If these Crop Profits Are Realistic....Maybe Those Old Cows Don't Look so Bad!

[ASRG]

From the Western Producer.

Statistics Canada recently released new crop production estimates. While yields vary from one province to another, let’s use average Saskatchewan yields since we’re using Saskatchewan expense numbers. 


Crop prices can vary dramatically from one day to the next, but I tried to use reasonable assumptions based on information from buyers and brokers. 


According to Statistics Canada, the average yield of canola in Saskatchewan was only 25 bushels per acre this year. Assuming a price of $13.50 per bushel picked up on the farm and subtracting total rotational expenses of $268 an acre, you’re left with a return of roughly $70 an acre.


The average yield of flax in the province is estimated at 21.6 bu. per acre. Assuming a price of $14.25 per bu. and total expenses of $199 an acre, the return is $109 an acre. Although the gross return from flax is lower than canola, expenses are also lower, leading to a larger net return.


Some producers have long claimed that they can make more money with flax than canola. This year, the numbers for Saskatchewan indicate that is indeed the case. 


The big equalizer is the disappointing canola yield. Canola profitability would pull ahead of flax if canola yields were three or four bu. better.


While canola is still one of the top crops for profitability, lentils have gone from one of the most profitable to one of the least lucrative.


Statistics Canada pegs average lentil yields at 1,296 pounds per acre. Assuming a price of 20 cents a lb. and subtracting production costs of $230 an acre leaves a return of just $29 an acre. That’s in the same bottom tier as barley and oats.


Barley yielded an average of 49.2 bu. per acre and feed barley picked up on the farm in Saskatchewan is worth about $5.20 per bu. Some areas are higher and some lower, depending on freight costs. Meanwhile, oats averaged 76.2 bu. per acre and the price assumption is $3.25 per bu.


With costs at $231 an acre for barley and $221 an acre for oats, these crops come out with net returns of $25 to $27 an acre.


It’s interesting to note that field peas are more profitable than lentils this year. With an average yield of 28.7 bu. per acre and assuming a price of $8.25, the net return pencils in at $56 an acre.


If you look at spring wheat (35.1 bu. per acre) and durum (33.9 bu. per acre) and assume a price for both of around $8 per bu., the net return for durum is $41 an acre while spring wheat is $55. That’s respectable compared to the other options.


All the crops are money makers, but net returns haven’t turned out the way most expected in the spring

[kato]

Do the costs take into account the machinery investment? If not, then this is pretty grim.

I remember one fall back in the early 80's (I think? if my memory is half way good), when we sold canola for $14.50 a bushel. That was profitable. It went a long long time before the price ever got close to that again.

Around here yields were disappointing as well. No one will say how bad, but I don't see a lot of smiles around the neighbourhood.

[ASRG]

kato: generally we had a pretty good crop here in central Alberta. There was some disease issues in both cereals and canola, but overall a pretty average year.
I wonder though how people can justify paying the prices we see for farmland or even the rents quoted on here from time to time?
I do a crop share deal on my grainland and it usually works out as good or slightly better than the going cash rent. One third of the crop, but I pay one third of spray/fertilzer and provide all bins (steel on cement). I give him a hand as needed. My tennant makes all the decisions (inputs/crop/marketing) and farms it like he owns it (which he probably will some day). We have a truly ideal relationship...we both are satisfied with it.

[grassfarmer]

Also from the Western Producer.

Farmers can make higher net profits from grass
than from canola.

Legal grass, that is.

That statement contradicts evidence presented
by the sea of yellow seen across the Prairies in
recent years, but comparative figures bear it
out.

Arnold Mattson, grassland stewardship co-
ordinator for Agriculture Canada, used to
believe there was more money in cereals and
oilseeds. But when the Alberta Forage Industry
Network challenged him to make comparisons,
he did.

He found that pastures provided higher net
profit than canola, spring wheat or barley, on
average, over a 10-year period from 2000 to
2011.

“I wish I would have known this 50 years ago. I
would have farmed a lot differently,” said
Mattson, who is an adviser to the forage
network and used to farm.

He compared returns on the three crops with
those from pasture grazing in the black, brown
and grey-wooded soil zones of Alberta. Pasture
netted an average $96 per acre in the black soil
zone, compared to $87.16 for canola, $24.15
for spring wheat and $4.50 for barley.

Results for the other two soil zones showed
similar spreads, with pasture coming out on top.

Mattson’s figures didn’t impress Rob Davidson,
a stockman who owns and manages 114 acres
near Creston, B.C.

That’s because Davidson nets about $200 per
acre on his pasture through management and
grazing of cattle, sheep, pigs or horses —
whatever type of stock he calculates will be
most profitable in a given year.

“People just don’t treat grass as a crop,” said
Davidson. “The people that grow continuous
grazing, we can triple their carrying capacity if
they would manage their grass even close to
what they do their canola, but they don’t. They
treat it as a no-profit thing. And grass is
extremely profitable.”

The profit is realized by feeding it through
animals, and because ranchers attribute their
returns to their animals, they don’t give grass
its due.

Mattson said he once surveyed producers in
British Columbia, Alberta and Saskatchewan
about their returns per acre. He was surprised
when most people put no value on their pasture
land because in most cases it was unsuitable for
farming.

“Where that mentality came from, I don’t know,”
said Mattson, “but it makes us our own worst
enemy.”

He suggested that producers reconsider their
view of pasture and grassland.

“If you look at it as though you were a
cattleman, your grass and your feed is a cost.
But when you look at it as a grass farmer, all of
a sudden the grass and the land are a profit
centre.”

Albert Kuipers, manager of the Grey Wooded
Forage Association based in Rocky Mountain
House, Alta., said producers often assume that
pastureland is unproductive.

However, farmers’ tendency to put their best
land into cultivation means pasture is often on
the poorest land.

“It’s amazing, when you put good land into
pasture, the productivity that you’re going to
get,” said Kuipers.

Davidson said that’s what he does, on land he
admits is rich, irrigated and ideally located in a
valley with a grazing season that extends from
April to December.

That’s how he achieves $200 per acre on grass,
but Mattson’s figures show that good profits are
achievable in what is considered to be the more
common prairie growing season of May to
October.

Davidson is a ranch management coach and
grazing mentor. He counsels calculation of
production costs above almost all else.

“For 25 years I’ve said put your best land into
grass because it will make you more money,
because you have less expenses.”

Higher grain and oilseed prices in recent years
are attractive to farmers, tempting them to
cultivate pastures and crop them.

[ASRG]

My own experience is seldom can you make poor land profitable growing crops, and yet it can be profitable in grass pasture.
Also....good land in crops can have enhanced profitability, through straw utilization, grazing the headlands, harvesting hailed out crop, etc.
Without a doubt good land can produce a lot of forage, as either a hay crop or through intensive grazing.

[ASRG]

I would further add I think the return on barley is pretty low? I mean $4.50/acre?
On the land I rent out this year the yield was about 85/bu/acre, which is a pretty average crop. This land is farmed in a four year rotation (barley/barley/barley/canola).
Even at $5.20/bu that is a gross of over $440/acre. Using the cost figures that would stiil provide a net profit of over $200/ac?
The real kicker is the one year of canola....when net profit can be pretty dramatic! My renter never would grow wheat because he didn't want to deal with the CWB. Now that might be an option as well in the rotation.
I have done a fair bit of negotiating oil lease contracts for people and get to see a lot of yield numbers and prices. Some farmers are achieving consistent "gross profits" through a variety of crops in a rotation in that $550-$580 range. The $580/acre farm was about 2000 crop acres in the Trochu area.....and yes that is what the oil company paid for annual rent!