High wheat prices relative to other commodity prices in the last year encouraged some producers to plant wheat on traditional corn or soybean plots this fall. With the recent upswing in the corn market, some producers are now considering whether they should stick with wheat or tear it out and plant corn next spring. The worksheet allows producers to input information relative to their resources and cropping practices to compare various scenarios.
This spreadsheet, along with a brief synopsis, can be accessed on the Internet by going to http://westcentral.unl.edu/agecon/ and clicking on “Wheat or Corn.” To use the spreadsheet you’ll need Microsoft Excel on your computer.
The spreadsheet considers two crop environments – irrigated and dryland. Deciding whether to change crops depends on many factors, including available equipment, cost of production, the producer’s ability to grow wheat versus corn and the prices that the producer anticipates receiving for wheat and/or corn this coming year. The spreadsheet was used to make the following analysis, based on some simple assumptions.
The analysis shows that spraying and killing the wheat and planting corn is a good choice on irrigated land while leaving the planted wheat often is the best choice for dryland conditions; however, producers are encouraged to use the spreadsheet to determine the best options for their situation. The spreadsheet found on the WCREC Web site may be useful but its results will be no better than the information entered and the assumptions used.
In the case of the irrigated cropping system, I compared 90 bu/ac wheat to 195 bu/ac corn using cost information from the Nebraska Crop Budgets and Bob Klein, extension crops specialist. The analysis includes the cost of planting wheat, and in the case of growing corn, the added cost of removing the wheat. The prices used in the analysis were observed on Nov 29, 2006 for the 2007 September wheat futures contract ($5.07) and the 2007 December corn futures contract ($3.60). Ignoring any differences between futures and local prices, calculations showed that irrigated corn would have about a $60 net advantage per acre over wheat. At these prices there would be about a $33 net decrease/increase for every 10 bushels more or less of corn produced with 177 bu/ac corn being the breakeven yield, 16 bu/ac less than the assumed yield/acre, with wheat yields held constant at 90 bu/ac.
In the case of wheat, each 10 bu/ac yield change results in about a $49 change in net income. If wheat yields were increased by 12 bu/ac, from 90 bu/ac to approximately 102 bu/ac, there would be no advantage in switching from wheat to corn. If the expected yields were held constant at 195 bu/ac for corn and 90 bu/ac for wheat, wheat prices would have to increase $0.66 per bushel or corn prices would have to fall $0.31 per bushel for the net incomes of the two crops to be equal.
The analysis of the dryland cropping systems assumed wheat yields of 65 bu/ac with corn yields at 100 bu/ac. The dryland analysis indicated that wheat has a $57 per acre advantage over corn. This advantage is a direct result of the yield assumptions. Dryland wheat yield was only 25 bu/ac less than the irrigated crop while the yield for dryland corn was 95 bu/ac less than its irrigated counterpart.
Using the same futures prices as the irrigated scenario, there would be about a $35 net decrease/increase for every 10 bushels more or less of corn yield. A corn yield of about 116 bu/ac is comparable to the 65 bu/ac wheat yield. In the case of wheat, each 5 bushels represents about a $25 change. If wheat yields were reduced to approximately 53 bu/ac there would be no advantage to either wheat or corn. In the case of price changes while holding the expected yields at the 100 bu/ac for corn and 65 bu/ac for wheat, corn prices would have to increase $0.57 per bushel or wheat prices would have to fall $0.87 per bushel to have equal net incomes.
The value of crop residue was not included in any of these analyses. Water costs were included in these analyses, but no explicit value was included for any water savings. Irrigators who have limited water may put a value on the water saved by producing wheat.
Matt Stockton
Agricultural Economist
West Central REC
Faith Colburn
Communications Specialist
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