As the 2020 planting season draws to a close across the region, producers still feel as though they are riding an economic roller coaster. No commodity seems exempt of the wrath of the coronavirus, but despite the market downturns, the farm must go on.
In regards to wheat, these spring and early summer months are generally not a time when a lot of it is being sold, so the market is often softer this time of year. The current situation makes the whole ballgame different, however, as all classes of wheat continue to feel downward market pressure.
In an effort to mediate the complete collapse of ag commodity markets, wheat included, President Trump and the USDA announced details pertaining to the Coronavirus Food Assistance Program (CFAP) on May 19. Initially, the announcement was met with marked enthusiasm from ag producers across the U.S., but it didn’t take long for rumblings to reach the surface as people began to read the fine print of CFAP.
CFAP pledges monetary assistance to U.S. livestock, specialty and non-specialty crop, and dairy producers, with certain stipulations, of course. One of those major stipulations happens to be the fact only durum and hard red spring wheat are eligible for assistance through the program. Winter wheat has been completely omitted.
“We fight this all the time. There are six classes of wheat, and barring circumstances, sometimes wheat is lumped all together and sometimes they break it all out. This time they decided to break it out,” explained Vince Mattson, wheat producer and current president of the Montana Grain Growers Association (MGGA).
Mattson went on to say, the breaking apart of these wheat commodities, in the instance of CFAP assistance, boils down to the perception of the various markets where wheat is traded.
“The Minneapolis market, they felt during their time period, was down more than that five percent they were looking for. So, spring wheat and durum got included, but they didn’t feel the Chicago or the Kansas City markets met that criteria,” he said.
Non-specialty crops eligible for CFAP assistance must have suffered a five percent or greater price decline during the specified period. Payments will be made based on 50 percent of the grower’s 2019 total production or the 2019 inventory still in storage as of Jan. 15, 2020, whichever is smaller, and that is multiplied by the commodity’s applicable payment rates.
Mattson admits, MGGA had heard rumors during the initial planning stages of CFAP that winter wheat would be excluded from the list, but ultimately, when the final list of eligible crops was posted and it was discovered winter wheat was not there, the whole organization was shocked. Especially since winter wheat markets have actually been feeling plenty of negative pressure themselves.
As of May 20, winter wheat had experienced a 76 cents drop since April 20, 2020, which is a nearly 15 percent price decline, according to Mattson. Because of this, Mattson immediately sent an email to Chandler Goule, CEO of the National Association of Wheat Growers, voicing MGGA’s concerns over winter wheat not being eligible for CFAP.
“They are trying to put a case together for winter wheat and soft white wheat, as well – trying to get them included,” Mattson stated.
More than the actual immediate and tangible market losses wheat has experienced, Mattson pointed out the biggest industry blow may very well be the potential market losses. After being caught up in the U.S. trade wars, things had finally started to open up for U.S. wheat exports. China recently bought wheat, although shipments had not been made, and the U.S. industry was looking at moving wheat into India. The wheels where just starting to move on all the trade deals, and now, due to Coronavirus, all the logistics have been disrupted.
“The momentum is gone, that’s the crux of the deal,” he said.
This is momentum that is going to be hard to pick back up again and markets don’t correct themselves over night. No one knows for sure how these international trade deals could have impacted the U.S. wheat industry, but there was speculation wheat could have started moving towards $6 or $7 a bushel. In contrast, wheat is currently selling at around $4.50 a bushel.
The U.S. wheat industry has weathered some storms, but the omission of winter wheat from CFAP eligibility has been a tough blow. Even though things are rocky right now, Mattson still holds on to hope that positive markets could be on the horizon, it’s just that nobody knows when they may happen.
CFAP application enrollment opened up May 26 and will be accepted until Aug. 28. Applications are available online or may be found through your local FSA office. All producers are encouraged to reach out to their local FSA agent for further assistance.