Crop profitability depends on assumptions used

“Every hand’s a winner and every hand’s a loser,” Kenny Rogers sang in The Gambler. Substitute “crop” for “hand” and you’ll get the picture when it comes to cropping budgets.

Agriculture departments in Saskatchewan and Manitoba have come out with their 2016 cropping guides using typical yields, assumed crop prices and estimated costs to compare profitability.

Both departments advise farmers to use the numbers as only a guide and that the important numbers are the ones from producers’ own farms.

That’s certainly good advice given the wide differences in analysis.

In the black soil zone of Saskatchewan, the agriculture ministry uses an assumed soybean yield of 30 bushels an acre with a price of $9.35 a bu. The crop loses $28 per acre after deducting total rotational expenses.

In Manitoba, a 35 bu. per acre crop is assumed and the price assumption is $10 a bushel. In general, Manitoba has more heat units and can grow higher yielding varieties. As well, Manitoba producers probably enjoy a higher price than Saskatchewan because of freight differences.

The Manitoba calculations have soybeans generating a small profit of about $8 an acre after deducting total costs, which puts the crop in the middle of the pack for the various crops that were analyzed.

It’s not great, but it’s quite a bit better than the projection in Saskatchewan.

Profitability is reversed when looking at lentils.

It’s no surprise in Saskatchewan that red lentils pencil out as one of the most profitable crops. In fact, one could argue that the 33 cents a pound assumed as a red lentil price is actually too low, given that new crop contracts have been widely available at higher levels.

Based on an assumed yield of 1,500 lb. per acre in Saskatchewan’s dark brown soil zone, lentils come out with a return over total rotational expenses of nearly $225 an acre.

The Manitoba assumptions are starkly different. The yield is assumed to be only 1,100 pounds per acre and for some reason, a price of only 24 cents a lb. is assumed.

It’s probably fair to project the production of a lower grade in Manitoba, but 24 cents seems really low.

Anyway, using those yield and price assumptions, lentils lose $35 an acre in Manitoba, making them No. 16 out of 17 crops analyzed. Only buckwheat has a lower return.

Winter wheat comes out as a significantly better option than spring wheat in both Saskatchewan and Manitoba. In fact, winter wheat is the second most profitable option in Manitoba.

In both provinces, canola looks substantially more profitable than flax. The most profitable crop in the Manitoba analysis is navy beans, which come out with a $69 per acre net return.

Saskatchewan analyzes a number of specialty crops and one that jumps off the page as profitable is quinoa at nearly $300 over expenses.

It’s interesting to see how the two provinces handle fall rye.

Saskatchewan uses a yield of nearly 71 bu. an acre in the dark brown soil zone for the new high yielding hybrid fall rye. With a price assumption of $5.50 a bu., the return over all expenses comes to nearly $95 an acre, which beats all the other cereals.

Manitoba assumes a slightly better price of $5.75 a bu. but uses a yield of only 50 bu. an acre. As a result, the return is only $9 an acre, which is still marginally better than wheat and soybeans.

Check the agriculture ministry websites to see all the crop budget projections.

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