2014 Colorado and U.S. Wheat Crops Colorado is the second largest winter wheat producing state in 2014 (Kansas is #1) due to crop failures in Texas and Oklahoma. 2014 Colorado winter what crop is currently estimated at 100.8 million bushels compared to 44.3 million bushels last year and the 5- year average of 80.0 million bushels. 2014 U.S. all-wheat crop is currently estimated at 2.03 billion bushels, compared to 2.13 billion bushels last year and the 5-year average of 2.22 billion bushels.
Colorado Wheat Transportation Logistics 80% of Colorado’s winter wheat crop is typically exported and moves by rail to Gulf of Mexico and the Pacific Northwest ports (and is usually the state’s top export by dollar volume). 20% of Colorado winter wheat crop is consumed domestically and moves from the Eastern Plains by truck to the Ardent Mills flour mill in Commerce City. Very little of the 2014 Colorado winter wheat crop has moved to export yet due to lower wheat prices and rail car shipping issues.
Wheat Exports 50% of U.S. wheat production typically exported. 80% of Colorado wheat production typically exported. Colorado and U.S. wheat exports primarily move by rail.
Double Whammy (Lower commodity prices & higher freight costs) USDA is currently estimating the U.S. price for wheat will average $6.30 per bushel in the current 2014-15 marketing year compared with $6.87 per bushel last marketing year and a record $7.77 per bushel in the 2012-13 marketing year. USDA is currently estimating the U.S. prices for corn will average $3.90 per bushel in the current 2014-15 marketing year compared with $4.45 per bushel last marketing year and a record $6.89 per bushel in the 2012-13 marketing year. Rail freight costs are much higher and farmers pay the cost of freight – it’s in the “basis.”
Farmers Pay the Cost of Freight It’s in the “basis” K.C./Chicago Futures Price - Freight/Margin = Basis = Farmer’s Cash Price
Desperate Situation Now/Crisis with New Crop Corn “Train Wreck is Coming” U.S. wheat crop is currently backed up in the marketing and transportation system and is in on-farm storage, country and terminal elevators. U.S. wheat crop is not moving normally due to lack of marketing by farmers due to lower prices caused by a record 2014 U.S. corn crop that will be harvested in October/November and higher rail freight costs that are reflected in the basis. 2014 U.S. corn crop is estimated at a record 14.0 billion bushels, compared to 13.9 billion bushels last year and the 5-year average of 12.5 billion bushels.
Impact on Colorado Wheat Farmers and Colorado Economy Colorado Rail Costs to Gulf Ports Tariff RateShuttle Trip Freight ($/bu)Leasing Mkt. Basis ($/bu) UPSP Byers1.26.40 –.95 $1.66 - $2.21 Cheyenne Wells1.21.40 –.95 $1.61 - $2.16 BNSF Yuma 1.23.40 –.95 $1.63 - $2.18 Holyoke1.29.40 –.95 $1.69 - $2.24 *Impact on Colorado wheat farmers and Colorado economy is an additional $32.3 - $76.6 million.
How to Avoid a Train Wreck Improve poor performance – increase velocity to bring basis back to historic levels. Congress and the Surface Transportation Board (STB) should require railroads to live up to their common carrier obligation. STB should require railroads to treat shippers of all commodities fairly and equitably.