Purdue News

September 27, 2002 Ag economist: Poor weather + market boom = wheat revival WEST LAFAYETTE, Ind. – A crop that's been gradually disappearing from Indiana farms the past 120 years may be poised for a comeback. Through a series of weather- and market-related events, wheat has re-emerged as a precious – and profitable – commodity. Hoosier producers might want to consider adding wheat to their crop mix, said Craig Dobbins, Purdue University Cooperative Extension Service agricultural economist. Dobbins said below-average harvests in much of the United States and other grain-producing nations this year, coupled with rising grain demand and subsequent smaller carryover stocks, are boosting commodity prices for all grains, especially wheat. "The last several years we've been in a pattern of fairly low prices," Dobbins said. "But with the poor weather in the U.S. this year and bad weather events around the world, we've had a real tightening of grain stocks in this country. So we've seen price movements this year that are much bigger than what we've seen in the past. "One of the commodity prices that has moved rather substantially is wheat. If one takes a look at current wheat prices or those in the futures market for next year's wheat crop, it looks as if wheat has regained some of the profitability that it used to have." Current wheat prices are around $4 a bushel in Indiana, with new crop 2003 prices ranging from $3.30 a bushel to $3.50 a bushel. By comparison, wheat was trading for about $2.50 a bushel one year ago. In addition to the grain, farmers can earn extra cash for the wheat straw. Construction and landscaping demands have put a crimp in straw supplies. "Producers might want to get out their pencils and budget through to determine what kinds of returns they might expect from wheat on their farms, relative to corn and soybeans," Dobbins said. Most wheat grown in Indiana is soft red winter wheat. The crop is planted in the fall and harvested the following summer. This year, state wheat production totaled about 17.2 million bushels, down 32 percent from 2001. Only 330,000 acres was harvested, an all-time Indiana low, according to the Purdue-based Indiana Agricultural Statistics Service (IASS). State wheat acreage has declined almost annually since the 1880s, when Indiana's harvested acres topped 3 million. Although still among Indiana's leading cash crops, wheat is far behind corn and soybeans. The IASS estimates Hoosier farmers will harvest 627.1 million bushels of corn from 5.27 million acres this fall. The soybean harvest is projected at 232.9 million bushels from 5.68 million acres. Farmers might consider growing wheat for reasons other than just the higher prices, Dobbins said. The crop is relatively inexpensive to plant, it improves cash flow at a critical time of the year and is harvested early enough that many farmers can get in a soybean crop the same year. "While now is the time you've got to make a decision and get it planted, wheat will be harvested in July, which may be an important time to bring in some additional cash that corn and soybeans won't provide until September, October or November. So wheat might help smooth out some of the cash flows as we get into next year," Dobbins said. "Another thing to think about is, what does it cost to put each of these crops in the field? Relative to corn and beans, there's less investment tied up in a wheat crop." Producers in southern Indiana also can take advantage of a wheat and double-crop soybean rotation. The wheat/double-crop soybeans combination affords the greatest return after expenses – the contribution margin – of any crop rotation option, Dobbins said. On high-yield soils, wheat/double-crop soybeans provides an average contribution margin of $251 per acre, followed by rotation corn ($220 an acre) and rotation soybeans ($194 an acre). On average- and low-yield soils, the estimated contribution margins for wheat/double-crop soybeans are $204 an acre and $163 an acre, respectively – about $30 per acre ahead of rotation corn in both cases. Wheat as the sole crop in those fields is third, at an average of $147 an acre on average-yield and $129 an acre on low-yield soils. "That would certainly be an impetus to plant wheat," Dobbins said. "The problem that one faces with double-crop soybeans is you're never sure what the weather is likely to be. If we have a dry summer again next summer, the double-crop strategy might not work. But having the ability to get a second crop gives a producer more flexibility. If you have a poor wheat crop, you have another chance for additional revenues with a later-planted soybean crop." Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu Source: Craig Dobbins, (765) 494-9041, cdobbins@purdue.edu Purdue News Service: (765) 494-2096; purduenews@purdue.edu To the Purdue News and Photos Page