Taming the Bulls and Bears

Are you better off selecting (and marketing) varieties for yield or for protein?

By Betsy Jensen

Ag Commodity Instructor, Northland Community and Technical College, betsy.jensen@northlandcollege.edu

Each growing season has its challenges, but like a proud parent, we can usually find something to be proud of after the harvest chaff clears.  Maybe one variety averaged 10 bushels higher than the next, or maybe another variety topped 15% protein.

Which brings us to the age-old question: when it comes to variety selection, are you better off growing for yield or for protein?

I think most growers would agree that the nod goes to planting for bushels.

For one thing, our farm programs and crop insurance are designed for bushels, not for quality.  You receive an LDP based on 12% protein wheat, even if you average 14%. Your direct payment yields are based on your historical wheat yields, not the quality.  Your crop insurance yields are determined by bushels, not quality, so if you want to build up your average, it stands to reason you plant a mega-yielder variety. 

Marketing low quality wheat can be a challenge, and you must make a few minor changes in your approach.  You definitely cannot deliver at harvest. During the 2005 harvest, we had huge vomitoxin discounts, which disappeared to almost nothing within two months. Delivering at harvest was very expensive in 2005, if your quality was not top notch.

When marketing low quality wheat, you must have patience.  There will be an opportunity to sell poor quality wheat during the marketing year. It might not be until January and February, but it will come. You can use a brokerage account to hedge your futures position, and when you see a local bid for an any pro/any falling numbers/any vomitoxin wheat, reown your futures position and deliver the cash grain.

In a perfect world, you could hold wheat indefinitely, selling when discounts have eased significantly.  Of course, there are few farmers who can afford to hold wheat indefinitely, and in reality, the expense of holding wheat often eats up what profits you have from higher prices.  If you have low quality wheat to sell, you need to set price targets, and make sure to take advantage of any sales opportunity. 

You should also let your elevator manager/merchandiser know about your quality dilemma, and perhaps they can let you know when a bid arrives. You should also be willing to elevator shop. In 2004, a local elevator was offering exceptional any-protein bids but mediocre high quality bids, and down the road another elevator was offering just the opposite; large discounts but an exceptional good quality bid. Business is business; you have to be willing to look around and shop for better prices at different elevators.

To be clear, don’t let pie-in-the-sky yield potential cloud your judgement – from a risk management standpoint, you need to diversify your wheat variety selections.  Variety selection doesn’t necessarily have to be an either-or situation. You can grow several varieties, complimenting a high yielding variety with a high protein variety, hopefully selling the high protein wheat at a premium.

Make sure you plant something with disease tolerance, something with a little quality to it, and maybe a few with high yield potential. I’m very uneasy about wheat varieties that seem to arrive from nowhere and claim to yield more than anything else out there. For example, my husband asked a sales rep about the parentage of a particular race horse variety.  The sales rep told him there was no parentage, like it just arrived from heaven one spring.  We’re not planting that variety.

I believe most wheat growers realize that we need to listen to the end users and exporters when it comes to wheat quality and protein.  We listen quite closely, in fact, to what the marketplace is telling us to plant.  And more often than not, it’s telling us to plant for the bushels. 

Jensen puts her marketing strategies to work farming with husband Brian near Stephen, Minn.  Her market education activities including this column are supported in part by the Minnesota wheat checkoff, directed by the Minnesota Wheat Research and Promotion Council. If you have a question or topic related to marketing that you’d like to see addressed in this feature, call 1-800-242-6118, or email Jensen: betsy.jensen@northlandcollege.edu.