Fall 2011 wheat planting decision
Kentucky grain farmers in some parts of the state have been harvesting corn for a few weeks now and they will soon need to decide how much wheat to plant this fall. In Kentucky, wheat is almost always planted in the fall following harvest on corn ground, and then double-cropped with soybeans in early summer after the wheat harvest. This allows for two crops in one year. However, soybeans planted after the wheat harvest are more susceptible to summer drought, so on average, yields are lower for these double-cropped soybeans. In Kentucky, this yield reduction typically averages around 20%, but in many years there will be no yield difference due to weather.
The main difference between this year and last year is that we have had significant price increases in soybeans and corn, but wheat prices are a bit less than they were a year ago. All else being equal, this will result in fewer acres planted to wheat this fall, and consequently more full-season soybeans. What follows are some examples of these planting decisions and the likely implications.
In this analysis, I account for additional costs associated with the double-cropping including fuel, machinery repairs and depreciation, labor, hauling, etc. I’m using 2012 new crop CME future’s prices on October 4, 2011 and adjusting for new crop basis (estimated from a major grain elevator in western KY of $.40/bu for corn, $.50/bu for soybeans, and $.60/bu for wheat). This results in new crop prices of $5.20/bu for corn, $11.30/bu for soybeans, and $6.20/bu for wheat. Finally, I’m evaluating two locations with different agronomic characteristics: The first location is around Hopkinsville, which traditionally does a lot of double-cropping, and the second is the Daviess/Union County area that has some of the best yields for corn and soybeans, but traditionally plants less wheat. Cash rent is assumed to be $195/acre for both these areas (note: this will vary substantially but is done for illustrative purposes only here). Net profit is estimated after subtracting out all variable and fixed costs represented by an efficient operation. Major assumptions are: $3.50/gallon fuel, 15 mile one-way trucking, $.50/unit N, $.57/unit P, and $.53/unit K.
Let’s first compare double-cropping to planting full season soybeans. I’m using average yields in each area which results in roughly a 20% drop in soybean yield for double-cropped beans.
Hopkinsville Area Assumptions: 68 bu wheat 35 bu double-cropped soybeans 41 bu full-season soybeans
$159 net profit wheat-soybean double-crop $51 net profit full-season soybeans This results in a $108 difference in favor of the wheat-soybean double crop. Double-cropped soybean yield would have to drop to 25 bu in this case before full-season beans were as profitable.
Daviess/Union County Area Assumptions: 65 bu wheat 38 bu double-cropped soybeans 50 bu full-season soybeans
$174 net profit wheat-soybean double-crop $151 net profit full-season soybeans. This results in a $23 difference in favor of the wheat-soybean double crop. Double-cropped soybean yield would have to drop to 36 bu in this case before full-season beans were as profitable.
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