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What should I plant?

04/16/2021

The three main crops in our area are corn, soybeans and wheat, with some specialty crops such as edible beans and sugar beets. The first three crops dominate our acreage. Crop rotations that include wheat are very beneficial for soil health. Multiple years of research at the University of Guelph, Ridgetown Campus has consistently proven that corn and soybeans yield better in a rotation.

For many farmers maintaining a rotation is standard practice, and often we don’t see huge acreage shifts from corn to soybeans in any given year. There are very few swing acres that go all one way or the other.

The profitability of crops has three main components: yield and selling price, less expenses. Sometimes we may fixate on the cost side of the equation, and fair enough, that is an important driver for profitability. In 2021 with the rise in fertilizer prices, it is not taking any more bushels of the crop to pay for the same amount of fertilizer as it did in 2020. Commodity prices are much improved over last year, keeping pace with the cost of production.

The marketing side of the farming business needs equal attention as the cost side. The job of the commodity market this time of year is to encourage acres to be planted. After planting, the market's job is to buy those bushels now as cheaply as it can.

Let's look at current market prices, yields and gross income:

100 bushel wheat / acre at $8.00 per bushel is $800/acre
220 bushel corn at $6.50 per bushel is $1430 / acre
60 bushel soybeans at $16.00 is $960/ acre

The way to optimize farm income is forward contracting a portion of the crop to lock in these current prices before harvest. A marketing plan for the entire crop is also good practice to consider. The best way to sell corn at $6.50 is to sell some at $6.50.

In order to lock in prices, it is good to know your cost of production. We can help with this using a return to land, labour and equipment calculator. Often, land, equipment and labour can be the more significant costs to be covered.

The two main drivers for covering these costs is yield and selling price. After entering input cost, the following matrix tables are produced. You can see various combinations of yield and market prices needed to cover the fixed costs of land, labour and equipment.

You can see yield ranges on the top and market prices on the side. Looking at corn; if you needed $700 an acre to cover fixed cost, then a combination of 175 bushel corn and a price of $6.00 a bushel would cover that. If you need $800.00, then 190 bushel corn and $6.50 per bushel would cover that. Our agronomy programs can target yield performance, while our grain division can cover marketing and pricing opportunities.

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Don’t hesitate to contact AGRIS Co-operative to have a strategy discussion.

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