In Tennessee and much of the surrounding area, the months of September and October are generally the times producers finalize their decision on whether to plant wheat.

Certainly, there are many other decisions occurring during this harvest period, but producers interested in wheat should have already developed their wheat production plan.  

There are normally several factors that are examined when developing a wheat production plan. The factor I most look at is the profitability factor. How does wheat and double-crop soybeans compare to other competing crops?

I would be amiss if I didn’t mention other factors that are also considered. Producers also consider financing ability or available capital, crop rotation, seed availability, landowner desires, and planting conditions.

Another factor to mention at least in cotton country is the timing of wheat harvest as compared to other production practices such as weed and insect control. Each of these factors is important in their own right and varies among individual farmers.

When producers consider wheat and the double-crop soybeans that are usually planted behind wheat, then the 2013 farm plan has begun to be formulated.  Even then the plan can and generally is tweaked based on crop economics.

In Tennessee, when we are considering wheat, we are considering how wheat and double-crop soybeans will stack up against full-season soybeans, corn, or cotton.

With an early corn harvest, producers should have adequate time to seed wheat and that has spurred the interest in planting wheat. Interest in wheat this year also comes from back to back years of good to excellent yields and wheat prices that have trended up with corn and soybeans.

Wheat prices have at times broken out on their own as wheat for feed is considered a substitute for corn and overseas production problems.

I still like a diversification of crops and crop rotation as we just don’t know what crop will yield the best. It does not take much of a yield increase at today’s prices for one crop to overshadow the other.

However, farmers with irrigated land and with hopefully a more stable production would have the capability to focus on profitable crop selection more so than dry land.

The table below examines returns from corn, cotton, soybeans, and wheat/soybeans.

Expected yields consider Tennessee 5 year average yields and trend line yields. Prices are based on current offerings for 2013 at the time of this writing. Prices no doubt will change during the next year, so producers may want to look at various pricing scenarios as well as different yields. 

Variable cost assumptions

At this writing it is difficult to estimate costs for the 2013 production year, but I am assuming variable cost will be stable for 2013. Fertilizer and seed costs will be the ones to watch for 2013.

Producers who have trouble controlling glyphosate resistant weeds will have higher weed control costs.

Land costs are 25 percent of revenue and are used as a method of comparison.

 

2013 Estimated Returns Per Acre

 

Cotton

Soybeans

Corn

Wheat/Soybeans

Yield

830 lbs.

37 bu.

120 bu.

60bu./27 bu.

Price

$0.78 lb.

$13.25 bu.

$6.20 bu.

$8.39 bu./$13.25 bu.

Revenue

$647

$490

$744

$861

Variable Expenses

$481

$219

$331

$436

Returns Over Variable

$166

$272

$413

$425

Land Costs

$159

$121

$185

$213

Returns Over Variable & Land Costs

$8

$150

$228

$212

Fixed Costs

$76

$41

$39

$83

Returns Over Specified Costs

($69)

$109

$189

$129

 

This is at least a starting point for 2013 planning. In crop decisions where there are no equipment changes, I look closely at Returns over Variable Costs for own or cash rent ground or in the case of share rent — Returns over Variable and Land Costs.

If equipment changes are going to be made, I might consider fixed costs, but really recommend a whole farm plan. In the above scenario, wheat and double-crop soybeans are worth considering, particularly on own or cash rent ground.

It generally seems the yield of double-crop soybeans is the key to the viability of the system. Wheat on its own would return $242 per acre over variable expenses or $118 per acre over variable and land costs, so 44 percent of the returns are coming from the double-crop soybeans.

Considering the above assumptions, corn again looks strong for 2013. Cotton does not look very exciting at this time, but could be the sleeper crop for 2013 if acreage (U.S. and foreign) is reduced and the economy improves moving prices higher.

There still is plenty of time to compare cotton, corn, and soybeans, but looking at these numbers gives me some confidence that wheat and double-crop soybeans can have a place in the crop mix for producers in 2013.

Develop your own estimates and use your numbers as you plan for the next year.

Developing or updating budgets is a very useful tool that can be performed throughout the year. It is important to use this tool before making major marketing decisions, wheat planting decisions, seed or input orders, and final planting decisions.

I will be updating these numbers as we go throughout the year and they will be posted at http://economics.ag.utk.edu/outlook.htmlunder Profitability Outlook.

Discuss with your supplier, fertilizer and other inputs. If commodity prices stay strong or increase, fertilizer and other input prices will most likely increase.

Producers who know what their phosphate and potash needs are for 2013 may want to consider applying them this fall or locking in current prices.

Every farm situation is different, so plan ahead to make informed decisions in your operation. If you would like assistance in developing a farm plan or budget, contact your local County Extension office, Area Specialist — Farm Management, or in Tennessee call the MANAGEment Information Line at 1-800-345-056.