High Protein
Producing above average yield and high protein wheat offers opportunity to break even or better.

Protein is where the premium is; it could be as much as $36/acre

High protein wheat should pay for increased inputs

Oklahoma’s average protein for the 2017 wheat crop was 10.9 percent (Plains Grain, Inc). Using the current Kansas City hard red wheat protein basis schedule, the basis for ordinary wheat (<11 percent protein) was 43 cents (Milling and Baking News, Nov.7, 2017, pg. 41). The basis for 11.4 percent protein wheat was $1.53, or $1.10 higher.

Using the Oklahoma average 2017 yield per acre (33 bu.), 11.4 percent protein wheat is worth $36.00 (33 bu. x $1.10) more per acre than the average value 2017 bushel.

During the 2017 harvest, Plains Grain, Inc. collected wheat samples from 78 elevators across Oklahoma. Seventeen of the 78 locations had average protein greater than 11.4 percent, with a range between 9.3 percent and 12.2 percent.

Anecdotal evidence reveals that some producers delivered 12 percent or higher protein wheat to sub-terminal elevators and received 90 cents and higher per bushel premiums.

Plains Grain data show that the average protein in Oklahoma wheat was 12.3 percent in 2012, 12.8 percent in 2013, 14.2 percent in 2014, 12.6 percent in 2015, 11.0 percent in 2016, and 10.9 percent in 2017.

Oklahoma production was 154.8 million bushels (mb) in 2012, 105 mb in 2013, 48 mb in 2014, 99 mb in 2015, 137 mb in 2016, and 99 mb in 2017. The average weighted protein for these six years is 12.1 percent, with a low of 10.9 percent and a high of 14.2 percent.

 PREMIUMS VARY YEARLY

One complaint about protein premiums is that every year the premium is different. During the last six years in early July, the average premium for 12 percent protein over ordinary (<11 percent protein) was 68 cents. The range is from zero in 2015 to $1.65 in 2017. Only in 2015 (0 cents) and 2014 (10 cents) was the 12 percent protein premium less than 70 cents.

The premium for 12 percent over 11.4 percent protein averaged 34 cents and ranged between zero in 2015 to $1.00 in 2017. The premium was 30 cents in 2012, 16 cents in 2013, 10 cents in 2014, and 50 cents in 2016.

During the six-year period 2012 through 2017, Oklahoma’s average weighted yield was 33 bushels per acre. Using the average weighted premium (basis) for 12 percent protein versus ordinary protein ($0.68), wheat value increased $22.44 per acre. The value of 12 percent over 11.4 percent was $11.22 per acre.

This analysis indicates that producers could increase input costs to produce higher protein wheat and still increase net returns. However, logic indicates that inputs and management practices that are used to increase protein will also increase yield.

 

ABOVE AVERAGE YIELDS

Anecdotal evidence indicates that growers who produce relatively high protein wheat also have above average yields. Protein and yield increases are realized by efficient applications of nitrogen and other nutrients and fungicides when needed. Crop rotation has also resulted in higher yields and protein.

Even at a $4.00 per bushel cash price, each additional bushel above the 33 bushel average increases returns per acre by $4.00 (because of higher input costs, net returns will not be $4.00). If average production is increased to 40 bushels per acre, compared to 33 bushels, the return per acre would be increased by $28.00.

Adding the $28.00 per acre from higher yield, plus $13.60 (12 percent vs. 11.4 percent at 40 bu.) from higher protein implies that costs could increase by $41.60 per acre ($28.00 from yield and $13.60 from protein) and still break even. Going from ordinary protein to 12 percent would make the increased return $55.20 per acre ($28.00 from yield and $27.20 from protein).

Domestic millers and wheat exporters need and demand 12 percent or higher protein hard red winter wheat, and 60 pound test weight. In most years, the test weight requirement is met. Protein is where the premium is, and it may be worth $36.00 or more per acre.

 

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