Profit potential | Smaller volume crops have upside in current market
Farmers might change their cropping plans to fit with their marketing hopes if break-even returns continue, says farm marketing adviser Brenda Tjaden Lepp.
It could be good news for special crops, which many growers ignored during the recent boom years.
“It won’t be so easy to grow mainstream crops and make money out of it,” said Brenda Tjaden Lepp, co-founder of FarmLink Marketing.
“There might be a migration back to some of the smaller volume crops that have a greater upside.”
Tjaden Lepp said the boom from the mid-2000s until 2013 encouraged farmers to grow big acreage crops such as wheat and canola and experiment with corn and soybeans.
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Herbicide tolerant options were attractive and all of them were easy to price and move any day a grain elevator had room.
However, prices have now plunged to break-even or loss-making levels.
Providing more crop management and accepting less marketing security will be attractive to many who hope to squeeze a few extra dollars per acre by growing crops with more upside potential.
“Some crops that might have been off the radar for the last few years you could see getting a big increase,” said Tjaden Lepp.
“It’s been the case in the last three years that you’re going to make money on anything you grow. If that’s not the case anymore, a lot more thought has to go into which crops have the best potential.”
Farmers weren’t lazy during the bull market, but there wasn’t much incentive to complicate farm management for a tiny bit more profit potential. Dropping small acreage crops was attractive if they were hard to market.
“Mustard, you can’t always get a bid. You can’t always turn your dry beans into cash,” said Tjaden Lepp.
Tjaden Lepp said thin or non-existent margins in non-traditional crops such as corn and soybeans also make them much less attractive. A wreck on those crops could be devastating if a farm has poor overall profit potential.
“This year is taking some of the shine off the prospect for growing corn and soybeans,” said Tjaden Lepp, noting the thousands of acres of green corn still standing in fields.
“It was really hard to talk guys out of growing corn this year.”
However, with many crops likely to be severely damaged by the wet, cold harvest and corn selling for less than $3.50 per bushel, farmers might not feel like gambling in coming years.
