Many farmers are confused. How do you make a choice in terms of planting decisions and crop selection for the coming year? Personalities in media are convinced soybeans are a great answer to years of low prices. Agronomists will argue that producers need to stick to the rotation. As an economist, all I can offer is a look at the numbers.
I won’t attempt to bore you with all of the background as this article does not intend to dive deep into budgeting. I believe simplicity is key when it comes to record keeping and budgeting because if something is simple, you are more likely to do it.
Summer crop producers have several crop options to plant in Oklahoma. I’ll focus on corn, sorghum, sesame, cotton and soybeans. Comparative analysis requires that one be fair in the assessment in order to get useful data. I have tried to be as neutral as possible when calculating fertilizer and land costs. As input costs like fertilizer increase, legumes will benefit from their relatively “free” nitrogen and so on.
Corn always will have more struggles in dryland areas. Oklahoma will never see huge yields unless we are under a pivot. Considering dryland production, if prices come in a t $4.25/bu. a 73-bushel yield is required to breakeven. At a 100-bushel yield a price of $3.12/bu. is needed. This is certainly obtainable if the current ag outlooks hold.
Sorghum has really stepped up to the plate for 2021. Assuming a $5.60 harvest price results in a breakeven budget at a yield of 46 bu./acre. If you can raise 70-bushel sorghum, the breakeven price falls to $3.68/bu. This budget is friendly to a majority of producers who regularly utilize sorghum in their rotations.
For those looking for a different oilseed crop that can tolerate dry and heat, you may consider sesame. Sesame prices have increased following other commodities ranging in contract price from $0.40-$0.46/pound. A $0.40 price requires a 478-pound yield to breakeven. If you can raise 700-pound sesame then the breakeven price falls to $0.27/pound. This is increasingly advantageous, especially for producers who cannot grow soybeans.
Cotton has expanded its range in recent years. Analyzing soley dryland cotton, a price of $0.85/pound requires 411 pounds/acre to breakeven and a 504-pound yield requires $0.69/pound to cover costs. The general strength in oilseed markets, including cotton, has taken the pressure off of budgets.
I anticipate that soybeans in Oklahoma will break even at 24 bushels per acre if a harvest price of $10.82 can be achieved. The other side of the revenue equation can suggest that if a producer raises 25-bushel soybeans, a price of $10.23/bushel is sufficient to break-even. The most exciting part of this observation is that both of those numbers seem very obtainable this year.
What can a farmer glean from my observations? I do not see a clear winner. The best advice I can give is to plant a crop that fits the rotation and that you are comfortable with. Manage price risk in the best way you can and focus on the things you can control. Perfect rains and sunshine cannot completely mask poor management decisions. We are paid on our skill as good managers.
Milacek is Oklahoma Cooperative Extension Service northwest area ag economics specialist.