Crop profitability hinges on assumptions

Every crop’s a winner and every crop’s a loser and the best that you can hope for is to not lose your shirt. (Sung to the tune of The Gambler, with apologies to Kenny Rogers.)

Budgets for 2017 can show cropping options as winners or losers, depending upon the assumptions that are used.

Saskatchewan’s agriculture ministry has posted a 2017 Crop Planning Guide on its website. I enjoy this sort of analysis and think it’s useful to see the assumptions.

However, the real value comes from plugging in your own yields, prices and input costs.

As usual, Saskatchewan Agriculture uses estimated crop yields that are 20 percent above Saskatchewan crop insurance five-year averages for each soil zone. Certified seed is assumed for all the crops. Fertilizer prices were gathered at the end of November and include urea (46-0-0) at $413 a tonne and phosphorus (11-52-0) at $616 a tonne.

A major deviation in assumptions from past years is in chemical costs. For 2017, the potential cost of managing the growing problem of herbicide resistance is part of the equation. As a result, herbicide costs are up significantly.

The herbicide cost for spring wheat is assumed to be $61.92 an acre, while durum is $37.70 an acre because more products are available for spring wheat. This affects the relative profitability of the two crops.

One of the highest assumed herbicide costs is on lentils at $85.22 an acre. Despite this, large green lentils are the runaway winner for profitability in the brown soil zone based on an assumed price of 45 cents a pound.

Red lentils have a higher assumed yield but a much lower assumed price of only 30 cents a lb. While their net return isn’t as high as large green lentils, they still pencil out as one of the more profitable cropping options.

Of course, the financial picture will be much different if root rot destroys your lentil yield and/ or quality. You have to take that risk into account when analyzing the numbers.

The Crop Planning Guide firmly establishes that the ABCs are still valid, as in “anything but cereals.” When cash as well as fixed costs are included, many of the cereals, particularly wheat, winter wheat, feed barley and even malting barley, show negative returns.

Interestingly, soybeans come out as a more profitable option than canola in the analysis. In the dark brown soil zone, a soybean yield of 30.7 bushels per acre with a price of $12.43 a bu. is used.

By comparison, the canola yield is 41.6 bu. per acre with an assumed price of $10.58.

When you subtract all the expenses, soybeans come out slightly better than canola. While soybean acreage may indeed rise in Saskatchewan this year, there won’t be enough yield confidence for a wholesale switch.

Flax comes out with a much lower profitability than canola in the Saskatchewan Agriculture analysis, but the price assumption is only $10.71 a bu. Based on the new crop price offerings I’ve seen, my price assumption would be higher.

The most profitable crop in the analysis is quinoa, but if too many people took that to heart and grew quinoa without a price contract, the profitability would not be good at all.

While every crop could be a winner or a loser, there are a lot of considerations behind the numbers you use for analysis and the confidence you can place in those numbers.

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