In a previous article, I discussed the concern that 2014 profitability would have to come from yield as prices have declined. The August USDA reports increased yields slightly for corn, cotton and soybeans. Some analysts are expecting additional increases to be made in future reports. Does this mean that yields will be high enough to generate returns to producers?
In Tennessee, projected yields from NASS field based surveys indicate that 150 bushels of corn per acre, 862 pounds of cotton per acre, and 44 bushels of soybeans per acre will all be produced on the average in the state.
It was also estimated that 68 bushels of wheat per acre were produced in the just-finished wheat crop. With the amount of discounts and dockage, wheat producers in Tennessee received it would have been difficult for producers to show a profit on the wheat portion of a wheat/soybean combination. If a profit was not there for wheat, then the double crop soybeans will have to make up the loss.
Based on UT Extension budgets and a rough estimate of $5 per bushel for wheat sold, the loss would be $56 per acre considering variable, fixed and land cost. Some wheat in Tennessee when considering discounts and dockage would have had a net price less than $5 bushel and incurred a greater loss. Breakeven yields are estimated based on UT Extension budgets and an estimate of land cost based on 25 percent of estimated revenue – 25 percent of crop insurance cost. Fixed cost includes depreciation and interest on machinery and a management labor cost.
Breakeven yields at current prices look achievable for soybeans and double crop soybeans. Some producers may be able to make the breakeven yield needed for corn and cotton but on the average they will be difficult to achieve. Irrigated yields fare about the same with corn needing 227 bushels per acre and cotton needing 1,360 pounds per acre to break even.
Breakeven yields for soybeans are estimated at 58 bushels per acre and 45 bushels per acre for double crop soybeans. Producers with a viable marketing plan and who have priced portions of their crop will have lower breakeven yields and a potential to make a profit.
At current price levels and projected yields, Tennessee producers and those throughout the Mid-South and Southeast with mostly unpriced crops will face tight-to-negative profit margins this fall.
Information on the 2014 Farm Bill is starting to be released and it is starting to be implemented. This first year may be a test on the level of a safety net it will offer. The Cotton Transition Assistance Program enrollment is underway and runs until October 7, 2014. Producers with what in the past has been referred to as a cotton base are eligible to sign up. Check with your local Farm Service Agency to confirm eligibility. Indications are that you do not have to have planted cotton in 2014 to receive the cotton transition assistance payment. Look for the other portions of the farm bill and their sign up to be announced. They may play an important role in a farm’s viability this year.