The disease hasn’t stopped farmers from growing cereals, but they now demand a much higher level of profitability
Fusarium headblight has been evolving for decades as it has spread through North America’s cereal grains areas.
So too have farmers, buyers and processors, as the wheat and barley markets grapple with the costs and impacts of the fungal disease.
“There’s a shift away from risky crops and to crops that are not as risky,” said William Wilson, a North Dakota State University economist and wheat market expert, at the 9th Canadian Workshop on Fusarium Head Blight.
“Scab is pretty risky. Growers don’t like risk.”
The disease, which can savage a wheat, durum or barley crop’s value, knocking it down to feed status if infection is bad, is endemic is major growing regions like Manitoba and the Dakotas, as well as being a more sporadic plague in places like Saskatchewan and Alberta.
Farmers have reacted, Wilson said, by slashing cereals acres by millions, spending on multiple fungicide treatments, selecting resistant varieties and knowing how to market an affected crop.
Elevators and handlers have responded to the disease by setting tight specifications and establishing relatively stable discount schedules, as well as expanding their catchment areas in years when local crops are badly affected.
Processors have learned to test, survey production zones and ensure their suppliers aren’t sending them grain that falls beneath their standards.
FHB has cost the entire production system a lot of money, time and effort, but in the end it has led to farmers who know how to avoid most of the risks in most years, handlers who know how to deal with damaged crops, and processors who can handle the unpredictability of fusarium outbreaks.
“The problem persists; we’re just controlling it better,” Wilson told the workshop, which brings together scientists, researchers, agriculture professionals and farmers from not only Canada but also a number of U.S. states and overseas.
The cost has been real. Farmers in North Dakota usually hit spring wheat with at least two treatments of fungicide. At about $15 per acre per treatment, it’s a significant cost and crimp on profitability.
That cost, plus the risk that the crop will become badly affected by FHB and be downgraded, mean that farmers have demanded much better profitability for taking on the risk.
Basically, North Dakota farmers are needing to believe they can net about US$130 per acre to plant spring wheat rather than a less risky crop.
“For him to be equally well off … he’s got to be paid $130,” said Wilson.
The futures markets have had to evolve too. When FHB first became a major problem in 1993, the Minneapolis Grain Exchange began incorporating a fusarium tolerance into its spring contracts, based on the Food and Drug Administration acceptable limits.
The Chicago Board of Trade’s winter wheat contract did not.
That led to FHB-damaged wheat being delivered against the Chicago contract, creating headaches for anybody ending up with it. That caused the Chicago contract to be discounted against the other wheat contracts, creating a wider spread than should have existed.
Processors and maltsters have come out OK, with the elevator system doing a good job of segregating FHB-damaged grain.
“Discounts end up very effectively separating good versus bad at the country elevator level and it doesn’t go downstream,” said Wilson.
Farmers and the rest of the grains industry have paid dearly for the spread of FHB, but they have learned how to assess the risk and the expected returns they need to justify seeding the crop.
They might be growing fewer acres than they used to, and being more careful with the ones they still seed, but they still grow the grains if they can show them the money, Wilson said.