What a difference a year can make. The 2020 soybean season began with futures prices near $8.50/bu., relegating soybean production to highly productive acres.
Many Oklahoma producers experienced good summer rains and the production year seemed like it would turn out OK.
What was not expected is the $3.50/bu. increase in soybean prices to end the year. That kind of a price move is not unprecedented, but could be unexpected for farmers who have been dealt many difficult situations over the past decade.
Without spending a great deal of time on soybean budgets, I expect that a farmer who produces $220/acre in total revenue is covering most imaginable costs of production. Given the approximate $8.00/bu. cash price at planting, this commanded a 27.5 bu. yield to cash flow.
What has transpired makes soybean breakeven attainable for more producers across Oklahoma. Current cash beans can be sold in many locations for $11.25/bu. At that price, the breakeven is pushed below 20 bu./acre.
The problem with current prices is sustainability. Can price levels hold, and why are prices at these levels in the first place?
Fundamentals, including growing condition concerns, are a major reason. Strong trade is another but cannot shadow the influence of fund buying.
November 2021 soybean trade is currently at $10.50/bu. more than $1.00/bu. lower than current prices. This does steal some of the luster from a 2021 soybean budget, but it is a much better situation than in April 2020.
It is early to consider price protection for 2021 production. Put options or straight hedges can be executed but must be done so conservatively. Other crops of note include the outstanding basis bids for grain sorghum. Those budgets have gotten equally better and basis contracts should be at the forefront of a price risk mitigation strategy.
Times are looking better for Oklahoma farmers as the current wheat crop continues to grow. Use the winter months to look back on what transpired in the previous year. We are always learning, and there could be many more crop production options in 2021 due to increasing prices.
If you would like more information on budgeting or growing soybeans, please contact your local county extension educator. Enterprise budgeting software is available to producers so individual costs and production goals can be used. This will assist producers in adopting new enterprises on their operations.
Milacek is Oklahoma Cooperative Extension Service northwest area ag economics specialist.