NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

March 4, 1999

Economics Suggest More Oilseeds Again in 1999

Current crop prices are near or below loan rate for all major crops. This situation is pushing producers to select crops for 1999 that have the best loan rate relative to costs of production—and then hope that yields are good enough to compensate for low prices. Under this scenario, oilseeds are the benchmark for which other crops will have to measure up, says an agricultural economist at North Dakota State University.

"Following this strategy and some much-needed emergency federal aid made the difference in 1998 for some producers," says Andy Swenson, farm and family resource management specialist with the NDSU Extension Service. "However, it is risky business to need a better-than-average crop again."

Fortunately, the loan program was basically unchanged when the 1996 farm bill swapped price protection (target prices and deficiency payments) for market transition payments and planting flexibility. Swenson says,"At the time it was incomprehensible that most farmers, a few years later, would be determining their crop mix with the marketing loan as an important consideration."

An analysis of return over variable costs—using the loan rates and average yields—reveals that oilseeds generally are the top crops in all regions of the state, Swenson says. Oil sunflower is best in south central North Dakota. In the southeast and southern Red River Valley, it is soybeans, and mustard in the northwest and southwest. In the north central, northeast and northern Red River Valley, canola and mustard vie for top billing.

"Flax is a strong contender in every region and will undoubtedly see increased acreage in 1999 for several reasons," Swenson says.

Flax has a low cost of production, and unlike other oilseeds, it has only a minimal susceptibility to Sclerotinia and does not contribute to the disease, Swenson says. Also, with recent changes in production practices, such as early planting, flax may have a better chance of topping historic average yields.

Swenson offers, as an example, a comparison of return over variable costs using average yields and projected variable costs for south central North Dakota and loan rates from Stutsman County. He notes that variable costs do not include fixed costs such as land rent or ownership, machinery and other overhead expenses, or labor and management costs. Complete fixed costs, excluding labor and management, will run about $55 per acre.

"According to this analysis, only sunflower and soybean reflect a positive return for south central North Dakota after variable and fixed costs," Swenson concludes. "However, non-oil crops need to be in the farm plan because of rotational considerations. A spring wheat price of $3.44 per bushel and $2.03 for barley would provide the same return as sunflowers in this example."

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Sources: Andy Swenson (701) 231-7379 and Dwight Aakre (701) 231-7378

Editor: Dean Hulse (701) 231-6136

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