Producers look to wring out a profit in 2014

Cost of production factors are unpredictable, but a recent spread sheet tries to pin them down


There have been significant shufflings and a few surprises since Manitoba Agriculture brought out the first draft of its 2014 cost of production spread sheet in January.

The final version, which was just released, is more accurate than the first draft but does not paint a pretty picture for producers, says spread sheet engineer Roy Arnott.

The spread sheet previously used crop yield numbers based on insured values to rank the top 19 crops commonly grown in Manitoba. Those yield numbers are now based on actual 10 year average yields.

The yield numbers are stable, but input costs and commodity prices can be jumpy.

The spread sheet is available on Manitoba Agriculture’s website.

“We’ve designed the software so a farmer can change the numbers we’ve provided and plug in the numbers he feels are correct for his farm,” said Arnot.

Soybeans: The most significant change since January was the big jump that soybeans made from the bottom to the top of the ranking. The obvious reasons are that new varieties better suited to Manitoba and better agronomic practices have increased the average yield.

“A big factor right now is that soybeans are an excellent risk management crop,” said Arnott.

“When we consider the cost of fertilizer, soybeans look a lot better because they don’t need much (fertilizer.) In times of rising input costs and lower commodity pricing, low input crops rise to the top of the priority list. Low input crops like soybeans and winter wheat help manage your risk. With less investment, you stand a better chance of making a profit. It’s that simple.”

Corn: Corn has also benefited from improved varieties and better agronomic practices, but it remains in 19th position at the bottom of the heap in eastern Manitoba and 15th in the west.

“High input costs always equal high risk and lower odds for profit,” Arnott said.

“Corn requires a load of fertilizer, plus you have to factor in specialized planting and harvest equipment. In most years, you’ll need a dryer and that means buying expensive propane.”

Corn is factored in at 96 bushels per acre now that the cost of production software uses actual averages. However, with prices hovering around $4 a bu., it gives growers a $400 per acre gross revenue.

“But your input costs all in are about $475 per acre,” he said.

“You’ve got that expensive seed, high fixed costs and drying costs in excess of 50 cents a bu. That’s why corn is at the bottom of the heap.”

Winter wheat: Arnott said winter wheat has been at the top of the list for the past decade because it always turns a profit with a minimum of risk.

“Winter wheat hangs in there at or near the top, and always does it without a lot of fanfare. The profitability has been so solid. It’s a lot tougher, a lot more robust, than we previously thought,” he said.

“I think farmers need to take a closer look at putting it (winter wheat) into their rotations. It spreads out their workload in the spring and at harvest. Plus it lets a guy farm more acres with the same equipment. And from an agronomic point of view, Manitoba farmers need more crops in their rotations. Winter wheat is one way to extend those rotations.”

Wheat and canola: Arnott said wheat and canola are the bread and butter crops in Manitoba, which is not necessarily a good thing.

“These two are finally under significant pressure from some of the other crops,” he said.

“Canola, especially, is feeling the pressure. It’s an expensive crop to grow and that means it’s a riskier crop to grow. The canola budget says that with average yields and average pricing, it’s going to be a challenge this year to cover fixed costs, operating costs, labour and your living expenses.”

Arnott said it should send the message that other crops deserve a look.

The profitability of oats is on par with wheat, or even higher in some cases, and there were good contracts last fall for rye. More producers are putting flax into their rotations, and soybeans are no longer the mystery crop it was a few years ago.

“Manitoba is on the verge of becoming a six-crop province, and that’s a good thing,” Arnott said.

“Disease issues (are) showing up in our major crops. We all know it’s because of tight rotations.”

He said a more diversified rotation gives growers a longer spread between canola crop years and wheat crop years. A better crop mix not only breaks disease cycles but also solves many insect and herbicide resistance problems.

“If producers could go from one oilseed crop to three oilseed crops, and from a two year rotation to a four year or six year rotation, the risk reduction would be tremendous,” he said.

“The cost of production would also drop if we addressed some of our problems with rotations. If you eliminated one pesticide application in a canola crop, you’d save $20 to $30 per acre. With a 30 bu. yield, that’s like picking up a buck a bushel on your price. A buck a bushel on canola can make the difference between profit and no profit on a lot of farms this year.”

For an in-depth look at the numbers and to download the spreadsheets to put in your own farm costs and prices use this link.

To view a related story on winter wheat for 2014 click here. To watch the WP weekly videocast where this story is highlighted click here.