Dave Wiechert of Nashville, Illinois, does good business most years cleaning seed for farmers in preparation for planting season. But this year, Wiechert is doing big business after harvest: cleaning fungus off wheat so farmers can sell it.

The “head scab” fungus can produce vomitoxin, a chemical that is poisonous to humans and livestock when consumed at high levels. This year, soft red winter wheat has been hit badly by the fungus, which develops when it rains during the crop’s key growing period.

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Head scab, which scientists call fusarium head blight, can hit profits of farmers and grain handlers hard, while raising costs for bread and cereal makers.

Previous outbreaks cost the U.S. wheat and barley industry $2.7 billion from 1998 to 2000, then another estimated $4.4 billion in 2011. It is too soon to know the full economic losses for 2014.

In addition, unsellable wheat has been competing for storage space with bumper corn and soybean crops about to arrive in the autumn harvest. Cleaning the wheat reduces vomitoxin levels as it sifts out damaged grain, but it can cost about $1 per bushel for farmers. Wheat currently sells at around $5 per bushel.

“This is the worse I’ve ever seen it,” said Wiechert, owner of Wiechert Seed Inc., which he has operated since 1985. The business is 50 miles southeast of St. Louis, Missouri, near the epicenter of a vomitoxin outbreak.

“We’re trying to get the vomitoxin down to a sellable level and trying to get the test weights up,” he said.

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Head scab shrivels the grain. This reduces test, or average, weights from the harvest, which also cuts profits. This outbreak will hit farm incomes that are already down for the first time in several years, shrinking 27 percent in 2013/14 from a year earlier, according to data from the U.S. Department of Agriculture.

Livestock that consume feed made with scabby wheat can get sick with vomiting and diarrhea. Some will refuse to eat the feed, reducing the amount of weight they gain.

Diseased wheat can be blended with higher quality product to reduce the concentration of the chemical to acceptable levels, but some grain handlers are struggling to find good SRW wheat near at hand.

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Farmers whose wheat carries large amounts of the pink-tinged damaged crop face deep discounts at elevators, and some grain will get flat out rejected for purchase.

VOMITOXIN LEVELS RISE

Soft red winter (SRW) wheat is grown in a large eastern section of the United States, in the south from Louisiana and Arkansas across to the Carolinas and in the north from Missouri across the Midwest to Pennsylvania and Maryland.

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It accounted for about 19 percent of the U.S. total wheat crop in 2009 through 2013 and is used typically for cakes, biscuits and pastry.

Exports, excluding China, through the July 2014 marketing year totaled about 1.7 million tonnes, down from 2.0 million tonnes in the previous year, according to data from the U.S. Wheat Associates.

“It is in a lot of the wheat, areas east of the Mississippi River would be the most suspect, all along the U.S. Gulf and through the Eastern Seaboard. There were even high levels coming out of Pennsylvania,” said Max Hawkins, a livestock nutritionist at Alltech Inc, a feed company based in Lexington, Kentucky.

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Vomitoxin levels are coming in well over approved maximums for both livestock consumption and for products eaten by humans.

A preliminary survey from the U.S. Wheat Associates showed composite vomitoxin level from more than 500 samples across nine states was at 2.5 parts per million (ppm) for the 2014 SRW wheat crop, much higher than 1.4 ppm in 2013 and the five-year average of 1.3 ppm.

The U.S. Food and Drug Administration restricts vomitoxin in finished products such as flour to 1 ppm. The FDA advises total diets for chicken and cattle have less than 5 ppm and swine at 1 ppm. Export buyers typically limit levels to 2 ppm.

HARVESTING, STORING UNSELLABLE WHEAT

Farmers with crops hit badly by head scab will get steep discounts if they want to sell their wheat. Some Midwest grain elevators have set discounts for vomitoxin levels between 6 ppm to 10 ppm anywhere from 40 cents to $2 per bushel. Many locations rejected wheat with levels of 10 ppm and higher.

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Farmers are growing more frustrated as the autumn harvest for corn and soybeans approaches. Normally, they would sell the wheat, leaving on-farm storage bins empty and available for freshly cut crops, Wiechert said.

“They’re scrambling around trying to find out if they can put more storage bins (on the farm), or if they can find a place to store it, because it is really going to cause a problem this fall,” Weichert said.

Dave DeVore, a grain merchant at Siemer Milling with facilities in central Illinois and western Kentucky, said he must buy wheat outside of his normal purchase areas due to high vomitoxin levels.

“We’re seeing about 10 ppm and I don’t know that we have seen that before. The elevators are not sure what they’re going to do with that wheat,” DeVore said.

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While DeVore does not expect to have any issues making high quality flour for customers, his input costs will certainly rise.

“You have to pay more simply because of the freight costs. If we have wheat railed in, we have additional freight costs and that’s the biggest thing, the freight costs,” DeVore said.

(Additional reporting by Julie Ingwersen)