More and more we hear the term Identity Preserved (I.P.) describing a feature of various commodities, in an effort to achieve a premium in a specific market place. I.P. wheat is one of the leading commodities in this I.P. premium arena. As wheat harvest is over and seed is being purchased for fall planting, you may be considering IP wheat production. It is important to thoroughly evaluate all aspects of I.P. wheat production and contract options prior to locking in production acres.
Like any new venture or niche market opportunity, a thorough analysis of your current farming enterprise and I.P contract features will provide you with the information necessary to make the best management decision. A basic S.W.O.T. analysis of your operation in light of the I.P. wheat production opportunities will provide this information.
A basic S.W.O.T. analysis evaluates your operation internally and externally. Internally you evaluate the Strengths and Weaknesses, and externally you evaluate the Opportunities and Threats.
The strengths and weaknesses of your operation in light of I.P. wheat production may be noted in terms of your past wheat production history, intensive crop management abilities, financing of additional input needs, production equipment availability, grain drying and storage ability and trucking capabilities.
In evaluating opportunities and threats, the availability of a contract itself would be the opportunity, and threats would include things such as weather, diseases, insect and weed pressure, and the like.
Other points to consider in I.P production include the following:
- Understanding the yield potential of an I.P. variety vs. a normal variety.
- Understanding the contract quality requirements of an I.P. variety and the potential negative downside to not meeting contract specifications.
- Will the company buy the grain if it does not meet the specifications, and at what price?
- What is the pricing risk of sprouted wheat?
- What production data (especially independent data) is available on variety characteristics, preferably from fields in your area?
- How and when will delivery of the crop to the buyer be handled?
- What are the additional input requirements and estimated expenses?
- How do intensive management requirements translate to additional fuel costs, equipment wear, and soil compaction issues?
- What is your time availability in terms of additional management requirements such as field scouting, chemical/fertilizer applications, harvest, potential drying, storage and transportation?
It is just as important to evaluate what is included in the contract, as to consider what is not included in the contract. For example: What is the acceptable vomitoxin level, and what occurs if you surpass that level? What if everyone else surpasses that level, and all the available I.P. wheat contracted misses the specifications by a few points or even few tenths of a point? Supply and demand in a limited I.P. marketplace interacts slightly different than that of the regular market.
I.P. contracts are an exciting opportunity for growers to increase the potential profit margins of existing acreage and long-term assets. The better understanding a producer has of the commodity and contract being considered, both the positives and negatives, the better the management decision will be.