Best to focus on improving margins on poor acres

Most people are acquainted with the 80-20 rule.

It is used in many instances: eighty percent of the land is farmed by 20 percent of the farmers, 80 percent of purchases are made by 20 percent of consumers in a particular sector — that sort of thing. I’m going to put a different twist on it.

Let’s take a look at the land you farm. Can we fit the 80-20 rule onto you farm? Does 80 percent of your profit come from 20 percent of your farmland? Probably not. From my experience, it is probably more like 80-40 or 80-60.

One thing about my experiences in Western Canada for the last 40 years is that while virtually all fields are the same, in that they fit into a nice half mile by half mile, every field is different.

If you are lucky, and there are some of you out there, most of your land is uniform and probably profitable. For example, land in the Red River Valley, land around Swan River, Man., Indian Head or Melfort, Sask., or Lacombe, Alta., fall into these situations. Growers in these areas are lucky.

However, most land in Western Canada is not as uniform, nor as uniformly productive as these areas. About that rule; let’s call it an 80-40 rule of farmland productivity. In financially tight times, as we now appear to be entering, this concept becomes more important.

The vast majority of your profits will come from the most productive areas on your farm.

Using the 80-40 rule, between 30 and 50 percent of your land will be showing a marginal profit or loss and up to 20 will be outright losing money.

From the combine, it feels great to see those areas churning out 90 bushels of canola, but we tend to ignore the areas that are only producing 25. It doesn’t take much sophisticated calculating to realize those areas are losing money.

Maybe now is the time to quit trying to do everything right to gain an extra bushel per acre across the whole field. It might be time to try to improve the yield in the specific areas where you are losing money or reduce costs in those non-profitable acres. Either way, the strategy is to improve the margin on the poor acres.

In the past, when farmers managed much smaller acres, they used the less productive acres for pasture or as the area where manure was spread.

I remember a knoll on our farm that grew very good crops. I asked my dad about it once. He said the hill got countless loads of manure in years when they kept cattle and horses.

On many of today’s farms, applying manure to specific, less productive areas isn’t an option. Today, all you need is a fertilizer applicator or drill that is equipped with variable rate technology.

Most V.R. programs start with identifying production zones. This can be done by a variety of methods, many of which are proprietary to the company providing the service.

Most often, these use satellite imagery to produce the zones. Yield maps can also be used to produce zones.

Zones are usually soil sampled, with multiple, representative samples grouped like fields. The number of zones will vary depending on the variability within the soil. A very uniform field might only have three zones, a variable soil may have up to seven or more. Grid sampling is also used, but works best at two acres or less per grid.

Once the soil analysis is complete, yield targets can be established for each zone, and fertilizer recommendations created and copied onto memory cards that can be entered into a control panel on a drill.

This, using the fertilizer information, the zone map and the tractor’s GPS system, enables the drill to apply the prescribed fertilizer at any location in the field.

The bottom line when discussing a variable rate program is that it should make you money. I always use the desired payback somewhere between $1.50 to $2 for every $1 invested. If the cost of V.R. is $3 per acre, you should expect a return of a minimum $4.50. However, there may be additional costs and benefits from V.R. If a new piece of equipment such as an ammonia controller or a new drill is required, these costs have to be amortized over a number of cropping seasons. As other benefits of V.R. may include more even maturity and protein and reduced lodging.

The only way of accurately analyzing the performance of a V.R. fertility program or any other technology you are testing, is to first leave a comparative check.

This may be the grower’s traditional fertilizer rate, for example. At a minimum, this should be done on 10 percent of fields. At harvest, an analysis can be made comparing yields in the V.R. zone and the check in that zone. A comparison should be made for each zone to get a relative yield for that zone versus the check and can be automated and, or provided by a service.

Tighter margins mean many producers should consider a shift from the free swinging, Jose Bautista strategy from when commodity prices where high, to a strategy that more resembles Miguel Cabrera, hitting a lot of singles.

Take care of the yields in your most productive areas, but really concentrate on the soils offering low profits or where you may be losing money. That is where you stand the best chance of improving your bottom line.

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Comments

  • ed

    If you double or triple the grain price, you will be making a tidy profit on all of your land/productive units. The Canadian cattle guys found that out. Of coarse they didn’t do it intentionally. The had a trade sanction imposed upon them, (BS-E) and rather than immediately destroying production (about a 50% cull would have done it), by killing and incineration the seemingly unwanted product to get their prices back in six months, they flooded the market with cheap beef and held over cows and heifers and made the problem worse. A large percentage finally went broke, gave up, or retired and production dropped. You can now make money on even your poorest animals. Cutting production is the only solution here. Summer fallow, paid set asides and reduction of intense ag. will bring back prices and profits, even on the poor land.

    • neil

      Cutting back production to increase prices would only work if all exporting countries agreed to do it at the same time-USA, Russia, Ukraine, Kazakhstan, Europe, Brazil, Argentina, Australia, etc. We live in a world trading market so one country cutting back production will be filled by another country increasing production and filling the sales void.

      • ed

        When the CWB pulled out of the export market for a few month in the late part of the last decade, the prices went up immediately and dramatically, so you know your statement to be untrue. The of coarse they got accused of starving the world, but all the product made it to the mouths and the farmers made a considerable amount of extra money from the market.

        • neil

          I don’t know the details of the event you are referring to but I don’t believe your analysis of it to be true. If that did happen it would have been because of a world shortage of the crop not because the CWB alone didn’t have enough of it.

      • Guest

        But,Neil, there is nothing stopping the U.S. and Canada and Europe and Australia from reducing production. They already work together for a common goal on many other issues.

  • Dayton

    If you want people to stop smoking make it difficult and expensive to do so. Cost of production will determine who plays in the future. Marginal land will be seeded to grass as it should.

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