History in the making with ’21 sorghum crop value

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MAKING MONEY: This year U.S. grain sorghum producers are set to reach new heights in terms of crop value. With the current acres, anticipated yield and prices, the value of the 2021 crop is roughly $2.7 billion.
Sorghum Focus: As crop input costs rise, plan your marketing and consider options like forage for cattle.

Harvest is heating up across the Sorghum Belt. I wrote last month that yields were likely to be strong, and I’m pleased to report this is still the case as harvest nears completion in the southern portion of the belt and ramps up in Kansas and other areas to the north.

As I write this, USDA is reporting that 31% of the crop has been harvested compared to the five-year average of 32%. Given the harvest in Texas is 80% complete relative to the five-year average of 76%, the national statistic is somewhat misleading. The reality is harvest for much of the central and northern Plains sorghum crop is well ahead of schedule.

Yield projections for sorghum

The late hot and dry weather took away some top-end yield potential, and the Texas Gulf Coast crop had some major quality issues with late rains that caused sprouting. These issues will keep this year’s national yield from being a record, but given acres and prices, sorghum farmers are projected to haul in their most valuable crop ever this fall.

According to USDA’s September World Agricultural Supply and Demand Estimates report:

• Planted acres were 7.3 million.
• Harvested acres will be 6.5 million.
• Yield will be 69.7 bushels per acre.
• National average price will be $5.85 per bushel, slightly lower than past projections.

Together, these values mean a crop worth just shy of $2.7 billion — the most valuable in history.

Apart from the loss of top-end yield potential and basis weakness starting late in the summer, the only real cloud hanging over this harvest is input prices for next year. We’re working to aggregate all the hard data now, but the anecdotes are flying in from across the Sorghum Belt around the same storyline: Input prices, especially those for fertilizer and pesticide, have skyrocketed.

How to handle input costs

This is a complicated issue that involves multiple aspects of the supply chain and has political ramifications both at home and abroad, so there are no easy solutions. However, as always, being cognizant of total production costs and making sales when the market allows profit opportunities is a proven strategy for managing high input costs.

For example, according to Kansas State University, the cost of production for sorghum grown in southwest Kansas in 2021 was $3.25, including $1.28 for fertilizer and herbicide. A doubling of prices for these two inputs would mean a total cost of production of $4.53. While a 39% increase in total cost is shocking and certainly not ideal, being aware of this number and using it as a target for sales will help farmers manage the blow of higher input costs.

As I write this, December 2022 futures are trading at $5.30 per bushel, indicating significant profit opportunities still exist for those able to take advantage of them by making sales or hedging.

Of course, if inputs simply aren’t available (as could be the case in certain geographies), the strategy might need to change. In this case, lower yield targets will mean a different cost structure. However, the rules still apply here, and keeping the total cost per bushel in mind will help farmers know when profit opportunities exist.

Farmers also shouldn’t forget that tweaking rotations is always an option. I’m already hearing from farmers who are planning on fewer row crop acres and increased sorghum forage acres to support their cow-calf herds. Either way, sorghum is poised to be a good option again in 2022.

Duff is executive vice president for National Sorghum Producers. He can be reached by email at john@sorghumgrowers.com or on Twitter @sorghumduff.

 

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