By Jennifer L. Drey

Washington wheat farmers face challenging times as the industry navigates changes in U.S. trade policy and potential cuts to crop insurance and key conservation programs included in the U.S. Farm Bill.

Industry representatives have already taken to Washington, D.C., to make sure they have a seat at the table as the four-year Farm Bill is renegotiated in 2018, said Michelle Hennings, executive director of the Washington Association of Wheat Growers.

As the state’s fifth-largest commodity, Washington wheat was valued at $657 million in 2016. The state has about 3,715 active wheat and barley farmers, with nearly all wheat farms owned and operated by families. More than 11,000 jobs are tied to wheat and barley farming in Washington, according to the Washington Grain Commission.

“Because we are in such an excellent climate here, we have some of the highest yields in the country. This area is just made for growing wheat,” said Scott Yates, director of communications and producer relations for the Washington Grain Commission.

The climate in Washington allows for the state to grow five out of the six classes of wheat that are produced in the country. However, Eastern Washington farmers primarily grow soft white, which has less gluten than other wheats, making it a perfect ingredient for cookies, certain cakes and noodles, Yates said.

The majority of Washington wheat is exported, primarily to Japan, which has a strong preference for soft white wheat, as well as club wheat, that grows in Eastern Washington.

The U.S. has long held more than 50 percent of the market share for wheat in Japan, with Australia and Canada meeting the rest of the country’s demand. However, concerns loom as the industry waits to see what will happen as those countries, along with nine others, move forward with the Trans-Pacific Partnership, or TPP, trade agreement without the U.S.

The agreement, now known as TPP-11, will lessen tariffs over the nine-year period of its implementation for the 11 other Pacific-touching countries that are proceeding with it. That will land U.S. wheat at a $65-per-ton disadvantage to Canadian and Australian wheat when the TPP is fully enacted.

“They want our product because of the quality of it, but if we’re not competitive, we’re going to be out of the picture,” Hennings said.

As a non-member of the TPP, the U.S. will need to write a bilateral, or one-on-one agreement, with each of the member countries. For that reason, WAWG would like to see funding levels increased, or at minimum maintained, for the U.S. Department of Agriculture’s Market Access Program, or MAP, and Foreign Market Development, or FMD, program, both of which are used to develop overseas markets.

“If we’re not going to be able to participate in these multi-lateral agreements, we’re going to have to work twice as hard to try to come up with bilateral agreements,” Hennings said. “If we do lose those markets, we may never get them back, so this extra funding in the Farm Bill is extremely important to us.”

The MAP program helps build commercial export markets for

U.S. commodities by pairing USDA Foreign Agriculture Service partners with U.S. agricultural trade associations, co-operatives, state regional trade groups and small businesses to share the costs of overseas marketing and promotional activities.

The FMD program promotes U.S. commodities overseas by creating, expanding and maintaining long-term export markets for U.S. agricultural products.

Both programs could be used to help wheat growers move into new markets, such as South America, which Yates said the industry is diligently working on.

MAP and FMD were collectively funded at about $235 million per year in the 2014 Farm Bill, which expires in late 2018.

In comparison, several competing countries in the European Union spent close to $1 billion on their agricultural export promotion programs in 2016, according to U.S. Wheat Associates, a cooperating organization in the programs.

“Other governments are investing more in global food and agricultural markets while inflation, sequestration and administrative costs are chipping away at U.S. funding,” Tom Sleight, CEO of U.S. Grains Council, said in a statement.

Both USDA and industry-funded research have shown that MAP and FMD generate a return of $28.30 for every $1 spent, returning an annual increase in farm income of   $2.1 billion between 2002 and 2014, according to WAWG.

In addition to the pricing disadvantages expected as a result of the U.S. pull-out from the TPP, Washington wheat farmers also are bracing for a serious loss of market share in China, which recently announced intentions to impose a 25-percent tariff on all U.S. wheat.

China recently has been ramping up its imports of soft white wheat and other U.S.-produced wheat classes, with more than 12.5 million bushels of soft white wheat being shipped to China so far in the 2017-18 marketing year, according to a recent WAWG news release.

That flow is expected to be severely curtailed once the tariff goes into effect, the association said.

On top of that, looking deeper into the Farm Bill, WAWG also is concerned about cuts to crop insurance that are included in President Trump’s proposed budget for 2019.

More than 90 percent of Washington’s 2.2 million acres of planted wheat were enrolled in crop insurance programs in 2016.

Funded under the Farm Bill, the insurance is a risk-management tool used for unforeseen events such as weather and quality issues, Hennings said.

“For wheat farmers, this part of the Farm Bill is very important because it’s the only risk-management tool that we have,” she said.

The proposed 2019 budget would establish a $500,000 adjusted gross income limitation for crop insurance, commodity and conservation reserve program eligibility. Additionally, it reduces the average premium discount in the crop insurance programs, cutting $22.4 billion over 10 years. It also caps underwriting gains for crop insurance companies at 12 percent, which equates to $3 billion in cuts over 10 years.

“It’s very important for farmers to be able to stay competitive even if some catastrophe happens with the wheat crop,” Hennings said.

Even without the proposed budget cuts and concern over trade policy, Washington wheat farmers already have been facing adverse conditions in recent years as downward pressure has continued to decrease wheat prices. Washington’s wheat crop was worth closer to $1 billion about five years ago. Current pricing on wheat falls lower than the cost of production, Yates said.

“Farmers are incredible optimists and they’re always thinking, ‘OK, we’re going to get this back.’ But right now, things are pretty bleak,” he said.

The pressure on pricing can be partially traced to a world shortage of wheat in 2008, which led to high pricing that lasted through about 2012. With wheat in short supply, many countries that previously did not grow wheat began to do so. Once world weather — and thus world wheat crops — improved, the excess began pushing wheat prices lower, Yates said.

Looking ahead, it’s too early to know how the 2018 crop will turn out. Weather may very well be the least predictable of all factors facing the wheat industry.

“We’re concerned, but of course, you never can really tell,” Yates said.