Winter Wheat Planting Decisions and Break-even Yields

Winter Wheat Planting Decisions and Break-even Yields

Aug. 21, 2014

Profit margins for wheat-growing areas in southwest Nebraska and the Panhandle are expected to be tight for the upcoming year, based on market conditions, UNL cost of production estimates, and historical yields.

Download PDF or customizable Excel spreadsheets for each of the 66 Nebraska Crop Budgets.

Although there are several planting options for wheat ground, they all face the challenge of potentially lower market prices, requiring higher yields to break even.

Wheat producers' profit is affected by yield, market price, and cost of production, the most stable of which for planning purposes is cost of production. As growers consider planting decisions for the 2014-15 wheat crop, this article will use cost per acre as a base to evaluate wheat profitability and potential planting alternatives.

The following assumptions were used to make these calculations:

  • Costs per acre are from the 2014 Nebraska Crop budgets and are divided by an estimated local price to obtain a break-even yield.
  • Closing futures prices from Aug. 20 for December 2015 Kansas City Hard Red Winter Wheat and December 2015 Chicago Corn serve as an indicator for the 2015 harvest price.

Basis for both corn and wheat (the difference between cash and futures price) is lowest the second week of October.  Thus, the average basis the second week of October from 2009-12 will be used as an expected harvest basis to estimate a local price for sample wheat-growing areas of the state. To compare wheat to commodities besides corn, the break-even prices estimated by the UNL Crop Budgets will be used (Table 1, below).

Southwest Dryland Production

Two dryland wheat budgets (60 and 64) provide cost estimates for wheat production in the southwest at $283.47 and $352.27 per acre. Assuming an Aug. 20 closing price of $6.612 per bushel and the average wheat basis for McCook in the second week of October of -$1.11, producers would need to yield 52 bushels and 64 bushels, respectively, per acre to break even. This break-even yield for both scenarios is above the USDA NASS Red Willow County average of 47 bushels per acre for non-irrigated winter wheat from 2010-13.

Budget 19 estimates dryland corn production costs for the southwest at approximately $429.36 per acre. With a December 2015 futures contract price of $4.084 per bushel and a McCook corn basis of -$0.34, a break-even dryland yield would be 115 bushels per acre.  The average dryland yield for Red Willow County from 2009 to 2013 is 77.22 bushels per acre. In 2010 the county saw a record high average yield of 116.9 bushels per acre.

The grain sorghum budget for the southwest (33) has an estimated production cost of $346.23 per acre.  With an assumed yield of 105 bushels per acre, the break-even price for grain sorghum is $3.64 per bushel.

Panhandle Dryland Production

Three of the Nebraska Crop Budgets (61, 62 and 63) outline different wheat fallow options for the Panhandle, with cost per acre ranging from $287.73 to $300.28.  Assuming a basis for Sidney of -$1.09, yields to break even would need to be between 52 and 55 bushels per acre. Cheyenne County non-irrigated winter wheat yields are not available for 2012 or 2013. However, from 2009-11, the county average, 40 bushels per acre, is well below the break-even yield.

Millet may be an alternative option for Panhandle dryland wheat production. Millet has the lower per-acre cost of production, $191.73, and is outlined in budget 40.  UNL assumes a reasonable yield at 22 hundredweight, and a break-even price of $8.72 per hundredweight.

An emerging crop in the Panhandle, yellow field peas, also could be an alternative to dryland wheat. With a low per-acre production cost, $195.04 (Budget 43), the break-even price for peas is $5.57 per bushel, assuming a yield of 35 bushels per acre.

Two dryland sunflower budgets are also available for the Panhandle, no-till following corn and ecofallow (Budgets 57 and 58). UNL estimates the cost per acre of production for dryland sunflowers at $231.54 and $259.73 per acre, respectively. The yield estimate for Budget 57 is 13 hundredweight, making the break-even point $17.81. For Budget 58 the yield is 16 hundredweight, putting the break-even point at $16.23 per hundredweight.

Panhandle Irrigated Production

Approximately 12% of winter wheat in the Panhandle is irrigated, according to the 2012 Census of Agriculture. That is 86,500 acres, almost 20,000 of which is in Box Butte County. The cost per acre of irrigated wheat is $508.19 (Budget 65). Given the current market conditions, a yield of 89 bushels would break even. This assumes a -0.88 basis for Alliance. This break-even yield is close to Box Butte County's 2013 average yield of 86.5 bushels per acre, but much higher than the five-year average for the county of 68.5 bushels per acre.

By comparison, the Panhandle pivot-irrigated corn budget (26) estimates a cost of $787.00 per acre. Given the Aug. 20 December 2015 futures contract closing price and a corn basis of -$0.40 for Hemingford, a break-even irrigated yield would be 214 bushels per acre. The average irrigated corn yield from 2009-13 for Box Butte County was 160 bushels per acre.

Dry edible beans (Budget 32) have an estimated cost per acre of $589.55. Considering a 25-hundredweight expected yield, the estimated break-even price is $23.58 per hundredweight.

Estimated break-even yields may be attainable for some producers, but in many cases are above the county average.  No matter what you plant for 2014/15, it is important to have realistic expectations of cost of production and attainable yields. The 2014 Nebraska Crop Budgets are based on UNL production recommendations and expectations.  Cost projections are based on assumptions thought to be valid for many producers in Nebraska. However, individual producer costs may vary, depending on agronomic and financial needs.

When making planting decisions it is important to consider all costs associated with production, including labor, scouting for pests, insurance, overhead, and land taxes.  The costs quoted above include these as well as non-cash expenses such as machinery depreciation, lost interest on operating capital, and real estate opportunity cost.

For help estimating production costs, the UNL Crop Production Budgets are available online in an Excel format that can be customized to estimate costs for your production system. This also allows you to compare commodities based on your practices.

Jessica Johnson
Extension Educator – Ag Economics
Table. 1. Cost of production, estimated price, and break-even points for crops grown in southwest Nebraska and the Panhandle.  (Source: For left four columns is UNL Crop Production Budgets)
Budget Cost per Acre Yield Break-even Price/Unit Estimated Price Break-even Yield (bu)
60. Wheat, No-Till after Row Crop $283.47 45 bu $6.30 $5.502 51.52
64. Wheat, No-Till before Corn, 2 Crops in 3 years $352.27 60 bu $5.87 $5.502 64.03
19. EcoFallow Corn, Follows Wheat, 2 Crops in 3 years $429.36 115 bu $3.73 $3.744 114.68
33. Grain Sorghum, Conventional Tillage, $346.23 105 bu $3.64    
61. Wheat, No-Till Fallow, 1 Crop in 2 Years $288.83 55 bu $5.25 $5.522 52.31
62. Wheat, Stubble Mulch Fallow, 1 Crop in 2 Years $300.28 50 bu $6.01 $5.522 54.38
63. Wheat, Clean Till Fallow, 1 Crop in 2 Years $287.73 45 bu $6.39 $5.522 52.11
40. Millet, No-Till $191.73 22 cwt $8.72    
43. Peas, No-Till $195.04 35 bu $5.57    
57. Sunflower, No-Till, Following Corn or Grain Sorghum $231.54 13 cwt $17.81    
58.Sunflower, EcoFallow, after Wheat 2 Crops in 3 Years $259.73 16 cwt $16.23    
65. Wheat, No-Till after Beans, Pivot Irrigated $508.19 90 bu $5.65 $5.732 88.66
26. Corn, SmartStax RIB Complete, Pivot Irrigated $787.00 180 bu $4.37 $3.684 213.63
32. Dry Beans, Conventional Tillage, Pivot Irrigated $589.55 25 cwt $23.58