BITING THE DUST
MAY 3, 1996
Although the people who raise food are struggling, the people who eat it may not even notice the drought of 1996.
TOM BEARDEN: It's been a frantic couple of weeks at the Kansas City Board of Trade. This is where hard red winter wheat--the kind used to make bread--changes hands. Where wheat prices soared to all time record highs last week--then plummeted--then rose again. Wheat is now trading at nearly double what it was last year. Mike Braude is president of the board.
MIKE BRAUDE, Kansas City Board of Trade: Last week we had the biggest day in our 140-year history, that's the good news. The bad news, of course, is what's causing it, and it certainly isn't good for the producer.
TOM BEARDEN: This is why the market is so volatile--dead and dying wheat plants in fields throughout the nation's breadbasket--because of one of the worst droughts on record. Brian Turney farms in Sumner County, Kansas, just South of Wichita.
BRIAN TURNEY, Farmer: And you've got wheat here that, uh, you know that top leaf there is only an inch and a half off of the ground on this plant. And a lot of this wheat died before it ever got a little bit of rain to keep it going. And now the green bugs have attacked it. And they actually just suck the life right out of the wheat. See down here on the ground, there's actually green bugs all over the ground, there's just hundreds of them down here.
TOM BEARDEN: Turney's family has been farming here for generations, but they've never seen it this bad.
BRIAN TURNEY: My grandmother's 85 years old, and she farmed with my grandfather through the drought of the 1930's in what they called the dustbowls. And she says that as far as she could tell, it was not even as dry in the 30's during the dustbowl as it has been this winter.
TOM BEARDEN: A few weather forecasters are even predicting a return of dustbowl conditions that forced thousands of farmers off the land. Turney says he saw similar conditions a few months ago when it got so dry on a neighbor's fields the soil turned to powder and started to blow away.
BRIAN TURNEY: This field here has been mostly destroyed from wind erosion, and it just didn't come up good in the fall. They have already worked most of it up.
TOM BEARDEN: Prospects are that Sumner County, normally the biggest wheat producing county in America, will only harvest about a quarter of its usual crop. Norbert Gurstenkorn says losses like that are bound to have a substantial impact on small-town America. He runs the co-op elevator in Conway Springs.
NORBERT GURSTENKORN, Grain Elevator Manager: Some of our suppliers of farm supplies, ourselves for example, it's going to cut back the money that the farmer's going to use to spend, and he's going to cut here and there in order to make it, have enough to put the next crop year in. So it's hard to say dollars and cents. Well, maybe I'd say at least 25 to 30 percent cutback in farm supplies and things like that.
TOM BEARDEN: All this bad news from the farms has made for historically high wheat prices.
MIKE BRAUDE: For the first time in the 13 years that I've been President of the Exchange we had $5 wheat at harvest last year. A couple of weeks ago I saw $6 wheat for the first time. Last week, I saw $7 wheat for the first time. So we're in, at least in my tenure in the business, in new high ground.
TOM BEARDEN: But then it rained in the Midwest over the weekend, a storm which caused flooding a couple of hundred miles to the East. Some futures traders thought it might save some of the crop, and the market dropped. Prices shot back up when it became apparent that the rain had come too late for a lot of fields. Although the weather played a major role in the price changes, the drought isn't the only factor. Supply is another reason. The once enormous stocks of wheat stored in America's grain elevators are at their lowest level since 1947. A few years ago, Norbert Gurstenkorn's elevator would have been bulging with grain. Today, it's empty. That's partly because the federal government used to store surpluses of grain as part of the farm support program. Policymakers decided to get out of that business. But it's also because the rest of the world has been buying more and more American grain. The higher the demand, the higher the price on the grain markets. Wade Collins, a broker in Kansas City, says foreign demand has dramatically changed the marketplace.
WADE COLLINS, Commodities Broker: They have more money to spend, they have more people to feed, they have more animals, their economies, particularly the Asians are booming, and they're growing, and that's where the demands come from.
TOM BEARDEN: Other countries aren't just buying wheat. They're also snapping up corn. Cattle ranchers have found the price of feed corn skyrocketing. At the same time, the drought has rendered some pasturelands ungrazeable. All this comes when herds are at the biggest they've ever been and a surplus of beef means lower prices. Couple low beef prices with much higher feed prices, and a lot of cattlemen can no longer afford to feed their animals. So they're sending them to the slaughterhouse, depressing beef prices even more.
WADE COLLINS: Our domestic industry largely waited to buy, and the prices kept getting higher and higher. So now it's extremely unprofitable in some sectors for them to continue to feed their animals, so they are liquidating them.
TOM BEARDEN: Collins says telephone conversations with his customers indicate they're very worried.
WADE COLLINS: I saw and felt a range of feeling in their voices. We have never seen wheat and corn prices as high as we saw last week. We have not seen cattle prices this low in ten years. Here they were buying, trying to buy grain for their livestock; they were trying to market their livestock with prices that at their point seemed like would never go up. And I've never felt that range of emotion in my career.
TOM BEARDEN: While the people who raise the food struggle to survive, the people who eat it may not even notice the drought of 1996. Scott Merrill trades in wheat futures.
SCOTT MERRILL: Consumers probably won't be affected that much. It's kind of a misstatement to think that the price of wheat plays a significant part in the price of bread. It probably will only affect the price of bread or those kinds of goods a couple of cents a loaf.
TOM BEARDEN: And the price of beef may actually decline substantially because so much product is likely to be dumped on the market. But even as consumers get a meat windfall this year, traders think foreign demand will continue to push prices upward for all American agricultural commodities--permanently. Meanwhile, the farmers are trying to move on. They're turning under their dead wheat plants and preparing to plant new crops. Under previous federal farm legislation, they wouldn't have been permitted to do that. The 1996 Freedom to Farm Bill removed those restrictions. It also took away the chance for federal financial assistance for this year's failed crop. While other farmers may not agree, that tradeoff is just fine with Brian Turney.
BRIAN TURNEY: The best thing the government has done for us in this 1996 Farm Bill is to give us the freedom to rotate to any crop that we want to rotate to and let them work and pay us.
TOM BEARDEN: But the replacement crop will still be subject to the vagaries of the weather and the whims of the marketplace. And that's something that never really changes in farm country.