basis levels have been much more positive in Kansas recently,” he said. “In some cases equal to the futures prices. Until recently many places were at 30, 40 or even 50 cents under.”
According to the United States Department of Agriculture Central Kansas Terminal and Processor Daily Grain Report, hard red wheat prices were up 31 cents at Wednesday’s close.
Bids in the Hutchinson area ranged from $5.26 to $5.42 per bushel, 14 cents under to two cents over the futures price for September.
While prices have come up, as higher protein wheat is mixed with lower protein wheat and demand is met, prices may come back down.
Peirce said while many farmers would like to see higher prices, anything helps after the tough year. However, he said some folks might not even see a premium on their higher protein wheat — simply because they don’t know. Elevators will buy higher protein wheat at a higher price, because they can sell it to millers and exporters at a higher price, but only if they can test it.
“Some of the smaller country elevators may not have a protein tester because it’s an expensive piece of equipment,” he said. “Any value you can add to your product, you need to do it, but in this case, you have to test it to see what you’ve got, which is a drawback.”
O’Brien said foreign markets have also supported wheat prices recently, stemming from uncertainty about wheat crops from Russia and other countries.
“If you ask an economist there’s never one simple factor,” O’Brien said. “There are some concerns about crops overseas that have helped support prices as well.”
Meanwhile, soybean prices have hit a 10-year low. Soybeans were plagued by low prices in 2017, and the impact of trade disputes between the U.S., China and other partners have continued to drag prices down.
Soybean prices in Hutchinson were $7.91 to $7.95 per bushel at Wednesday’s close, up 2.75 cents but still 69 to 65 cents below the August futures price.
“Soybean market prices have been affected by trade,” O’Brien said. “As long as soybeans are available for China to buy from South American producers — especially in Brazil — we’re going to have lower prices. That could change this fall when the South American supply has all been bought up, and China has to come to the U.S.”
Corn prices are also low. O’Brien said unless farmers end up with a tremendous yield, the price will likely be below the cost of production. He said the next USDA World Agricultural Supply and Demand Estimates report will play a large role for corn and soybeans.
“Right now so much depends on the size of the U.S. corn crop,” O’Brien said. “The date to watch now is August 10 when the USDA will release its WASDE report. It will be the tone setter for the grain markets for August through December.”