Contract crops proved as fickle as commodity-crop prices for John Ward, Sycamore, IL, in 1999. Rather than adding contract-crop acres as he had planned, he planted fewer this year than in 1998.
Still, he's so sold on specialty crops that he opted not to build a 100,000-bu bin, but three smaller bins (15,000-, 6,000- and 3,000-bu capacity) to segregate grain.
"I've got plans for two more 20,000-bu bins," Ward reports. "But grain prices are going to have to rebound before we do anything more. We'll be lucky to even cash flow this year.
"We had grown edible soybeans for 20 years until our soybean contractor lost his market in Japan to the Chinese this year," he says. "Last year we got a 50 cent/bu premium on 160 acres of edible beans. This year we didn't contract any."
So, even contract crops compete on a global basis.
"You can't blame the Japanese," he says. "They're close to China and can save quite a bit on shipping. But we still offer a higher-quality product, and I believe the market will come back."
The loss of food-grade soybean contracts was offset in part by Ward's expanded acres of high-oil corn.
"We grew 84 acres of high-oil corn last year and increased that to 150 acres this year," he says. "We'll get a 20-25 cent/bu premium, based on oil content. It could go as high as 30 cents/bu. We're starting to sell some high-oil corn directly to a large hog co-op. It gives us a chance to make a little extra money picking up the basis difference."
Long-term, selling high-oil corn directly to hog co-ops could be a significant market for Ward and other area farmers. "Within a 15-mile radius we've got 15-20 large hog operations," he says.
Ward had hoped to contract some food-grade corn, but distant markets meant that trucking would eat up the price premium. He's also looking at waxy corn as a potential contract crop.
While contract crops have proved somewhat fickle, Ward thinks the setback is temporary. "I can see the day where I won't grow any No. 2 yellow corn," he predicts.
Contracting crops gives Ward more than just a price premium. He also sees it as a way to stay in an industry that's getting too complex for his liking.
"Technology is moving so fast, we have trouble keeping up and still producing a good crop. And, it has become so competitive," he says. "My expertise is knowing how to manage the soils and the crops. With contract crops, the marketing is already taken care of."