WASHINGTON, July 12, 2017 - Wheat acreage in the U.S. is at its lowest level in more than 100 years and that’s bad news for the country’s millers and bakers who depend on stable supplies of the grain, according to a new report from Rabobank.
So far, rising yields have helped offset declining acreage, the report says, but a catastrophe like a major drought could put America’s breadmakers in a bind.
“As the acreage base has continued to shrink year after year, the impact of droughts looms larger since there is less cushion in the case of production problems,” says the report, which focused primarily on hard red winter (HRW) wheat because it is the largest class and especially important to breadmakers. “A lower capacity for production in this wheat class, based on decreased acreage, increases the probability of weather-related price volatility, driven by supply-related issues.”
American farmers are still producing a lot of wheat despite a roughly 40 percent reduction in wheat acres over the past 27 years, according to the report, which puts wheat acreage for the 2017-18 marketing year at about 46 million acres, down from 75 million acres for 1990-91.
Like acreage, production has also dropped. Farmers will produce about 1.8 billion bushels for the 2017-18 marketing year, according to the latest USDA forecast. That, Rabobank says, is down from 2.75 billion bushels for 1990-91.
That’s a major red flag for America’s millers and bakers. The millers need a stable supply of the grain to produce the flour that’s used to bake the loaves of bread, buns, rolls, pasta and other wheat-based items on grocery shelves and restaurant menus.
ABA CEO Robb MacKie
“We have begun a productive dialogue with all links of the grain chain, from wheat growers to bakers, to develop solutions to improve wheat production and quality, and restore wheat as a commodity that farmers want to grow,” said Robb MacKie, president and CEO of the American Bakers Association.
There may not be much the industry can do immediately about declining acreage, but there is a renewed focus on improving yields and the quality of the U.S. wheat that goes into everything from hamburger buns to spaghetti.
“Bakers have been very concerned about the decline in planted wheat acres over the years, and with this year’s crop being the lowest acreage planted since 1939, wheat quality is a top priority,” MacKie told Agri-Pulse.
MacKie leads a coalition called the Grain Chain, which brings together growers, millers, and bakers to address policy issues as a united grain industry.
David Schemm, president of the National Association of Wheat Growers, tells Agri-Pulse that much of the planting reduction can be blamed on “unfair trade practices” employed by foreign governments – especially China – that prop up their producers and exports at the expense of U.S. farmers.
“A study last year by Iowa State economists showed that China’s domestic support programs were costing U.S. wheat farmers $653 million as a result of these incentives stimulating over-production, driving down world prices,” Schemm said.
The Office of the U.S. Trade Representative is also focused on China. USTR officials filed two separate complaints with the World Trade Organization last year against China’s support for its agricultural sector.
In September, the USTR launched a trade enforcement action against China over its artificially high prices for wheat, corn and rice. The U.S. said this distorts world markets and causes billions of dollars in losses every year for U.S. farmers and exporters.
As then-President Barack Obama put it: “These unfairly distorted prices on important crops lead to overproduction in China and disadvantage American farmers who export these same crops around the world.”
Three months later, the USTR filed a challenge against China at the WTO for the country’s failure to import enough wheat, corn and rice to meet its tariff rate quotas.
Meanwhile, Schemm, a Kansas wheat farmer, said the Bakers Association is doing what it can to support its members.
“Many wheat farmers are reducing their wheat plantings and switching over to other crops,” Schemm said. “NAWG is focused on how to maximize productivity on the acres that are planted to ensure it continues to be a competitively profitable crop.”
U.S. wheat production and exports are both expected to decline for the 2017-18 marketing year, according to the latest USDA forecast.
