Fargo, North Dakota
December 7, 2006
By Dwight Aakre, Farm Management Specialist
North Dakota State
University Extension Service
Crop prices this fall have strengthened
considerably compared with this time last year, leading to a
more optimistic outlook for 2007. Much of the improvement in
prices is due to the increased demand for corn because of the
growth in ethanol production. As the price of corn increased,
other crop prices have been dragged along, thus improving the
outlook for many commodities.
The December 2007 corn futures contract
has been trading around $3.60, which becomes a reference point
not only for the corn price next year, but also impacts the
price other crops need to reach to compete with corn for acres.
The North Dakota State
University Extension Service has developed an Excel
spreadsheet, "Crop Compare," to assist producers in evaluating
the relative profitability of different crops. This spreadsheet
is available at
www.ag.ndsu.nodak.edu/aginfo/farmmgmt/farmmgmt.htm.
Crop Compare evaluates alternative crops
to determine the cash price needed for each crop to provide the
same return over variable costs as the base crop. The choices
for the base crop for comparison are corn, soybeans and spring
wheat. Users can input the futures price and basis for corn,
soybeans or spring wheat, as well as the expected yield and
variable costs for each crop. The results show the cash price
needed by other crops to be as profitable as the crop selected
as the base crop.
Using a $3 cash price for corn ($3.60
futures minus 60-cent basis), the cash price for soybeans needs
to be $7.32 in the east-central region to as high as $8.15 in
the southern Red River Valley to compete with corn. Spring wheat
is most competitive with corn in the northwestern region at
$5.35, but needs to reach $6.81 in the southern Red River
Valley.
Likewise, barley is most competitive in
the northwestern region at $3.17, while it must be $4.64 in the
southern Red River Valley. This would be the average price
received for all barley produced, not just that portion that
makes malting status.
The comparable price for oil sunflowers
is $14.38 in the northwest and $19.98 in the southern Red River
Valley. Canola is equal to $3 corn in the northwest at $13.64,
but must be at $23.46 to compete in the southeastern region.
Flax competes best with corn in the northwest, where it needs to
be at $7.61, but must be at $12.75 in the southeast. |
