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|Archives - September 2008|
|Monday, September 01, 2008|
Spiking prices and insatiable demand produce a record-breaking season for Oregon’s farmers.
By Ben Jacklet
Midway through the frenzy of the harvest, Oregon Wheat Growers League president Kevin Porter found himself working as truck driver for the day. His job was to load a thousand bushels or so of wheat into a 70-foot rig, haul it off to the McNary Grain Elevator by the Columbia River, return for another load, and repeat, all day long. Out in the fields, three combines were cutting 30-foot swaths of wheat nonstop and offloading without slowing. By day’s end 10 people, 10 machines and $3,000 worth of diesel fuel had harvested 300 acres of wheat and loaded it into storage for export.
Efficiency is nothing new in Oregon wheat country. What has changed is the money.
Not any more. The wheat price was hovering at around $8 a bushel during the harvest, and if global grain supplies remain constricted and Australia suffers through its third consecutive year of drought, the price is expected to bump up even higher. Wheat hit a record $16 per bushel in February, and while prices have dropped to earth this summer, the market remains strong. Oregon wheat farmers have the option of selling early for twice the price they’re used to getting, or holding out for more.
Wheat growers aren’t the only farmers harvesting with a renewed sense of urgency this season. Spurred by the weak dollar and the ethanol boom, the global marketplace is starved for wheat, hay, grass seed and other major Oregon exports. Prices are up for the vast majority of Oregon’s 225-plus agricultural products with the sad exception of onions. No wonder the Oregon Department of Agriculture is forecasting record revenues.
The strong market for agricultural exports helped convince a major Japanese shipping line, K Lines, to resume service to Portland in July after a four-year hiatus. Exports of Oregon agricultural and processed food products in the first quarter were worth $978 million, which Brent Searle of ODA called “an amazing number and nearly equal to the entire annual [agricultural] exports a couple years ago.”
Unfortunately for farmers, the costs of diesel, fertilizers and farm chemicals are rising just as rapidly as are crop prices. But they are getting paid well enough for what they produce to invest and expand. Agricultural sales trickle far and wide through the Oregon economy, from the John Deere dealership to the grocery store to the farmland real estate market. More money in farm sales means more money for food processing, agricultural services, retail and wholesale trade, transportation, and warehouse storage. Companies such as Ag West Supply, founded in 1932 with five locations in Oregon, are benefiting from the uptick. “We’ve built an aggressive sales plan and we’re ahead of that right now,” Ag West general manager Steve Danner said. “There’s a lot of concern about expenses but there’s a lot of optimism too. We’re expecting a very strong fourth quarter. There’s a lot of older equipment out there that needs to be updated.”
Commodity prices also are reawakening demand for farm properties. The average value of Oregon agricultural land hardly changed between 2002 and 2005, increasing minutely from $1,185 per acre to $1,192 per acre. From 2005 to 2008 it grew by 51% percent to $1,800 per acre.
“The value of agricultural land has increased and the biggest reason for that is the commodity prices,” says Deb Sue Hamby, a Pendleton-based loan officer with the Northwest Farm Credit Services bank. “There have been a lot of outside investor buyers that have been coming into the area buying up land.”
“The farmers are in a very good position for the first time in at least 10 years,” Krueger says. “A lot of them had one hell of a time getting through the hard times but if they’re still standing they are looking at some real opportunities now that the market’s going the other way.”
About 230 miles west of Umatilla County’s arid wheat country, the green fields of the Willamette Valley are lush with growth. Cruising past healthy rows of nursery trees, corn, blackberries, hazelnut trees, wheat and green beans, berry farmer Doug Krahmer has nothing but praise for the climate, soil quality and crop diversity of the Willamette Valley. Krahmer is glad he invested in farmland here when he did. He figures that valley land prices have doubled if not tripled since he bought most of his properties in 1999 and 2000.
Other specialty crops in the valley such as hazelnuts and hops are also doing extremely well, and the bump in commodity prices has encouraged a massive shift back into Willamette Valley wheat. Valley farmers who followed the money years ago from wheat to grass seed followed it right back to wheat in 2008, building makeshift wheat storage areas and securing last-minute freight rail contracts to get their crops to the grain terminals of Portland for export. Unlike dry-land farmers east of the Cascades, the farmers of the valley have many crop options, so they are accustomed to following markets and planting accordingly. They did not benefit significantly from the commodity price increases last year, but they are expected to capitalize in 2008 and 2009.
As chairman of the Oregon Blueberry Commission and a member of the Oregon Board of Agriculture, Krahmer is acutely aware of the risks and opportunities stemming from the current volatility of world markets. He sees great potential in exporting to the burgeoning middle classes of India and China, but like most farmers he identifies the recent price bumps as a double-edged sword. Yes, farmers are making more money (Krahmer rotates wheat on his fields to prepare the soil for berries and was happy to earn income from that crop for a change last year); but at the same time fuel and fertilizer costs are “eating us alive,” he says.
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