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Soft White Loan Rate Climbs 21 Cents

by Scott Yates, Staff Writer
Capital Press, December 23, 2005

SPOKANE Northwest wheat growers got an early Christmas present with news the U.S. Department of Agriculture is increasing the loan rate for soft white wheat by 21 cents in 2006.

The same announcement revealed the loan rate for hard red spring wheat will drop by 20 cents. The hard red winter loan rate will decrease a penny.

In Walla Walla County, that means the loan rate for soft white wheat is rising from $2.74 a bushel to $2.95 a bushel while the loan rate for hard red spring drops from $3.40 a bushel to $3.20. The rate for hard red winter wheat drops from $3.24 a bushel to $3.23.

Similar rises and declines are being played out across the Northwest's wheat-growing counties. Tom Mick, chief executive officer of the Washington Wheat Commission, said he doesn't know whether the new rates will alleviate growers' anger with the government program.

"I haven't talked with enough producers yet to see what impact this will have. They are definitely glad to see the soft white wheat rate go up," he said.

Based on the new spread between soft white and hard red winter, Mick said, it appears the loan rate won't be "a major factor" in determining which class to plant. The disparity between the cash price of the two classes, however, may continue to drive Northwest growers to embrace hard red winter.

Dana Heron, seed merchandiser at Connell Grain Growers and the newest member of the Washington Wheat Commission, said the spread between soft white and hard red winter is in excess of $1 today.

"This (loan rate announcement) will cause some head-scratching, but I don't think it will change my product mix much," Heron said, noting that supply-and-demand fundamentals are driving prices.

"Soft white wheat is not in demand. Hard red winter is," he said.

The problem with growing hard red winter wheat in the Northwest comes down to quality. The region's weather is particularly suited to low-protein wheat varieties. Higher-protein wheat has been difficult to achieve.

After the Japanese complained of the hard red winter quality they were receiving in cargoes in 2003, acreage declined dramatically and several varieties were blacklisted. Part of the problem stems from growing varieties that aren't adapted to the Northwest.

Another difficulty is growers' lack of familiarity with the class and its additional nitrogen needs. Those needs and the rising cost of nitrogen could also play a role in growers' decisions about what to plant.

Although the loan rate for soft white increased across the board, the class remains the lowest-valued in the country, according to the government.

The release announcing the loan rate said varying supplies and changing demand patterns of different classes produce widely variable market prices.

By moving to the class-based system for wheat, the Commodity Credit Corporation now provides marketing assistance loans and loan deficiency payments reflecting market prices for each class. Soft white's low value means the market is thinning out, said Keith Bailey, manager of Odessa Union and Reardan Grain Growers.

"I don't know that (the loan rate announcement) solves anything," he said. "The marketplace doesn't seem to be wanting soft white wheat. Protein wheats are more in favor."

He said he has been seeing growers become more interested in growing hard red recently, but he doesn't believe there will be a swift shift to the class.

"It's an economic decision. How much risk is there, and how much potential for gain?" he said.

Scott Yates, Staff Writer
Soft White Loan Rate Climbs 21 Cents
Capital Press, December 23, 2005

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