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US Farmers Wary of Gaining From Russia’s Woes

Kirk Johnson|The New York Times
Thursday, 19 Aug 2010 | 5:18 PM ET

SPRINGFIELD, Colo. — Russia’s ban on grain exports, in response to a devastating drought, has sent prices shooting up all over the world. But farmers here in wheat country, far from seeing the spike as an unexpected blessing, are wary.

As planting time approaches next month, they are balancing the possibility of greater income against the failed promises of the past, when bonanzas turned bust, sometimes at terrible cost to their bottom lines and the environment. Even many farmers who plan to plant more wheat are begrudging and hesitant — fearful that global dynamics could shift again between now and next year’s harvest.

Flames are seen in a field at the edge of Voronezh, central Russia, on July 31, 2010.
Alexey Sazonov | Getty Images
Flames are seen in a field at the edge of Voronezh, central Russia, on July 31, 2010.

Prices hit a two-year high recently, up 57 percent in less than three months. And on Thursday, the price of wheat spiked again after mellowing in the last weeks on reports that Russia may have to import millions of tons of wheat.

“The market says plant more,” said Eugene Schroder, who farms about 4,000 acres here in the flatlands of southeast Colorado near the Oklahoma border, where agriculture’s fingerprint stretches beyond the eye’s ability to see — some fields stubbled and cleared in post-harvest, others tassled and green with corn.

Mr. Schroder said he feared that wheat prices were being manipulated by speculators, as was the case a few years ago, just before the recession, when the price soared and then crashed.

“What is this wheat market? I don’t have a clue, and I’m a professional wheat farmer,” he said. “There’s a complete lack of transparency.”

And yet, if good wet weather holds up in the next few weeks heading into the mid-September planting time, he plans to follow the market’s signal and quadruple the number of acres in wheat. Mr. Schroder’s nephew, Curtis Schroder, who farms about 10,000 acres, said he was contemplating about the same degree of expansion on his land — to 640 acres, from 160 acres in this most recent crop.

Talk like that, repeated over morning coffee by men in baseball caps and coveralls, sends a shiver down the spine of people like A. C. Chenoweth.

Mr. Chenoweth, 89, vividly remembers how the grasslands here in Baca County were broken up for wheat beginning in the 1920s when he was a farm boy. By the mid-’30s, the loosened earth — parched by drought and abandoned by impoverished homesteaders — was lifted up in vast, swirling brown clouds. Southeast Colorado became one of the Dust Bowl’s epicenters.

“Especially to an old codger like me that saw it first hand, you wonder if it might happen again,” he said. “It worries you.”

Even before Russia’s drought, wheat was on the rise in Baca County.

Thousands of acres of grassland formerly protected under a federal system called the Conservation Reserve Program were shifted into open-market farming uses in the last few years — and much of that went to wheat.

From 2008 to 2009 alone, about 100,000 new acres of winter wheat went into cultivation in the county, according to federal figures — the biggest one-year jump since the late 1950s.

This year, a quirk of crop insurance, which locks in grain prices for policies based on a window that was set in the last few weeks — after Russia announced the ban on grain exports on Aug. 5 — could accelerate the trend, farm experts said, or prompt farmers in other parts of the country to give wheat another look.

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“I can plant this wheat and be guaranteed a pretty sweet income,” said Bill Spiegel, a spokesman for the Kansas Association of Wheat Growers, referring to the insurance window. “That’s something a savvy farmer has to consider.”

But there are also reasons why another wheat boom — let alone another Dust Bowl — is not in the offing.

One is that wheat, the historic amber-waved grain of the American bread-basket, is out of fashion — a beleaguered has-been crop on many farms, supplanted by the modern cash-cow of farming: corn, used for everything from ethanol fuel to food additives to animal feed.

Fewer acres of wheat were planted nationally last year than any year since 1971, according to federal figures. Kansas, the biggest wheat-producing state, had fewer acres in cultivation this year than any since 1957.

History's lessons ...

Another brake on any irrational exuberance over wheat will be farmers’ own suspicions, despite the incentives of higher prices.

Some think they are being played, and that the big run-up is partly, or largely, just market manipulation — like the increase in 2007 and 2008 that drove wheat prices more than twice as high as they are now before a gut-wrenching crash during the global recession.

“I hate to sound negative, but I’ve been burned so many dang times on wheat that I think I’m done,” said Olea McCall, who farms about 4,000 acres near the Kansas border, mostly in corn, wheat and sorghum. Mr. McCall said his attitude was not helped by missing out on the new run-up in prices.

“I sold at 4, and three weeks later went to 6,” he said, referring to the price in dollars-per-bushel.

He said he thought the climate was changing, too — hotter in summer and colder in spring_ — making the high plains less favorable to wheat. He has been steadily reducing wheat acres and plans to keep going in that direction with next month’s planting.

And there is another echo of the past that matters to farmers old enough to remember. In 1972 and 1973, in the spirit of thawed tensions between the United States and the Soviet Union, the United States sold hundreds of millions of bushels of wheat to the Russians after another disastrous crop failure there.

This month’s price spike is eerily similar to what happened then, said Colorado’s agriculture commissioner, John R. Stulp, who is also a wheat farmer. And the response could well be same, too — overreaction and overproduction by farmers, leading to a glut and a crash in prices.

“It took 20 years to sort the market out after that,” Mr. Stulp said of the 1972-73 price bubble.

But there is also a big division between farmers who sold just before the recent price increase, like Mr. McCall, and those lucky enough, or cagey enough, to have held on — keeping their grain in storage, and their powder dry.

Mr. Chenoweth, for example, who farms about 3,200 acres — mostly in wheat, with no plans to expand — said he was still sitting tight on his grain stocks, waiting for the higher prices he believes will come.

“You’ve got to know when to hold your cards,” he said.

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