Small grains are well adapted to the deep, fertile soils of West Central Texas. They normally are grown on fine-textured clay or loamy soils. Practically all small grains are fall-sown since spring-sown grains usually has lower yields and test weight because of shallow root systems, heat and dry weather that usually occurs in the late spring. In this region moisture is a limiting factor in crop production; the average annual rainfall ranging from 16 to 25 inches. Crop yield potentials vary greatly within the area because of erratic rainfall distribution each year. Moisture management is the key to increased production.
Wheat is the predominant small grain planted in the region because of its versatility, winter-hardiness, ready market demand and economic returns. Oats are planted on more than 100,000 acres each year. Its popularity has increased with the introduction of more winter-hardy varieties. Oats are primarily planted for grazing purposes but can be harvested as hay or grain. Barley is less winter-hardy than wheat, but produces profitable returns from winter pasture and grain on less soil moisture when managed properly. Barley is the most tolerant of the small grains to soil salinity, while oats are the least. Rye is grown primarily for grazing and is the most winter-hardy of the small grains. Triticale, is a cross between wheat and rye and is planted for grazing. Triticale is generally less winter-hardy than rye but more winter-hardy than oats; it's degree of winter-hardiness will be dependent on the variety of wheat and rye used to make the cross.
Small grains grown in sequence with other crops, or rotated with fallow fields, result in more stable production. Typical rotations are small grain-fallow-small grain, small grain-fallow-grain sorghum-fallow-small grain, small grain-fallow-cotton-small grain, or small grain-cotton-grain sorghum. Rotations which require double cropping generally are not desirable in the dryland area and fallow practice may not increase yields enough to justify the operation.
Several drills on the market will plant through both standing and downed wheat stubble. These are usually equipped with narrow fluted, corrugated or ripple coulters and double disk openers to cut through the stubble. Depth bands, gauge wheels and/or press wheels are used for depth control.
Use of herbicides or combinations of herbicides and reduced tillage are presently being used in an effort to conserve fuel, labor, soil and moisture.
Purchasing quality seed is one of the cost effective investments made by a producer. Certified seed is often a good investment, as it allows the farmer to plant the newest genetics which should improve yields and pest resistance. For information on varieties refer to: Wheat Varieties Disease and Insect Ratings for West Central Texas, Small Grain Notes,or see your county Extension agent.
Good quality seed can be obtained at minimum cost by annually planting a small acreage to certified seed for next year's crop. Grain grown for planting purposes should be produced on fallow fields that are weed-free and disease-free. Give careful attention to weed and disease control to insure quality planting seed. Proper cleaning and seed treatments, plus a germination test before seeding, help insure good stands.
A soil test is the best way to determine fertilizer need. The amount of a given nutrient to apply depends on: the quantity of that nutrient remaining in the soil, cropping history, organic matter, available moisture, grazing practices and general management. For proper fertilizer recommendations a completed information sheet needs to accompany the sample(s) to the Soil Testing Laboratory.
Small grains which are grazed need more fertilizer than ungrazed grain. Nitrogen increases forage production, but grazing also removes much of the nitrogen applied in the fall. Stocker cattle gain approximately one pound for every ten pounds of dry matter consumed. Ten pounds of forage contains 0.4 pounds of nitrogen. For each 1 pound of beef produced on wheat pasture, 0.4 pound of nitrogen has been removed from the soil. If the livestock are removed before the joint stage of wheat, and conditions are favorable for grain production, replace the removed nitrogen by spring topdressing to harvest a normal grain crop. Nitrogen requirements are also higher when small grains follow grain sorghum and other high residue crops because of nitrogen immobility in the stalk decay process.
Applying fertilizer with the seed has proven to be a very efficient practice. All of the required phosphorus and up to 16 pounds of nitrogen per acre can be placed with the seed at planting. This practice increases early growth, root development, tillering, winter hardiness and resistance to diseases and insects. If Potassium is being applied with the seed be careful not damage the young seedling by applying too much fertilizer (actual Nitrogen and Potassium combined should be below 30 pounds per acre).
Split fertilizer applications are preferred. Incorporate one-third to one-half of the nitrogen and all of the phosphorus into the soil before or at seeding time. Apply the remaining nitrogen just prior to jointing. Field demonstrations have shown a split application of nitrogen has a yield advantage over preplant applications. If all the nitrogen is applied in the fall, excessive growth of ungrazed forage may occur and chances of freeze damage are increased. Nitrate leaching or denitrification can also occur reducing the amount of nitrogen available to the crop in the Spring.
Without soil test information, the following general rates of nitrogen and phosphorus are suggested for dryland production, except when following heavily fertilized crops where no phosphorus may be needed or where a nitrogen-producing legume (if used as a green manure crop and not harvested for grain) has preceded small grain:
|Not grazed||Fifteen pounds of nitrogen plus 20 pounds phosphate in the fall, followed by 30 to 50 pounds of nitrogen in the spring, if moisture is adequate.|
|To be grazed||Thirty pounds of nitrogen plus 30 pounds phosphate in the fall, followed by a spring application of nitrogen based on grain yield projections. The fall nitrogen application is for forage production. Base the spring nitrogen application on potential grain yield (generally 1.5 to 2.0 pounds of nitrogen is applied for each bushel of estimated yield). Some estimates of nitrogen removal by stocker cattle is that 0.4 pound of nitrogen is removed for each 1 pound of beef gain produced.|
In the spring, apply water for optimum soil moisture during the peak use period of booting, heading, flowering, and milk growth stages. Irrigation timing cannot be predicted in advance because of rainfall variations and other weather conditions. Apply the first irrigation normally at or before the boot stage of growth to alleviate stress during early grain fill.
High seeding rates do not appreciably increase total forage. Early production is favored by higher seeding rates. In the past, the following general seeding rates have been suggested:
|Seed per acre
|Seed per acre
With the many new varieties on the market, seed size varies greatly. Examples of these differences follow:
|Kernels per square foot
to equal 60 pounds
per acre seeding rate
This illustrates that a 40-pound-per-acre seeding rate of variety 4 will result in the same number of seed per square foot as 60 pounds of variety 2.
Increase seeding rates by 20 percent when planting after November 15. Small grains planted late normally do not tiller as well as early planted small grains. Consider additional phosphorus to enhance tillering and root establishment.
Herbicides available for controlling weeds in small grain are provided in the attached portable document format (pdf). "Herbicide Guide for Weed Control in Wheat (B-6139)".
Grain yield will not be seriously reduced if good grazing practices are used. Young small grain plants are damaged by severe defoliation. Delay grazing until plants are well established and 5 to 6 inches tall and the secondary root system is well anchored. Income from grazed forage should more than offset any losses in grain production, provided grazing ceases at the proper time.
Rank, succulent small grain plants are easily damaged by low temperatures. Properly controlled grazing may reduce low temperature damage resulting in increased grain yield. Early spring pasturing reduces yields only slightly; late spring pasturing reduces yields severely.
Practice stocking rates light enough to avoid continuous, complete removal of top growth. Leave enough top growth to hold the soil and provide plant protection. If a grain crop is desired, remove livestock before plants begin to joint and before the growing point, which is starting to develop into a head, gets far enough above ground level to be removed by grazing animals (this can range from February 15 to March 15). Since barley and rye are earlier in jointing than wheat, triticale or oats they may loose more grain yield by late grazing.
Maturity of the small grain crop will usually be delayed by late grazing. Additional problems that could result from this include: 1) reduced plant stands, 2) reduced number of tillers, 3) increased damage to plants due to livestock trampling, 4) shriveled grain due to plant and weather related injury, and 5) increased potential for wind erosion.
Small grains harvested before the soft dough growth stage may be used for ensilage. Under normal growing conditions silage production should range from 1.5 to 3 tons per acre. If soil moisture and nutrient levels are adequate during the growing season, 6 to 8 tons of silage production per acre is possible.
Oats makes a valuable hay crop when cut while the leaves and stems are still green and the grain is in the soft dough stage. Oat straw is the most palatable and nutritious of the cereal straws.
Wheat can be made into good quality hay if cut before the boot stage when crude protein content ranges from 14 to 15 percent or higher. Once the crop is fully headed, crude protein is reduced 50 percent. Yield should average 2 tons per acre.
Barley and Triticale can be made into good quality hay if cut prior to the boot stage; however, it is not used extensively for hay.
Begin harvest when grain moisture content ranges between 12 and 13 percent. Proper combine adjustment keeps harvest losses to a minimum. Wheat varieties vary in tightness of glume and ease of threshing. Oats, with a weaker straw than wheat or barley, sometimes presents additional harvesting problems. Wind, hail, rain, insects, and plant stress may cause lodging, increased harvesting cost and reduced grain quality.
Where lodging or shattering occurs or threatens, where weeds are a problem or when grain ripens unevenly, windrow oats and use a pickup attachment to combine the crop. An oat crop is usually damaged less by rains when in windrows than if standing full ripe.
In general, the harvest or graze-out decision is made in late-February by estimating the wheat yield potential and then comparing the estimated returns from mechanical harvest to the value of additional gain that could be added to livestock. In general, an estimated wheat yield of 14 -18 bushels per acre or greater is necessary for the grain value to exceed the value of grazing. However, this rule of thumb will vary as wheat prices and livestock prices change. Obviously, stronger wheat prices relative to livestock prices favor harvesting wheat for grain, whereas, stronger livestock prices relative to wheat prices favor grazing.
The remainder of this discussion will focus on the marketing tools available to producers who choose to harvest their wheat and sell it in the grain market. The marketing alternatives available for wheat are identical to those available for most of the traditional agricultural commodities. Each of these alternatives has its own advantages and disadvantages, which provides flexibility to implement a marketing plan (see RM3-3.0 Developing a Market Plan), but also requires a well-founded strategy to coordinate the producer's financial objectives, marketing expertise, and desired level of risk tolerance.
For the most part, producers face two types of price risk in a wheat marketing program: basis risk and market risk. Basis risk (see RM2-3.0 Knowing and Managing Grain Basis) refers to the variation of prices offered at the local elevator and the futures market price (Local Cash Price - Futures Price). Market risk (see RM2-5.0 Seasonality and Its Effects on Crop Markets) refers to the actual variation in wheat prices as the production season progresses. Producers need to be aware of these sources of risk and coordinate their marketing strategies to address the risks they are willing to accept and those they are hoping to avoid.
When wheat is planted, the actual cash price at harvest is unknown. Most West Central Texas wheat producers look to the July wheat contract on the Kansas City Board of Trade (http://exchanges.barchart.com/intra/kcbt/kcbkwdp.htm) to provide the most appropriate indication of future wheat prices near harvest. Throughout the production and marketing period, wheat futures prices are variable and subject to wide swings as current and expected supply and demand conditions adjust. While farmers as individuals have no control over the level of prices, they do have control over the timing and amount of their expected production that they choose to market at currently available price levels. For the purposes of this discussion, available marketing tools will be categorized as pre-harvest or post-harvest. Regardless of the chosen pricing method, producer pricing decisions should be made based on knowledge of supply and demand conditions, price trends, and numerous market information sources and wheat market outlooks.
Pre-Harvest Pricing Alternatives
Prior to harvest, many of the most commonly used marketing alternatives involve the wheat futures (see RM2-1.0 Introduction to Future Markets) and options (see RM2-2.0 Introduction to Options). Specific examples of these strategies include: (1) doing nothing, (2) forward contracting, (3) Hedging with Futures, (4) purchasing Put Options, or (5) "minimum price" contracts. If cash flow considerations are tentative, pre-harvest marketing alternatives can be used to relieve some of the uncertain price pressures related to wheat price at harvest. In addition, these methods also allow for producers to take advantage of favorable pricing opportunities no matter when they occur during the wheat production period. We will now look at each of the pre-harvest pricing alternatives.
Do Nothing: Let's suppose that on December 1, the July wheat futures contract is $3.40 per bushel. You have an opportunity to contract 5,000 bushels for 60 cents under the July wheat futures contract - or $2.80 per bushel (60 cents under is the Basis for this example). If you choose to do nothing and pass up this current pricing opportunity, you are willing to assume all the risk associated with wheat prices going lower in exchange for the chance that prices will go higher. The "do nothing" strategy is the proper choice if the outlook is for higher prices and/or if the grower is willing and able to assume both basis risk (risk that the basis will change) and market risk (risk that the market price will change).
Forward Contract (see RM2-38.0 Considerations when Using Grain Contracts): There are two types of forward contracts - a fixed price contract and a basis contract. The fixed price contract offers a guaranteed price for wheat meeting minimum quality requirements and specifies discounts and premiums from the base price for quality differences. If you accept a contract offer of $2.80 per bushel on December 1, you are willing to forego the opportunity for upside gain from higher prices later in the season in return for eliminating the downside risk of potentially lower prices. This strategy is appropriate for producers who are able to lock in a favorable price above their cost of production and are satisfied with the resulting profit level afforded from current prices. This strategy eliminates both basis and market risk, but in so doing, leaves no upside potential.
A basis contract locks in the spread between the local cash price and the futures price. For example, a basis contract of 60 cents under July futures would allow you to set the selling price at anytime before a specified deadline. If the futures contract traded at $3.60 per bushel, you could set your actual local cash price at $3.00 per bushel. Likewise, if the futures price fell to $3.20 per bushel, your price would be $2.60 per bushel. This strategy eliminates basis risk, but does not eliminate market risk. This strategy is appropriate for wheat producers who are in areas where there are pronounced swings in the local basis, offering the opportunity to lock in basis when a favorable spread is available. In order to recognize a favorable basis, producers must have some historical perspective about the local price situation in relation to the futures contract over time.
Futures Hedge (see RM2-14.0 Selling Hedge with Futures): A futures hedge is obtained when a producer takes a position in the futures market which is opposite to their cash position. For a West Texas wheat producer, this would involve selling a July futures contract early in the wheat production season with the intention of buying the contract back at harvest. If the price increases between the hedge placement and harvest, any gains in the value of the crop would be offset by losses in the futures market position. Likewise, a downward move in prices would result in losses in the value of the crop, but gains in the value of the futures market position. Hedging with futures yields similar results as the fixed price forward contract in that the producer locks in an expected price for their wheat, but it is different in that the producer is not tied to a specific elevator and the producer retains basis risk. Further, any activity in the futures market requires the producer to establish a brokerage account and post margin money with the broker.
Put Option (see RM2-12.0 Hedging with a Put Option): An option may be thought of as a form of price insurance. A put option is essentially insurance against falling prices. In order to get this insurance, the producer pays a premium. The amount of the premium depends on what level of coverage is selected and the length of time remaining until this pseudo-insurance policy expires. In general, the higher the level of coverage and the longer the time remaining, the higher the premium. An option's "strike price" may be thought of as the level of coverage being offered.
Suppose on December 1, you purchase a July put option with a strike price of $3.40 cents - the same price that July futures are currently trading. If the premium is 20 cents per bushel and the expected basis is 60 cents under, the put option establishes an expected price floor of $2.60 per bushel ($3.40 - $0.20 - $0.60 = $2.60) less a small brokerage fee.
Notice that the put option establishes an expected price floor whereas the fixed price forward contract guaranteed a specific price. The difference in the effectiveness of these strategies depends on the wheat price movement between December 1 and harvest. If the price declined, both strategies in retrospect would prove wise. However, if the price increased, holders of the put option would be able to sell their wheat at the higher price or hold wheat in storage whereas producers that forward contracted would be obligated to deliver at the previously established lower price. It is this additional flexibility (to pocket any upside price movement) that the put option buyer retains by paying a premium. The fixed price forward contract locked in a price while the put option established only an expected price floor. Further, the put option does not tie the producer to a specific elevator or require guaranteed delivery of bushels. Using a put option, the farmer still retains basis risk, but not downside price risk. A put option requires a broker, but no margin money is necessary since the extent of liability is limited to the amount the producer pays for the option premium.
Some wheat buyers offer "minimum price" contracts (see RM2-17.0 The Minimum Price Contract) which offer the same price protection and upward flexibility as the put option. These contracts fix the basis and establish a price floor, but do require the actual delivery of the number of bushels contracted.
Post-Harvest Pricing Alternatives After harvest, wheat not contracted must be sold or stored. Many times a post-harvest marketing plan is the result of expectations that wheat prices will increase in the months following harvest. The decision that must be made is whether or not prices are likely to improve enough to offset storage costs and what risks (if any) the producer wants to retain.
Post-harvest marketing decisions (see RM2-30.0 Post-harvest marketing Alternatives) typically involve selection between storage or the use a call option.
The Storage Option: On June 1, suppose you can sell wheat for $2.70 per bushel. If you instead decide to store the wheat, it will cost roughly 3.0 cents per bushel per month plus interest (the opportunity cost of the foregone immediate revenue from selling). Two months storage will cost 6.0 cents per bushel. If you expect the basis in two months to be $60 cents under the breakeven price needed to justify holding wheat would be $3.33 on the futures market ($2.70 foregone price + $.06 storage cost + $0.60 basis) or a local cash price of $2.76 per bushel. Storage also opens the risk of a declining price or a weakening basis. In that case, the producer is paying storage costs for wheat that decreases in value.
Call Option: A call option may be purchased in lieu of storage and allow the producer to benefit from a futures post-harvest price rally. The call premium (paid to obtain the call option) substitutes for storage costs and interest. Suppose a producer sold wheat for $2.70 per bushel and then purchased a September wheat call option for 15 cents per bushel instead of storing the wheat. If the market goes down, the producer would fair no worse than $2.55 per bushel ($2.70 per bushel wheat sold - $0.15 call premium) regardless of how far prices decline. In the interim, the producer has the proceeds of the wheat sale to pay expenses or earn interest. In instead prices rise, the call option gains value and entitles the producer to benefit from the post-harvest price rally. In exchange for the call option premium, the producer is able to retain upside price potential while avoiding exposure to storage costs and interest and downward post-harvest prices.
Ask your county Extension agent for current economic information on small grain production in West Central Texas. See current budgets, Economics of Wheat Production in Texas" (Texas AgriLife Extension Service).
The information given herein is for educational purposes only. Reference to commercial products or trade names is made with the understanding that no discrimination is intended and no endorsement is implied.