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Thursday, October 1, 2020  Spokane, Washington  Est. May 19, 1883
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Washington wheat country likely to remain Republican despite years of low prices under Trump

UPDATED: Wed., Sept. 2, 2020

By Thomas Clouse The Spokesman-Review

Jeff Emtman is a fourth-generation farmer in south Spokane County, not far from where the Ponderosa pines give way to the rolling wheat fields of the Palouse.

Emtman, 50, spoke from his combine Tuesday as he finished what agriculture officials believe is the 10th-best harvest in Washington since records started being kept in 1978.

“It’s going pretty good,” Emtman said. “We are probably 10 to 20 percent better yield than average.”

But, the price of soft white wheat at Ritzville was trading Monday at $4.57 a bushel.

The price was better near Pullman, at $5.30, because it costs less to transport it to Portland. Most farm economists believe farmers need more than $6 to cover the costs to produce that bushel.

That price-to-cost disparity raises two questions: How long can Washington wheat farmers survive below the cost of production, and will their economic struggles change how they vote in the upcoming presidential election.

Farm country has traditionally been a Republican stronghold, and it appears it will remain that way.

Despite receiving all-time record wheat prices during President Barack Obama’s administration and suffering years of low wheat prices during a trade war caused by President Donald Trump, farmers like Emtman continue to support the Republican agenda.

Emtman remembers the Obama years, when wheat prices were high enough to pay all his bills and leave a profit.

Prices were so good some farmers got back into the game after leaving the field, he said.

The current low prices aren’t enough for him to switch parties.

“I’m for what he’s doing on trade,” Emtman said of Trump. He added that most of his friends and colleagues feel the same way.

Randy Fortenbery, a farm economics professor at Washington State University, said he expects most commercial farmers, like Emtman, to remain strongly in the red camp.

“If you talk about commercial agriculture, they will continue to support him,” Fortenbery said of Trump.

Amid the trade wars he sparked with China, the European Union, Canada, India, Japan and Mexico, Trump authorized farm bailouts of $12 billion in 2018, another $18 billion in 2019 and the U.S. CARES Act included about $19 billion more.

Trump “gave (farmers) some compensation for the trade friction. And, he was able to negotiate agreements with Japan and renegotiate (the North American Free Trade Agreement),” Fortenbery said. “So farmers will say he got us back on track and compensated us.”

That doesn’t mean Trump won’t lose some voters.

“The farmers he might lose are those who sell in mostly domestic markets. They aren’t like fifth-generation farms. They are selling … directly to restaurants or farmer’s markets. They are not as red as larger commercial operations” Fortenbery said. “And they have been more affected” by COVID-19.

Politics and farming

Michelle Hennings, the executive director of Washington Association of Wheat Growers, was like many contacted for this story who did not want to directly comment about whether the lean years for local farmers would influence how they vote.

“We’ve lost that middle. That’s what is frustrating on our end,” Hennings said. “It’s either so far right or so far left that we can’t work together. When Republicans and Democrats agree, that’s when we really get our issues worked out.”

Fortenbery, who earned his doctorate in farm economics in the late 1980s, said the annual price of wheat clearly shows that local farmers enjoyed record prices under Obama and have mostly struggled to cover costs during Trump’s first term.

In six of Obama’s eight years, local wheat farmers earned better than $6 per bushel. But, the annual price hasn’t approached $6 once under Trump, according to statistics from the Washington Grain Commission.

But Fortenbery said the naked truth of the matter is that wheat markets generally don’t really give a hoot who is sitting as president.

“Except for the trade impacts in ’18 and the first half of ’19, I don’t assign the higher prices to either administration,” Fortenbery said.

“What happened in 2008 is that we had a structural change in demand and we had much more limited supplies. The low prices now are really a function of high supplies.”

World markets arguably have more effect on Washington wheat growers than any other grain producers. That’s because more than 90 percent of Evergreen State wheat gets exported to other countries.

“The politics can matter, but it’s hard to overcome a supply situation with politics,” Fortenbery said. “I’m sure the Chinese would not want to be buying from us right now. But they lost half their hog herd and they had some flooding issues. So, they are buying, including from us.”

Politics could change commodity prices quickly.

“Let’s say Russia invaded the Ukraine,” Fortenbery said. “That’s political. If that somehow destroyed the crop in Ukraine as the Russians marched across it, that could affect prices because it’s affecting supply.”

Global weather has been consistent enough that all the major producers of wheat – Australia, Ukraine, Russia, European Union, Canada and the U.S. – have plenty to sell and buyers like Japan, the Philippines, Indonesia, Mexico and Vietnam, already have a lot of wheat on hand.

“What’s going on right now in the U.S. isn’t directly influencing the price,” he said.

“The reason the price is low is because there is a lot of wheat everywhere. It’s not that politics can’t affect it, but it takes a pretty dramatic event for that to happen.”

Fortenbery used Australia as an example. That country had no corresponding trade war with China like Trump sparked with the U.S.

“Australians … also have low wheat prices right now,” he said, “because there’s just a lot of it available.”

The Washington harvest

Glen Squires, CEO of the Washington Grain Commission, said local growers started with a very dry spring. Timely rains in May and June led to some of the best growing conditions of all time.

“Our winter wheat yield is the fourth-highest in history,” he said. “Our spring wheat is the second-highest in history.”

However, several farmers west of Spokane did not get the same rains.

“Some areas out west … are average or a little below,” Squires said. “But, generally, it’s above average across the region.”

The U.S. Department of Agriculture estimated Washington’s wheat crop at about 153 million bushels, which would make it 10th highest since records were kept starting in 1978, he said.

Last year, Washington produced 142.7 million bushels of wheat.

“They estimate Idaho will have 104 million bushels; that’s the eighth highest in history,” Squires said. “Oregon really didn’t get the rains we did. They are looking at the sixth-lowest production since 1978.”

But the prices remain low, Squires explained farmers can survive if prices are below the cost of production as long as yields come in higher than expected.

“In the big picture, there are lots of things that kind of make it possible” for farmers to survive, he said. “They kind of lose money for a couple years and then have a good year. They may forego purchasing equipment. They cut back on input costs. They maybe take on more land to spread out their costs. But, several years of low prices is not good.”

Government to rescue

Fortenbery said it would take him hours to explain the evolution of farm subsidies, which still exist but in a complicated form.

Decades ago, if farmers said they should get $6 a bushel for wheat and the price was $5, the government would kick in a dollar.

Later farm bills would provide direct payments to each farmer in the household, or pay farmers to take ground out of production.

But politicians from both parties started supporting a market-based safety net as opposed to direct payments, Fortenbery said.

“in the last few farm bills, revenue crop insurance has become the primary safety net that the government gives to farmers,” Fortenberry said.

How revenue crop insurance works is, essentially, revenue equals price times yield.

Some months before planting, farmers and insurers set a price per bushel and study how much wheat that farmer has harvested over time.

The farmer then pays so many dollars per acre that guarantees his or her revenue from that crop.

If the prices fall below the set price, insurance kicks in to make up the difference. If prices are higher than the set price but the harvest yield is low, farmers similarly could get compensated, Fortenbery said.

“If the insurance costs $1, the farmer pays 60 cents and the government pays 40,” Fortenbery said, while noting he was oversimplifying the agreement. “The farmer pays an insurance premium, but the taxpayer pays a part of it.”

He noted the federal government offers similar subsidies for low-income housing and things like free and reduced-price lunches at school.

“If we didn’t have that,” he said of crop revenue insurance, “people would be significantly worse off in low revenue years.”

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