Lackluster grain prices in 2014 has Texas farmers hoping for something a little better as spring planting gets underway in the Lone Star State, according to a Texas A&M AgriLife Extension Service economist.
Dr. Mark Welch, grains economist in College Station, said producers are "generally optimistic" about putting in a crop this season, but there are still hurdles to clear in making a profit.
"In the lending community, there are operating loan challenges due to low prices," he said.
"If you look back over the last several years, we are coming off some really good years in terms of price and, in many cases, yields. Right now, for Texas, we've got some better moisture conditions than we've seen in a while as planting begins. So even with lower price prospects, the yield potential looks more favorable."
Photo at right: Dr. Mark Welch, Texas A&M AgriLife Extension Service grains economist, suggests farmers watch the cash market and also monitor the basis price to take advantage of profit opportunities in 2015. (Texas A&M AgriLife Extension Service photo by Blair Fannin)Welch said Texas farmers will likely continue to increase grain acres this year, but it's important to have a handle on costs and yield expectations.
"You should have a benchmark of what you need out of the market," he said. "Know your breakeven price, watch the market and if you see a bump above the cost of production, lock it down."
For example, Welch said, both wheat and corn had an unexpected rally late last fall.
"What a good opportunity to lock in some sales at the time," he said.
Welch also advises farmers to watch the price basis. Price basis is the difference between a cash price and the futures price of a particular commodity on a given futures exchange.
Welch said the sorghum market has had a particularly strong basis of late, which has created some profitable marketing opportunities. He advises producers to pay attention to both the futures and the cash market.
"Know what is happening in both to capture some of these opportunities," he said.
Welch said he sees great export opportunities for Texas farmers exporting commodities to Mexico in the future.
"I think that will be a very strong market for the U.S. and Texas," he said. "Texas is in a position to take advantage of the location of Mexico, the partnerships and growth prospects."
3.9.2015