WHEAT QUALITY — Mark Hodges (R), director at Plains Grains, Inc., and Kim Anderson, Oklahoma State University Extension grain marketing economist, made a presentation on wheat quality during the Small Grain Solutions tour. As markets go up and down, quality is one thing that producers can control. (Journal photo by Doug Rich)

Producers don’t have any control over the wheat market, which can go up or go down in a very short amount of time. However, producers do have control over the quality of wheat they produce, and there is always a market for quality. Today millers want more than generic commodities.

Mark Hodges, director of Plains Grains, Inc., and Kim Anderson, Oklahoma State Extension grain marketing economist, examined quality wheat production at three stops on the 2011 Small Grain Solutions tour sponsored by High Plains Journal and John Deere.

“If we are talking about quality, no matter what it is, if we just haul it to the elevator and dump it in the pit, we have just lost that value,” Hodges said. “We need to find a way to extract that value for you the producer, but at the same time we can’t put producers or anyone else in the marketing chain at greater risk.”

Our grain handling system was built around a government storage program. It was not built to take advantage of highquality segregation of grain crops. But change is coming.

Hodges said in 1995 that government buying agencies made 70 percent of world wheat purchases. Government contracts for wheat were for No. 2 hard red winter wheat and that was all. Today private mills make 70 percent of world wheat purchases.

For example, Hodges pointed to Mexico. In 1995 there was one government agency buying all of the wheat for that country, but today there are 92 different mills buying wheat and all of them looking for an advantage over their competition.

World wheat production is changing. In 2000 world wheat production was 21.7 billion bushels. Anderson said the average world wheat production the last three years has been 23.8 billion bushels. Nearly a 2 billion-bushel increase and none of that increase was in the U.S. Today the U.S. produces less than 9 percent of the world’s wheat production. All of the increase has been in other countries.

In 1998 the U.S. exported 35 percent of the world’s exportable wheat. Anderson said if you average the last five years, the U.S. has exported only 14 percent of the world’s exportable wheat. However, the number of bushels that the U.S. exports has not changed.

Hodges said to profit from change producers need to know what has changed, how things have changed, where they have changed, and how they can efficiently take advantage of that change. Producers need knowledge of the complete picture to see what is driving change internationally and domestically.

“We will always have commodity wheat, but I would suggest to you that we will start to diverge and have a commodities market and a quality market,” Hodges said. “If we are positioned correctly, we can take advantage of that quality market.”

Wheat producers are getting paid for quality today, but they might not notice it on an individual basis. Anderson said the wheat market works by commingling wheat, and the price is set on the average quality in most regions. If producers look at the basis—the difference between Kansas City Board of Trade price and your local price—they will notice changes from year to year among the different grainproducing regions.

“Normally in southern Oklahoma, south of I-40, the basis has been higher than the price of wheat in northern Oklahoma, but the last two to three years it has been 20 to 40 cents less because they had no protein,” Anderson said. “You don’t necessarily see it in the price you got, but you see it when you compare the pries of the other grain regions. Yes, you get paid for protein but not as an individual.”

“If you want to get paid for the quality of your product build grain storage on your place and merchandise what you produce,” Anderson said. “Deliver the high-quality stuff with protein to your bin and take the lower-quality stuff to the elevator.”

As a nation we don’t produce the same quality wheat every year. Flour mills pull samples at country elevators, locate the wheat that best suits their needs, and set their rollers for the year. “We don’t market wheat; we market what wheat will do,” Hodges said. “How do we know what wheat will do if we don’t do the testing and keep it segregated in some fashion?”

This is where Plains Grains, Inc., headquartered in Stillwater, Okla., can help. PGI’s stated goal is to successfully link producers of hard red winter wheat with buyers from around the globe seeking quality product at a fair price. PGI conducts a quality survey every year during harvest that ensures buyers purchase a consistent product and that allows wheat producers to receive a fair price.

Hodges said their goal is to gather and deliver timely quality and production data; cultivate relationships between producers, elevators, grain handlers, and domestic and foreign millers; and effectively market the quality characteristics of hard red wheat to interested buyers.

Hodges said PGI collects samples from 500 elevators across the High Plains and produces 27,000 data points on the crop as harvest moves from south to north. Hodges publishes a weekly report during harvest and compiles a summary when harvest is done. PGI collects information on protein content, dockage, foreign material, and grade, milling functionality and baking functionality. All of this information is available on their website, www.plainsgrains.org.

Hodges said when we look into a crystal ball everything appears to be upside down, but producers do have some opportunities to be rewarded for a quality product even with all the changes occurring in the wheat industry.