Fall 2018 Wheat Planting Decision
By Greg Halich, UK Associate Extension Professor in Farm Management Economics
Kentucky grain farmers have started harvesting corn and are getting to the point where they will decide if and how much wheat they will plant this fall. Compared to last year there is a modest increase in wheat prices, and a significant decrease in soybean prices. These changes will make planting wheat more attractive relative to last year. The following analysis attempts to quantify the extent of the relative change in profitability for crops harvested in 2019. The analysis includes estimated returns comparing double-cropped wheat/soybeans with full-season soybeans for the 2019 crop, and the likely implications for Kentucky grain farmers.
Additional costs associated with double-cropping are accounted for, including fuel, fertilizer, herbicides, machinery repairs, labor, hauling and depreciation.1 The analysis assumes a blended mix of selling directly from the field and selling from storage for both wheat and soybeans, as well as typical basis for each crop with those scenarios. This results in 2019 crop prices of $5.50/bu for wheat and $9.00/bu for soybeans. Note that the basis for soybeans for fall/winter 2018/19 is exceptionally weak and I’m assuming it will be closer to normal in 2019/20, but still $.10/bu weaker what we would normally see.
Two regions with different agronomic characteristics are evaluated. The first region is along the southwest tier of counties roughly between I-24 and I-65, which traditionally does a lot of double-cropping. The second region is along the northwest tier of counties (Ohio Valley region) that has some of the best yields for corn and soybeans, but traditionally plants less wheat. Cash rent is assumed to be $175/acre for both these regions for the average ground and $225/acre on the best ground (note: this will vary substantially, but is done here for illustrative purposes only). Other major assumptions are: $2.75/gallon fuel, 25 mile one-way grain hauling, $.40/unit N, $.40/unit P, and $.30/unit K.
Southwest Tier Assumptions (Average Ground):
72 bu wheat
40 bu double-cropped soybeans
50 bu full-season soybeans
Resulting net profits:
-$25 double-crop
-$27 full-season soybeans
This results in a $2 difference in favor of the double-crop, or essentially a break-even between the double-crop and full-season soybeans.
Southwest Tier Assumptions (Best Ground):
90 bu wheat
48 bu double-cropped soybeans
60 bu full-season soybeans
Resulting net profits:
+$89 double-crop
+$10 full-season soybeans
This results in a $79 difference in favor of the wheat-soybean double-crop. The double-cropped soybean yield could drop down to 39 bu before full-season soybeans were as profitable.
Northwest Tier Assumptions (Average Ground):
65 bu wheat
40 bu double-cropped soybeans
50 bu full-season soybeans
Resulting net profits:
-$61 double-crop
-$27 full-season soybeans
This results in a $34 difference in favor of the full season soybeans. The double-cropped soybean yield would have to increase to 44 bu in this case before the wheat/double-crop soybeans were as profitable. This would equate to a 12% yield loss of double-cropped soybeans compared to full-season soybeans.
Northwest Tier Assumptions (Best Ground):
75 bu wheat
50 bu double-cropped soybeans
60 bu full-season soybeans
Resulting net profits:
+$28 double-crop
+$10 full-season soybeans
This results in a $18 difference in favor of the double-crop. The double-cropped soybean yield could drop down to 48 bu before full-season soybeans were as profitable.
Given the current expected market conditions for 2019, planting wheat looks attractive this fall in much of Kentucky. Only those fields with relatively poor wheat yields relative to soybeans would full-season soybeans be expected to be more profitable. On the best ground in the south-west tier of counties, the wheat-soybean double-crop is projected to net almost $80/acre more than full-season soybeans.
This analysis doesn’t account for potential payments from the ARC and PLC Farm Bill programs. However, these programs would pay on base acre crop allocation and not planted acres, so there would be no effect on the planting decision. To change the assumptions above to your specific conditions and evaluate your expected profitability, go to the grain budget site. The Corn-Soybean Budgets and Wheat Budgets can be downloaded or opened directly from this page.