A study ongoing at Virginia Tech’s Tidewater Agriculture Research and Extension Center in Holland, Va., is geared to answering some of the barley economics questions.
The study is being conducted by veteran Virginia Tech agronomist David Holshouser and much of the field work and economic evaluation is being done by Virginia Tech graduate student Phillip Browning, who grew up farming with his father, Fred Browning.
“This study is about profitability. It is a cropping system study began back in 2008,” says Holshouser. “The Osage Bio ethanol plant has been the catalyst for a number of research studies geared to helping Virginia farmers figure out the best ways to grow barley from a production standpoint and an economic standpoint,” he adds.
Virginia is expected to harvest more than 105,000 acres of barley in 2010, more than double the acreage just a couple of years back. The limiting factor has long been price, more precisely low prices driven by a lack of marketing options. Osage Bio offers market stability, but growers have not rushed into planting large acreages of the crop, most opting to wait-and-see how the market shapes up.
The Virginia Tech researchers are comparing profitability of barley-soybeans, versus wheat-soybeans, versus full season soybeans. The tests were conducted at two sites, on varying soil types, at the Tidewater Station and one in western Virginia and one in northeast Virginia.
Right now barley is economically tied to corn. Both are used for ethanol production and barley is currently trading at 70-75 percent of corn. The Virginia Tech researchers based much of the economic component of their study on the price of barley versus corn.
Speaking at a recent Crops Field Day at the Tidewater Station, Browning shared some of the economic findings from the study with over 100 grain farmers.
Across all four locations, bean yields in the barley-soybean double-crop plots were slightly less than full-season beans. Bean yields in the wheat-soybean double-crop plots were significantly lower than full-season beans. Though yields and yield differences varied from one location to another, the trend for higher soybean yields behind barley versus wheat held up across all locations, Browning noted.
“Profitability is driven by both yield and price for the commodity. So, we tried to regionalize some of the farming practices, like conventional versus no-till systems and considered the prices in different parts of Virginia,” Browning explains.
The researchers used five-year pricing trends to place a value on soybeans, wheat and barley. Using production levels of 40 bushels of soybeans per acre, 75 bushels of wheat and 95 bushels of barley, they made some predictions as to the relative profitability of each crop.
If wheat trades at $4.60 cents a bushel, barley must trade at $2.50 a bushel to be comparable in profitability — in a double-crop situation. This assumes that growers get eight bushels per acre less beans behind wheat and two bushels less than full-season beans with beans behind barley, which was indicated from the four research sites in 2008-2009.
To be comparable to barley at $2.50 per bushel in a barley-soybean double-crop, full season soybeans must trade for $9.40 per bushel. The relative numbers vary as the price of all three grains fluctuate, Browning stresses.
“When we raised the soybean yield per acre, the price of wheat needed goes up and the price of barley needed goes down, because we are getting that 6-8 bushel per acre bump in soybean yields behind barley,” Holshouser said.
Kevin Engle is one of Virginia’s largest barley producers, and he echoes what Holshouser says about barley/soybean yield advantages over wheat/soybeans. Engle grows most of his barley under irrigation, which he says, is a big boost for the soybeans that follow. “Our best soybeans come after irrigated barley, so we are maximizing our crop yields, and at the same time, maximizing use of our irrigation equipment,” he says.
It also makes a difference as to where the grower delivers soybeans. In general, growers in southeast and south-central Virginia will get a better price delivering to Hopewell, compared to one of the other buying stations.
For large acreage grain farmers, like Engle, who farms near Hannover, Va., maximizing labor and equipment also may factor into barley production. Adding barley acreage will spread out summer grain harvest, and the high cost of grain harvesting equipment can be maximized by planting more acres of wheat or barley.
If barley harvest doesn’t interfere with work that needs to be done in other crops, having a few hundred acres of barley to harvest, then going directly into wheat harvest can utilize labor at a time when some other spring-planted crops don’t need a lot of attention.
How wheat versus barley fits into the whole farming system is a key to determining which crop fits in best with soybeans, as does the price of wheat and soybeans, which are not so closely tied to corn.
“Spreading out harvest could be an advantage for growers with a large wheat acreage, say 1,000 acres. Barley is going to mature 10 days or more earlier than wheat, so a grower could spread out the harvest season by planting 200-300 acres of wheat,” Browning points out.
“On the other hand, spreading out the harvest season in June could be a negative thing, if it interferes with other crop production. A grower needs to factor in the timing requirements of all crops when determining whether or not barley fits into his production schedule, Holshouser added.
By the time farmers in Virginia, northeast North Carolina, Delaware and Maryland are very far into their winter grain planting, the big ethanol plant in Hopewell, Va. will be chewing up barley at better than two million bushels per month. Ideally, a lot of that grain will come from the Southeast.
Though acreage nearly doubled last year, even an excellent yield on the105,000 acres projected for harvest this summer will provide less than 10 percent of the barley needed for the Hopewell plant alone.
For sure there are other markets for barley. It is highly desirable for livestock feed, especially in some dairy cow rations. Competition for locally grown barley, plus the high cost of shipping barley from as far away as Canada may force Osage Bio to increase prices given to local growers.
Ultimately, how much barley is planted in Virginia and surrounding states next year is going to be driven by one thing — profitability.