advertisement Larry Kepley always had both dryland and irrigated acreage, but in recent years, the high costs of fuel for irrigation has forced the Ulysses, Kan., farmer to give up on irrigated wheat.
“I possess equipment, farmland and marketing channels that are geared for an irrigated production plan that now makes no economic sense,” Kepley explains. “The present diesel, natural gas and nitrogen fertilizer costs have increased to the point that I expect a loss of about $35 per acre this year.”
Like thousands of other wheat producers, Kepley will have to absorb the loss. The huge jump in prices is putting a squeeze on wheat producers across the U.S., many who have faced drought conditions for six years. Low grain prices further complicate problems.
Wheat growers had the largest decline in average net cash income in 2005 of any commodity group, with on-farm wheat production expenses up 12% due to higher energy costs and interest expense, reports USDA’s Economic Research Service.
Double trouble. “Wheat is the first crop to really feel the double whammy of higher fuel and fertilizer costs this year,” says Sherman Reese, a wheat producer in Pendleton, Ore., and president of the National Association of Wheat Growers (NAWG).
“A lot of guys who fall fertilize in irrigated areas were hit with almost double fertilizer costs for anhydrous this year,” Reese says. “When fuel prices shot up in September, growers were still harvesting in the Pacific Northwest and paid much higher fuel costs.”
Reese says trucking costs were 50% more this fall than last year. Last spring, he bought nitrogen fertilizer for 30¢ per pound—now it’s 50¢ per pound. Wheat growers in central Texas made several tough decisions this fall on whether to even put down fertilizer as the price of nitrogen went from 14¢ per unit to 40¢ per unit, says Stan Bevers, Texas A&M Extension economist in Mount Vernon, Texas.
“Most producers made the decision to go ahead and put down fertilizer, but a lot of them changed blends to relieve costs,” Bevers says. NAWG has asked for Emergency Farm Energy Assistance from Congress to offset higher costs. Despite promises from senators, however, Reese doesn’t expect the disaster assistance.
“There just isn’t a whole lot of bright news right now,” Reese says. “On the horizon, we do think wheat is in a position to take advantage of the need for more biofuel feedstocks.”
At a crossroads. Long term, the wheat industry must realize that domestic yields are expected to continue lagging behind competing row crops. Wheat is the only major crop in the U.S. that doesn’t have a transgenic component. Yet, world competitors like China are quickly approaching a commercialized transgenic wheat product. As a result, the industry is losing acreage to higher-yielding corn and soybeans. North Dakota, for example, lost 500,000 acres of wheat production in recent years to biotech corn and soybeans, Reese says.
“The U.S. wheat industry is at a real crossroads right now regarding our survival,” Reese adds. “We’ve got to decide if we are going to embrace technology and make it cost-saving for the farmer while also benefiting the consumer downstream.”
Is it Time to Switch to No-till?
Producers who are no-tilling wheat may be in better shape economically this year than conventional-till producers, says Stan Bevers, a Texas A&M Extension economist based in Mount Vernon, Texas.
Bevers has compared actual costs of both no-till and conventional-till systems based on enterprise budgets for a hypothetical 3,200-acre wheat operation yielding 35-bu. wheat. The cost difference between the two systems for 2005 is $5.80 per acre in favor of no-till—a total cost savings of $18,560 when applied to 3,200 acres.
“Higher fuel, labor, fertilizer and equipment costs and lower prices for some herbicides swung the advantage this year to no-till,” Bevers says. Total costs for conventional-till rose $12 per acre from 2002 to 2005, whereas total costs for no-till rose by only $4.60 per acre. “In the past, there was no real economic advantage in making the switch to no-till,” Bevers says.” It’s just the opposite today.