Fall 2015 Wheat Planting Decision

 

Kentucky grain farmers have just started harvesting corn and are getting to the point where they will decide how much wheat they will plant this fall. In Kentucky, wheat is almost always planted in the fall following the harvest on corn ground, and then double-cropped with soybeans in early summer after the wheat harvest. This allows for two harvested crops in one calendar year. However, soybeans planted after the wheat harvest are more susceptible to summer drought, which means on average yields are lower for these double-cropped soybeans. In Kentucky, this yield reduction typically averages around 20%. As a consequence, the majority of soybeans planted in Kentucky are full-season plantings rather then double-cropped.

 

 

 

 

A major change the last two years is the continued price declines for wheat and soybeans (as well as corn). The following analysis includes estimated returns comparing double-cropped wheat/soybeans with full-season soybeans for the 2016 crop, and the likely implications for Kentucky grain farmers.

 

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 2016 new crop CME future’s prices on September 10, 2015 and adjusting for a new crop basis of -$.25 for both soybeans and wheat. This results in new crop prices of $8.40/bu for soybeans and $4.70/bu for wheat. Finally, I’m evaluating two regions with different agronomic characteristics. The first region is along the southwest tier of counties near Hopkinsville, 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 $225/acre for both these regions (note: this will vary substantially, but is done here for illustrative purposes only). Net profit is estimated after subtracting out all variable and fixed costs represented by an efficient operation. Major assumptions are: $2.15/gallon fuel, 25 mile one-way grain hauling, $0.40/unit N, $0.40/unit P2O5, and $0.40/unit K2O. 

 

Southwest Tier Assumptions:

 

Resulting net profits:

 

This results in a $37 difference in favor of the full season soybeans. The double-cropped soybean yield would have to increase to 39.5 bu before wheat/double-crop soybeans were as profitable.

 

Northwest Tier Assumptions:

 

Resulting net profits:

 

This results in a $86 difference in favor of the full season soybeans. The double-cropped soybean yield would have to increase to 48 bu in this case before the wheat/double-crop soybeans were as profitable. 

 

Given the current market conditions, double-cropping doesn’t look attractive for 2015- 2016, particularly in northwest Kentucky. An important note is that this analysis doesn’t account for potential payments from the new ARC and PLC Farm Bill programs. However, these programs would pay on base acre crop allocation and not planted acres. So there should be no effect on planting decisions.