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Rain Makes Grain

corn-harvest-on-jon-leeds-farm-00002869With a record-breaking summer harvest, where do farmers turn when elevators are full and no one is selling?

Story by Samantha Smith

With grain production at an all-time high and wheat prices at a nearly all time low, farmers are feeling the pressure when it comes to what they will do with the fall crops once they are harvested.

Cooperative elevators across the state are almost at capacity, and after the bountiful summer harvest, bin space in hard to come by. They are full of the wheat that farmers cannot afford to sell.

“Right now, you can’t really sell wheat and make any money,” said Ernie Theilen, general manager at Garber Cooperative Association.

His co-op in Garber, Oklahoma, brought in more than 1.95 million bushels of wheat during the summer harvest – much more than they anticipated.

“Wheat prices are low, and there’s a lot of carry in the market,” said Tom McCreight, CEO of Equity Marketing Alliance, well-known in the co-op world as EMA. “Wheat prices to the farmer per bushel will barely meet their production costs, and in some cases, they don’t. They’re trying to hold the grain as long as they possibly can.”

A carry in the market means wheat is in an inverse. Deferred futures are higher and bring more money than if farmers were to sell their wheat right now.

“It will pay to hold wheat and sell the markets that are bringing more money nearby, which would be your fall crops,” McCreight said. “They have more value today than they have in the future, where wheat has more value in the future than it does in the nearby.”

Holding the wheat crop is a good business decision for most farmers, he said.

“They’re making good decisions to hold grain if they don’t necessarily need the cash to put in another crop or pay bills,” McCreight said. “Usually the markets will tell us what we need to do, and right now they’re telling us to hold it.”

EMA works with 17 of its member cooperatives to move grain in order to make space for farmers to store their crops. They serve as the marketing arm of the co-ops they serve.

“We are licensed commodity hedge brokers” McCreight said. “We buy grain directly from the producer, hold it and then hedge it out into the future trying to capture those carries.”

Theilen, whose co-op is a member of the marketing alliance, said EMA has been working hard to move grain from co-ops across the state into long-term storage bunkers.

“A lot of wheat is going on the ground in bunkers under tarps,” Theilen said. “We’re getting wheat in from Blackwell, Lamont, Hunter – different places from EMA – so they can make space at their elevators as well.”

The process of moving grain from the elevator to the bunker can take some time. Co-ops must get electricity to the area where the bunker will be built, get the space set up with aeration tubes, and then start dumping wheat in trucks and unloading them into the bunkers.

The lack of space, Theilen said, has some farmers worried that they won’t have a place to bring their fall crops.

“A lot of farmers are concerned about where they’re going to take their fall crops,” he said, “because space is limited and nobody wants to move wheat out right now because they don’t want to take a loss.”

However, he said, co-ops will find a way to take the grain.

“We’re farmer owned and we’re going to do what it takes to take their fall crops and make space for it,” Theilen said. “We just need farmers to be patient with us, because it takes a little bit of time to move grain from the elevator to the ground, but we are working on it.”

With huge wheat supplies worldwide, McCreight says he doesn’t anticipate the price will get better for quite some time.

“It will probably be 18-24 months before we really see a significant change in the value per bushel on a local basis,” he said. “Time is what we need to bring wheat prices back to a more realistic value.”

But the grim outlook will not keep co-ops from serving their members, McCreight said.

“We will be fine,” he said. “Farmers will find a place to dump and to store their grain just as they always have.”

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