A profitable wheat crop wasn’t hard to come by when prices surged toward and beyond $10/bu. in the crazy trends seen in 2008. But realistically, the profit you make depends on both wheat prices and your input costs. And on average, many growers will see a breakeven in the $5.15 area this year, says Melvin Brees, economist at the University of Missouri Food and Agriculture Policy Research Institute (FAPRI).
“This is not an exact process because the growing season conditions and actual production are unknown,” he says. “But estimating breakeven price levels is one of the first steps in market planning. Breakeven prices vary considerably from farm-to-farm depending upon expected yields and production costs. Whether land is owned, share leased or cash rented also has significant cash flow and cost breakeven impacts.”
If you farm in Missouri or a nearby state, FAPRI offers online crop budgets that estimate crop costs per acre and per bushel. They are available at: http://www.fapri.missouri.edu/. “These budgets project total production cost breakeven prices at $5.17 for wheat, $3.02/bu. for corn and $6.42 for soybeans,” says Brees. “However, using cost projections based on farm records or using the budget generator also found at the FAPRI site should provide a more accurate estimate for individual farms. These enable adjustments for variations in costs and landownership that significantly impact cash flow and prices needed to breakeven or generate profits.”
Depending on your local basis (difference between cash prices and wheat futures prices), the Chicago Board of Trade and Kansas City Board of Trade July wheat futures contracts have been trading in the $5-5.20 range. Spikes in the market could open up opportunities to get part of the 2010 crop sold.
Mark Welch, Texas AgriLife Extension grain marketing specialist, says growers should consider marketing their wheat in three periods. He suggests marketing one-third of the winter wheat crop between now and the end of April, one-third between early May and late June and one-third after early August.
“With improving global economic conditions and forecasts for lower ending stocks, my outlook for wheat prices is higher over the next few months,” says Welch. “Price improvement will be muted by the large level of current stocks, but support from other grains and outside markets should be supportive of higher wheat prices.”