Conventional producers will bide their time

The possibilities appear endless for conventional grain farmers who may want to find something more profitable.


Organic grain prices are great, while cattle prices and returns are record high. 


Bison producers were enjoying strong returns long before the run-up in cattle prices, and the industry has been actively seeking new entrants. 


The sheep industry has often boasted good returns, and yet sheep numbers continue to decline.


Money is finally being made in the hog industry, and yet there are still unused facilities that can be bought for a fraction of their original construction cost.


With softer prices in the grain industry and returns diminishing, you might expect grain producers to start considering these sorts of options, but major changes don’t happen quickly or easily. Getting into cattle, bison, sheep or hogs on a commercial scale requires a major investment. Going organic requires patience and learning.


Following last week’s column on the potential returns from various crops and the diminishing profitability of the grain sector, I had a call reminding me that soybeans had not been part of the analysis. Another caller urged a closer look at the favourable prices for organic grain.


Trying a new crop is relatively easy. As returns tighten, that will be one of the first considerations. 


If we get into a prolonged downturn in grain prices, some producers will again start to explore the organic option. Avoiding the high cost of fertilizer and crop protection products is a driver. So is philosophy.


Comparing returns between conventional and organic production systems is not as simple as it seems on the surface. The economics look great if you assume 70 percent of conventional yields with large price premiums and much lower input costs.


However, how often might the land have to be seeded to a forage crop to solve weed issues? How often will a green manure crop be needed to enhance fertility? This complicates any economic analysis.


Still, with many organic crops currently worth two, three or more times that of conventionally grown crops, a strong economic case can be made for organic.


Of course, with any major farming change, you have to wonder what the economics will be in the years ahead. Will the huge premiums for organic grain be maintained? This is particularly important because it takes time to make the conversion to organic status.


Cattle numbers continue to decline, even though prices have never been higher. Most observers agree that any eventual herd expansion will come predominately from existing cattle producers rather than grain farmers branching into cattle. 


Bison and sheep are an even bigger leap, which is why it’s tough to attract new entrants.


The grain sector has enjoyed amazing returns in recent years. Prices may be fading, but the memory of those big dollars will last for a long time, as will the hope of market recovery. 


All sectors have gone through tough times in the past, and no sector is immune from that happening again. If you jump from conventional grain into organic or beef, you could be jumping from the frying pan into the fire. There are no guarantees. 


Most grain producers will tighten their belts, explore new cropping options and bide their time. They aren’t ready to bet on a different sort of enterprise.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at [email protected]

  • richard

    Kudos to Kevin Hursh for finally writing something objective about organic production as a legitimate alternative……

  • edward

    Actually, 50% summer fallow will by far trump any production practice out there in North America today if net profit is what a producer is into. With net profits per acre dropping significantly as of late, poor transportation/port logistical coordination and purchasers simply not willing to buy grain at a fair trade price the market signals to farmers are clearly to reduce production acutely until the price of commodities returns to above break even values. This could take quite some time as the industry does not believe that producers are business savvy or astute enough to actually do it. The industry believes the farm producers will for the most part simply wait for the rest of the world to have a weather related production drop and not need to do anything themselves as businessman to ensure any profits. The industry may even go so far as to spread suspect “just on the horizon”, weather or disease related global production fears to help the producer’s belief system along just a little bit. They could use some of the few expensive communication mediums at their finger tips such as print, radio, Internet, television, fancy billboards, crop tour or agronomic presentations to adequately accomplish this. By re investing a small portion of producers input dollars to pay for this at all times it will ensure low below cost commodities for the extremely lucrative value added processing sectors of agriculture. Summer fallow will lift net profits 20 fold and more and gets you out of that over production do-loop that most producers are presently in. It can vastly reduce work loads in critical seasons, increase family time, and vastly reduce risk, stress and stress related health, accident and injury incident levels. It makes increasing farm size quite often not only unnecessary but as well pale by comparison in terms of a good business goal. Still this is not a concept that many will put much time on a calculator towards. Farm producers, it is often said are breed to produce regardless of the resulting fallout.