Falling commodity prices mean extra care will be required when choosing crops to grow this spring.
A softer Canadian dollar is buffering the price slide, but the reduced returns are not spread evenly among all crops.
Wheat has taken one of the hardest hits over the past eight months, losing one-third of its value and nearly all of its margin.
The most profitable wheat choice needed to be planted last fall, but a late harvest meant few producers got the chance to take advantage of that opportunity.
No. 1 hard red spring wheat with 13.5 protein will gross $315 per acre in 2014-15 if prices are in the $7 range and growers can average 45 bushels per acre. A $55 per acre margin can be expected if one assumes operating costs of $190 per acre, including fungicide, new seed and a $65 per acre fertilizer bill, and fixed costs of $70 per acre. However, red ink isn’t far away if either the price or the yield slips.
Some growers will be able to expand that margin with lower operating costs and cheaper land rentals, but just as many will narrow the margin because of added labour costs and higher land rental or ownership rates.
The same type of operating costs will likely give durum a $45 per acre margin, as long as prices are $6.25 per bu. and yields are 48 bu. per acre.
Winter wheat is the winner, with a projected margin of $112 per acre if it brings $6 per bu. and yields 60 bu. per acre.
Both durum and winter wheat will need some improvement over current prices as well as a decent crop to meet that margin.
A $120 per acre margin is possible for malting barley if prices are $5.55 per bu. and yields are 65 bu. per acre, which is a tall order. The crop could actually lose $45 per acre if it should fail to make malt or is a feed variety, while still yielding 65 bu. per acre and fetching a $3 per bu. feed price, as some are predicting. The break-even price is $4.12 per bu. if costs are in the $241 per acre range.
Fall rye has some of the lowest costs of production at $196 per acre, $125 of which goes to operating costs. It could pencil in an $11 margin with a 48 bu. per acre crop and $4.30 per bu. price.
Oats have been a moneymaker for many growers in the past couple of years, provided they could move them after harvest. For this year, they will need to harvest 77 bu. per acre and receive the projected price of $3.24 per bu. to cover $225 per acre in costs.
Everything above that is gravy. A 90 bu. oat crop will put $73 in the bank after costs. An 80 bu. crop cuts that to $40 per acre.
Canaryseed has been another moneymaker for the past few seasons. It will do well at 1,150 pounds per acre, provided the projected price of 27 cents per lb. holds.
The crop has the potential to be a good choice at $73 per acre if one can get over the itching and the risk of needing to sit on it for a season or two if trade issues with Mexico or prairie over-production bump the price lower.
If rumours of 20 cent canaryseed came true, it would mean earning just $11 per acre after costs.
Operating costs of $389 per acre, including a 35 cent per bu. drying cost, make corn one of the more expensive crops to grow, but it could still yield a $25 margin if prices are $4.15 cents per bu.
However, this depends on yields of 100 bu. per acre. An 85 bu. per acre crop sees a $47 loss, while a 120 bu. crop, like the ones harvested on many prairie farms this year, puts nearly $110 on the table after expenses.
As a result, corn is one of the riskier of crops for 2014/15, although it does have a potential yield and margin upside.
For canola, 38 bu. per acre yields could generate margins of $80 per acre, even at $10.25 per bu. The crop breaks even around $8.50 per bu., but the margin jumps to $151 per acre if yields increase to 45 bu. per acre.
Canola breaks even when the prairie average of 32 bu. per acre is achieved, but that would still cover labour and a return on investment. This makes the crop a fairly safe bet for most operations.
Flax is a margin winner, even with yields of 28 bu. per acre, because of lower than average costs of production and a projected price of more than $13 per bu.
However, the price could quickly come under pressure if prairie over-production or bigger Black Sea acres push up world inventories.
Flax breaks even at about $9 per bu. on 28 bu. per acre yields, which makes it a good opportunity for next season.
Soybean acres are up dramatically in Western Canada, but it is still a minor crop by prairie standards.
Its low cost of production of $250 per acre keeps operating risk to a minimum. As well, prices have held up well compared to other commodity crops.
Soybeans offer a margin of $65, even at $10.50 per bu. based on a 30 bu. crop. The projected price is $1 higher than that, so $90 margins are still possible.
The crop offers safer bets than cereals, partly because of reduced grade risks, world demand trends and better fundamental price support.
Peas could make money at $11 for maple and $6 for yellow, but not much for the latter.
A 36 bu. per acre maple crop might exceed its $230 costs by as much as $166, while a yellow pea that yielded 45 bu. would produce a more modest $50 margin.
Sunflowers at 28 cents per lb. are a winner with yields in the 1,400 lb. range. The crop can deliver margins of $100 per acre with costs in the $295 range, even with some drying fees thrown in.
Lentils that yield 1,200 lb. per acre and fetch 19 cents per lb. won’t cover costs and would lose most farmers $10 per acre. Either yield or price must move to make them attractive this year. Break-even prices are 22 cents at that yield, and it would take 1,350 lb. to make it on 19 cents.
Kabuli chickpeas have the potential to be profitable despite the cost of fungicide, depending on yield. Statistics Canada feels producers could expect about 1,800 lb. per acre with prices in the range of 29 cents.
Regional prices are expected to be closer to 25 cents. At that price, break-even on yield occurs at about 1,200 lb. The crop offers upside on both price and yield if disease is kept in check.
Brown mustard could also be profitable next season at 37 cents per lb. An 1,100 lb. crop would gross about $400 with a $275 per acre cost of production. Yield could fall to 900 lb. and still produce a $60 per acre profit.
High yields and high quality are going to be necessary to make cereals attractive. Oilseeds will be the cash crop of choice, and a few specialty crops, for those who can manage them, will bring in much needed margins.