Wheat Basis Begins Recovery

by David Widmar

While the economic outlook for U.S. agriculture has been bleak in recent years, the challenge has been especially difficult for wheat producers. As evidence of these tough times, U.S. wheat acres, which have trended lower since the early 1980s, tumbled to new lows in 2016 and 2017. Furthermore, Brent previously examined the relationship between wheat and corn prices and found current wheat prices are historically low.

One of the most evident challenges wheat producers have faced in recent years has been a historically large gap between future prices – the price traded on the board of trade – and local cash prices. This difference –known as ‘basis’ – has been historically wide and creates challenges for producers’ marketing plans. This week’s post considers wheat basis data at three locations to look at the current situation as well as historical conditions. Continue reading

Are Fixed Farm Expenses Coming Down Yet?

 

Fixed Expenses coming down. Photo by Johnny Klemme

by David A. Widmar

As production agriculture in the U.S. transitions out of the boom-era, producers face a margin squeeze resulting from declining output prices and stubbornly high input costs. In most cases, producers are facing 2015 and 2016 crop production budgets with negative returns.

We are often asked when things on the farm will improve. In an earlier post and paper, we outlined that in the long-run it is likely that a combination of three scenarios will take place to stabilize farm profitability: 1. variable costs moderate through eventual reduction in farmer demand for inputs 2. Fixed costs decline through reduction in fixed assets demands and values, and/or 3) output price may improve.

In this post, we take a look at fixed costs from the most recent data (2014) provided by the USDA and Kansas Farm Management Association (KFMA). Keep in mind that net farm incomes across the country were lower in 2014, but still well above average.

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Sorghum: Why (and Where) Additional Acres May be Planted

Sorghum.USDA

by David A. Widmar

Excitement about sorghum has continued to grow. China’s appetite for the crop, which is often used for animal feed, has been driving demand and excitement for the crop that had otherwise been in a downward trend. While our earlier posts looked at production and yield trends, continued media attention on sorghum has again fueled our curiosity to further understand the renewed enthusiasm. For this post we looked at the emergence of a sorghum premium and where any expansion in acres may take place.

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