Crop rotation decisions used to be simple: corn and soybeans or soybeans and corn. However, conditions have changed.
Prices certainly have changed with ethanol production impacting corn demand and drought in the southern hemisphere affecting wheat prices. We've seen trends change like never before.
Technology has also changed, particularly in seed corn with the new triple-stacked hybrids allowing corn following corn to be productive and profitable.
In certain parts of the Corn Belt like Nebraska, wheat is an option to offset water shortages and irrigation costs due to fuel prices.
Price, cost and weather volatility will likely increase, too. The best we can do is to adapt. Smart farmers change before they have to. Lucky ones manage to scramble and adjust when push comes to shove. The rest are losers and become history.
There are no pat answers. Everyone will tell you to run the numbers, and that's great advice. But there's a litany of issues beyond the numbers that you must consider.
Getting planting, spraying and harvesting done on a timely basis is one. Having corn in the field when an ice storm hits at Halloween can derail the best-laid plans and numbers.
Having the infrastructure to handle a rotation shift is another. That may include grain storage, trucks, grain carts, drying equipment, labor, tillage equipment and other issues.
Yield drag with increased corn on corn is an issue in some parts of the Corn Belt. In some areas soil types explain the differences.
Diseases and insect problems in corn and soybean production are factors that vary from state to state and even area to area.
Basis levels that impact bottom-line profitability have recently disconnected with predictability and history. Wheat basis levels in Ohio and Indiana were 80¢ under the Chicago Board of Trade (CBOT) this summer, higher than they'd been in recent history.
Basis levels may change even more in the future from ethanol industry changes. Garrett Toay of AgTraderTalk recently shared with me the possible percentage of corn to be used in the future after all planned ethanol plants are in full production compared to the three-year average corn production in those counties and states. My conclusion is in some areas basis levels could turn upside down from historical levels.
If you're in an area where corn basis used to be 40-60¢ under the CBOT price, it could change to above the Board price at certain times and under certain conditions. On 200-bu. corn, that could equate to a $120/acre swing in profitability. Being in the right place, with the right products, at the right time can make the kind of differencethat buys farms.
What You Should Do
Running the numbers is still a good place to start when planning crop rotations for 2007. Then your management experience can kick in and you can evaluate the risk-to-reward factors already touched on.
Finally, you can then implement plans to capitalize on opportunities and mitigate risks.
Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 24 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.