North Central Oklahoma grain farmers likely will replace some wheat acreage with grain sorghum or corn this year, taking advantage of some of the best prices most have ever seen.
A dry fall that delayed or prevented seeding wheat also made spring crops seem a better risk, says Matt Landwehr, grain merchandiser with W.B. Johnston Grain Company, Enid, Oklahoma.
“We'll see some reduction in wheat acreage but I can't see that we'll cut back a lot. We don't have much wheat grazing. A lot of farmers held off and didn't plant early (enough to graze).”
Volunteer wheat, a result of wet harvest conditions that forced many farmers to leave wheat in the field, also complicated fall seeding decisions. “Some growers were waiting until the volunteer wheat died back before planting,” Landwehr said. “But that volunteer stand carries diseases over into the next crop.”
The price and availability of seed wheat also affected acreage, he said.
He said the crop got off to a slow start across much of Central Oklahoma. “Enid is a pretty good monitor for the state. It's been extremely dry in other areas, too.”
He said wheat farmers have a great opportunity with the current prices. Back in October, growers could book wheat at $6.88 July futures with a 25 cents negative basis. Prices have risen since.
“We haven't seen many contracts yet,” Landwehr said.
He said farmers who switch to corn have good price prospects. “It makes sense to lock in prices and buy crop insurance,” he said. “That way farmers are looking at some kind of return from the crop.”
He said grain sorghum and corn offer good rotation options for wheat. “Either will break the disease cycle. A lot are looking at it.”
He said grain sorghum export potential also looks good for Southwest farmers. “Much of Europe is a non-GMO market,” he said. “That helps milo.”
So does ethanol. “Potential for ethanol looks a lot stronger with higher oil prices. Demand for distillers grain, at $140 to $150 a ton is also a plus.”
He said a more stable corn price, just under $4 a bushel, keeps ethanol competitive. “Ethanol helps boost grain prices, especially milo.”
Landwehr said the last two years have taken a toll on North Central Oklahoma farmers. They made hardly any wheat in 2007 and only a slightly better crop the year before. “Grower attitudes are not good,” he said. “Two bad years are weighing on farmers. They have cash flow issues.”
Even though they expect prices to remain good through the 2008 crop season, they also look at significantly higher production costs. “Fertilizer costs went up $100 in a week,” he said. “Farmers are paying as much as $500 a ton for urea. Wheat farmers are wondering whether to topdress or not.”
Fertilizer prices are “somewhat related to energy costs but we also have to consider ocean freight,” he said. “Supply and demand is a factor, too.”
Landwehr said some farmers who anticipate planting milo or corn in the spring started applying fertilizer last fall. “They wanted the price and the tax obligation in 2007.”
He said some farmers who also run trucking businesses have been dealt a double blow. “With a poor wheat crop they've had nothing to move. Conditions in the Texas Panhandle have been much better, just a three-hour drive away. They made a good wheat crop.”
Landwehr said most North Central Oklahoma grain sorghum farmers did well in 2007. “In October we still had a good bit left in the field and it looked good,” he said.
He said farmers are looking closely at progress on the farm bill.
“Payment limitation is not a big issue in this area, but farmers need a better insurance program and a target price and loan rate increase.”
He said the Conservation Reserve Program is also a mixed blessing. “If we got CRP land back into production it would help the economy,” he said. “But (landowners) get money without the inputs (if they leave land in CRP). We need improvements in the program,” he said.
Landwehr said Johnston Enterprises works with clients to improve profit potential. “We're working with some on options trading,” he said. “We want to help manage risks. Options are difficult to understand but they provide some marketing insurance.”