By TIM UNRUH

Salina Journal

In a general sense, farmers in the Salina area harvested a good wheat crop with yields above the longtime average.

Combined with high prices -- more than $8 a bushel this past week -- producers should have more than offset the costs of high fuel, fertilizer, pesticides and other ingredients used to produce wheat, said Mike Woolverton, grain market economist at Kansas State University-Manhattan.

"We're looking at prices that are going to give farmers maybe double the revenues they would normally get from a wheat crop," he said. "It's definitely going to have an impact on local economies."

For the moment, the wheat results can be relished.

There were some fields that yielded from 70 to more than 80 bushels to the acre, but countywide, the guess is a yield in the low 50 bushels to the acre. The longtime county average is 40, said Tom Maxwell, District 3 agricultural Extension agent, Salina.

"With the yields we've got and the price we've got, we should still be profitable, even with the higher input costs," he said.

But, Woolverton said, while this year's profit will more than offset rapidly rising costs, "Next year is a worry."

And while many farmers will have some extra income that can benefit retail businesses and rural communities, Woolverton expects farmers to take a frugal approach to spending.

You might pay off debt

That attitude would please Dave Stanley, Minneapolis, executive vice president of Bennington State Bank.

"I'm not sure what the average producer is going to do. The average banker would hope that they would want to put themselves in a better position by paying off debt," he said.

Stanley, too, mentioned rising costs faced by farmers.

"We need good production and prices to stay profitable with this level of expenses," Stanley said. "We've had a good season and it's yet to be determined whether we have a good year."

Or buy a new combine

At least some farmers with money are feeling the urge to update equipment or make other purchases.

Carrico Implement, a Beloit-based John Deere dealer, is noticing some increase in sales, said sales manager Rodger Budke, after what he termed a "good, decent" harvest.

"There's some buying going on. I don't know that it's over and above what it usually is this time of year, but it is going on," he said.

Same goes at Warta Buick-Subaru-Suzuki, 2222 S. Ninth, said owner Mike Money.

"As soon as harvest is over, they are looking at upgrading their car, their pickup, whatever," he said.

This harvest will affect sales, Money said.

"What I'm seeing is not as much in Saline County as in the outlying areas. Some of those places had some great harvests," Money said.

Business is up "pretty substantially" at Straub International, 3637 S. Ninth, a Case International, Mahindra and Great Plains dealer, said chief executive officer Larry Straub. But customers aren't sure what to make of a wheat market that eclipsed $12 a bushel this past spring. Other commodities, such as corn, milo and soybeans, have posted historically high prices.

"This turnaround has happened so fast. People are just a little leery of it. There will be folks spending some money, but there's a little reluctance on this thing," Straub said.

What does it all mean?

Business is good now for Straub International, and he projects a strong second half of this year. But with market volatility, things can change in a hurry.

"This thing is growing pretty fast, but the input costs and the prices are growing together," Straub said. "People are not sure if this is a new normal or just a bubble."

The key for everyone is to improve your financial condition, he said.

"We're taking a lot of this windfall that we've got and aggressively paying down debt," Straub said. "If things so south, you're in pretty good shape to handle it."

For those thinking of upgrades in equipment, he said it would be wise to move quickly.

"There are equipment shortages that are brewing out there, and some of them are relatively significant," Straub said. "We're trying to get the message to customers that if you wait too long to get equipment or the tax man tells you in December that you need it, you may not be able to get it.

Worldwide demand for farm equipment is high -- Russia, China and India, are major consumers -- and factories are not able to keep up, he said. Manufacturers are hesitant about expanding to meet demand.

"They're very reluctant to build a lot of new plants. They don't want a lot of fixed-cost structure," Straub said.

No money to play with

Not every farmer has money to play with. Minneapolis farmer Steve Clanton said heavy rains forced him to plant wheat late last fall, and thus, his yields were below average. And because he forward contracted his wheat for around $6 a bushel, Clanton isn't enjoying today's high prices.

"This price doesn't necessarily mean that's what farmers are getting. I don't have any extra income," he said.

Clanton is a member of the Kansas wheat and soybean commissions. He's been busy lately planting soybeans, which are worth more than $14 a bushel.

"I was going to double-crop anyway. With the price of beans ... there are a lot of beans going in here," he said.

Brookville farmer Joe Kejr is still paying for the Easter 2007 freeze that ravaged most of the wheat in the Salina area.

Kejr abandoned half of 2007 his crop, and the half he harvested produced 50 percent of a normal yield. Because he wasn't able to fill 2007 contracts, they were rolled into his new wheat crop. In the end, he was paid in the range of four dollars a bushel for half of his 2008 crop.

"If you compare to last year, it was a great crop," Kejr said. "I also contracted some in the seven-dollar range."

Looking ahead, Kejr is wondering, with his banker, how to position his operation for next year, "discussing what we should consider doing on locking in a price" to sell wheat and buy fertilizer, fuel, chemicals and other ingredients to make the grain.

You just can't predict

But the crazy markets are preventing too deep of a gaze into the future. Some grain marketers are reluctant to contract months in advance.

"We are not contracting beyond 60 days, just because of having to finance the wild swings in the market," said Leon Hannebaum, owner of Hannebaum Grain, 2130 S. Ohio. This two-year period of rising grain prices has been the longest run-up in his 29 years in the business, he said.

Up until three months ago, Hannebaum was willing to write contracts for delivery up to two years in advance, but the industry is pulling back.

"Everybody has gone to that during this run-up period," Hannebaum said. "If and when the markets settle down, grain companies probably would be willing to buy for deferred shipment again."

Waiting for optimism

Dave Rempe, Abilene, K-State Extension agriculture economist for the Kansas Farm Management Association, said the times require nontraditional thinking. His nonprofit organization trades financial management and consulting expertise for farm data.

"Most people are pleased with the wheat crop and feel a sense of relief and optimism ... and from that you would think a lot of optimism would grow," he said. "But the last several months have taught us we don't have a clue what's going to happen."

It would be expected to think that this "tremendous combination of yield and price" will deliver a huge benefit to towns that hinge much of their success on farm profits. But that's not the prevailing attitude.

"The sense I get is this level of uncertainty causes stress," Rempe said.

The real optimism is still months away, when farmers learn whether their fall-harvested crops will fetch a profit.

"If these row crops come in decent, then that, to me, will be the point in time that people will enjoy. Certainly the potential's there," Rempe said. "We're trying to adjust to maybe a new normal, and we just haven't got there yet."

n Reporter Tim Unruh can be reached at 822-1419 or by e-mail at tunruh@salina.com.

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