Cost control is order of the day

BRANDON — Making a profit on crops grown this year is going to be a challenge, according to Manitoba Agriculture analysis.

All the main crops will lose money when all costs, including fixed costs, are considered, based on average yields, average total costs and the new crop market outlook.

“Biggest take-home: could be a tough year,” Manitoba Agriculture farm management specialist Gary Smart said in a presentation at Manitoba Ag Days.

Smart’s calculations, which look at western Manitoba, show that an average yielding crop will provide profits over operating costs.

Operating costs include inputs such as seed, fertilizer and fuel.

Winter wheat, which is already in the ground,will make a farmer with average yields and operating costs about $163 per acre. That’s a huge advantage over the next best crop, oilseed sunflowers, which produce an operating return of $98 per acre.

Other expected returns include Nexera canola at $83, oats at $77, soybeans at $71, InVigor at $61, spring wheat at $60 and barley at less than $3 per acre.

However, everything slips into the red when fixed costs such as machinery and land are added.

Winter wheat loses $2.77 per acre, Nexera loses $79, oilseed sunflowers lose $83, oats lose $89, soybeans lose $92, InVigor loses $100, spring wheat loses $102, and barley loses $160.

Smart said this sobering outlook means farmers need to focus on cost control and careful decision-making.

“Planning’s going to be important,” said Smart.

“Budgeting is going to be important.”

It is too late to use some return maximization strategies this year, but they are worth noting for future years because high profits don’t appear to be coming back soon.

Smart said fertilizer comprises 30 percent of a crop’s operating costs, so trying to price fertilizer well can be as important as pricing the crop well. Fertilizer is often cheapest in the fall, so farmers should at least think about their fertilizer plan soon after the last crop is off the field.

Smart acknowledged that some farmers can make well above average yields, and good growing conditions can add bushels that would substantially change the result.

However, long term averages and normal conditions should be assumed for planning.

2 Responses

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  1. Brian cross on

    Farmers have always been rewarded with lower prices when producing large crops The only way to cure the problem of low prices is to produce less Everyone says we have to feed the world ,I think we only have to feed the people that can afford to buy our product . Company’s such as potash corp limit production in order to boost prices and farmers should do the same

  2. A good article for all the farmers that signed 20 year mortgages and 5 year equipment loans based on one year’s high prices.

    I second what Brian said. Farmers have no moral, legal, or financial obligation to feed the world. Besides, every year when have millions of tonnes of carry out stocks, if the problem of hungry people was a lack of food we would end the year with zero.

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