The good news is we have $12 wheat prices. The bad news is because of low projected yields caused by the on-going drought, many western Kansas wheat fields will do no better than break even.
Incredible as it may seem, even with the highest price of all time, at least half of the western Kansas wheat fields will actually lose money. And that is because of low yields. In recently released USDA yield projections, many counties like Lane, Scott, Wichita and Greeley will average about 27 bushels per acre.
As you know, in an average, half of the yields will be higher than 27 bushels per acre while half will be lower than 27. And if you’re in that bottom half, you’ve got a problem because your gross per acre is not going to cover all of your production costs.
Using K-State’s crop production budgets for southwest Kansas dryland wheat, with a price of $7.67 and a yield of 43 bushels per acre, breakeven gross is $322/acre. So while we have a lot higher price and a much lower yield, our breakeven gross remains the same. Today with $12 wheat and a yield of 27, we’re grossing only $324/acre. Bottom line is we are barely going to break even. Please cancel my order on the new Chevy pickup!
Things are slightly better if you look at the entirety of western Kansas where yields are projected to average just over 30 bushels per acre. With $12 wheat, High Plains wheat farmers should make between $35 and $40/acre. That assumes, however, yields don’t decline further because of continued lack of rainfall….and that our cost of production stops going up. And believe you me, I’m not betting very big on either one of those things breaking in my favor.
As you move into central Kansas, the economics look better because many of those counties have projected yields in the mid-40s.
So at the end of the day, what does all this mean? Looks like the wise old man was right: “There’s a reason why wheat goes to $12……….you ain’t got any!”