Choosing gain over grain

It was one of the recurring story lines of the 2019 Wheat Quality Council Hard Winter Wheat Tour April 29 to May 2—there sure seems to be a lot of farmers choosing to graze out their wheat this year. 

And while producers up and down the High Plains have grazed out their wheat from time to time, Oklahoma farmers and cattlemen have decades of experience in the practice.

The choice between taking a wheat crop to grain harvest, or choosing to use it for stocker cattle gains has many different triggers, explained Derrell Peel, Oklahoma State University Extension Livestock Market economist, and Kim Anderson, professor and Extension economist. It’s worth taking a look at what factors played a roll in this year’s decisions so that farmers might identify future opportunities.

A three-system approach

“We think of three different wheat crops in Oklahoma,” Peel said. “There’s those who plant for forage only, those who grow wheat for grain only because they don’t want to fool with cattle and plan to raise wheat every year, and then there’s those guys in the middle who are dual purpose. They plant wheat to graze in the winter and then looking at cattle and wheat market conditions will consider taking it to grain or grazing it out.”

Peel said while there is some flexibility in these three production systems, most decisions of “grain or gain” are made in the fall so farmers can get stocker cattle purchased and put out on their wheat pasture from November to about February or March when the wheat reaches the first hollow stem phase. Once wheat hits first hollow stem, the head is starting to develop the grain that will be harvested from the plant. Cattle can graze off that growing point thus affecting final grain yields.  

The economic factors weigh in

Those dual-purpose farmers have a lot of decisions to make in the fall months, before a seed even hits the ground. Typically dual-purpose wheat seeding rates are higher than grain-only systems, so there’s higher seed costs. Also, more nitrogen must be applied if the plant is expected to do double the work of providing forage through its leaves and growing grain. So just planting the wheat could raise the cost per acre that the farmer has to recoup with cattle gains. The farmer also needs to consider not just variety selection and weather forecasts for planting and spring, but also what they stand to lose in terms of grain yield and if the benefits of gain outweigh the grain.

Anderson said the forward contracts in early May for wheat at harvest were in the $3.90 to $4 per bushel range, with the 10-year average June price of wheat in Oklahoma at $5.85. 

Meanwhile, Peel said the cattle market has remained steady and favorable. With less volatility than the wheat market, farmers last fall weighed the choice to source the right size of stocker cattle at the right price with the end market in mind, against the hope that wheat prices might rise by harvest. Peel advises growers to consider the identifiable market trends and if they can time the cattle for that market period. 

Peel cautioned that there’s more than just per-head costs to feeders. Farmers must also factor in supplemental feed in the winter, costs of any equipment and facilities, and labor during the winter and spring.

Typically the cost of wheat to graze is about 30 to 40 cents per pound of gain a calf makes on the wheat. If farmers were able to keep their cost of production down, they could make money off grazing cattle.

“That changes how he’ll buy cattle in the fall, whether he’ll go through graze out or pull them off at hollow stem,” Peel said. “If they start with 450-pound steers, and expect 450 pounds of gain, they get a 900-pound steer by mid-May that works.” 

This year, Peel said there may also be more and more dual-purpose growers considering putting up their wheat as hay to replenish stocks depleted this hard winter. 

What we saw this spring

Every year there’s a reason that sorts out over others for more or less grazed wheat. Available soil moisture, weather models, market prices and the cost of production are all factors. It’s not so much weather or crop condition concerns that had growers keeping cattle out on wheat longer this year, but rather their market returns on beef over grain.

Plains Grains Executive Director Mark Hodges told the wheat tour participants at their stop in Wichita, May 1, the wheat in Oklahoma looked remarkably well and yet some farmers were still choosing beef gain over grain for economic reasons. Lush, green, headed out fields of wheat, with little to no disease pressure and out of drought concerns, are being grazed out, he said.

“The Oklahoma projected planted acres were 4.2 million,” Hodges said. “The projected harvested acres are 3.19 million, with a bushel per acre average of 37.38, and a crop total of 119.27 million bushels.” The Oklahoma wheat crop has been on a roller coaster of variability the last decade, he added, with lows of 50 million bushels harvested to highs of 150 million harvested. 

This year, too, Hodges said Oklahoma lost 200,000 wheat acres to cotton production, based on the cotton market price compared to wheat prices at fall planting. Competing crops like corn and soybeans are also causing planted wheat acres up and down the High Plains to either drop or level out. Farmers can choose to terminate the wheat crop with a chemical application and then plant cotton, corn or soybeans into that residue.

“In Southwest Oklahoma, those guys may lose another 10 percent of our planted acres to cotton, or grazing, or even baling for hay,” Hodges said. 

So, before wheat growers climb into the combine cab this harvest season, it might be a good time to review how well their grain or gain decisions treated them this past year, and identify those opportunities for profit that they may capture with the next wheat crop.

Jennifer M. Latzke can be reached at 620-227-1807 or [email protected].