My column this week might not be the most popular one I have written for you, but it needs to be discussed.
I know most of you will have visited one of the major farm shows this winter. You likely returned with your mind full of exciting new products that promise to make you tonnes of money.
There is no doubt in my mind that, in general, high yields are more profitable. Land, machinery, crop insurance and family living costs mean that farming, or more specifically crop production, is a high fixed-cost business, and lowering your cost per bushel is a function of spreading those fixed costs over more bushels.
When grain prices were at all-time high prices, it was easy for growers to pull the trigger on every input that might result in a yield increase.
I have also heard from a lot of farmers over the last couple years reporting they have grown their biggest yields ever. The reasons for this are varied: great weather during the growing season, new high yielding varieties or hybrids, better fertilizer management and long-term no-till, to name a few.
Being able to brag at coffee row about that field of canola that went 70 bu. an acre or an oat crop that touched 200 is very satisfying. And with the prices we have seen in the last six to seven years, there has been a lot of profit in farming.
However, lately prices have gone into a funk. We are seeing a new level that possibly isn’t quite as rosy as in the past.
The problem is, we have become used to producing those big yields. As a grower pointed out to me the other day, “I used to look at 30 bu. of canola as break-even, then 35 and now it’s probably near 40.” This isn’t farfetched.
Looking at Guidelines for Estimating Crop Production Costs 2018 from Manitoba Agriculture, the average costs for growing a crop of canola is around $400 per acre (fixed and variable). Use a price of $11 per bu. and you have 36 bu. to cover costs.
What has changed? Two things: increases in input costs and a price decrease.
So, let’s look at what really creates yield and what it costs.
How much nitrogen does it take to grow a bushel of spring wheat? The sharpies out there are hopefully saying 2.2 pounds, and in most circles, you are correct. However, you may also be incorrect. This number is taken by deriving the amount of nitrogen to grow, say, a 50 bu. crop.
Studies have shown that 110 lb. of fertilizer nitrogen and soil nitrogen are needed to grow that 50 bu. per acre crop. However, if you look at, say, the first 45 lb., you will find that there is much more than a 20 bu. increase. It may be more like 30 bu.
I call this area of response the sustainability zone. It produces great returns, but the yield may or may not cover basic costs.
The next 45 lb. of nitrogen will likely return close to the 20 lb. expected, but you will notice from the illustration with this story that each pound of nitrogen applied is producing less grain than the previous pound. I call this area the zone of profit.
This is a very important zone because not only does it provide jingle in your jeans,but it also makes every other input on your farm more profitable. For example, if it costs you $15 to spray an acre of land with a herbicide and you grow 30 bu. of wheat on that acre, it costs you 50 cents per bu. At 45 bu., the cost has been reduced to 33 cents per bu.
So we are at 45 bu. on our crop and we now add 20 more pounds. This 20 lb. gives us only five bu. of yield., which is only half the 2.2 bu. per lb. of nitrogen. In fact, the last four to five lb. of nitrogen, while still showing a yield increase, might be losing you money. The cost of the nitrogen to increase the yield could actually be more than the value of the grain produced. I call this the zone of risk and hope.
So what needs to be discussed is, do you need to have the highest yields, or can you sacrifice the last five percent of your yield and make more money?
I work under the general guideline that you should expect an average of a 2:1 return for your inputs to cover risk. I may bend this to 1.5:1 but not lower. That means that if a fungicide treatment costs you $15, you should want on average $22.50 to $30 in yield. The premise is that you don’t want to be trading dollars with your inputs, and there should be an expectation of returns to cover the times when you aren’t making money from your treatment. And yes, that does happen.
In order to strive for profit and not higher yields, you have to exercise self-discipline and question every input you are using.
For example, I know growers who annually put down potash for their canola.
“Canola rarely responds to applied (potassium), even under conditions where cereals normally respond,” says the Canola Council of Canada.
“Critical levels are often stated to be around 280 kilograms per hectare of (potassium, 250 lb. per acre), or 112 parts per million in the top 15 centimetres (six inches), but research indicates that canola will not consistently or economically respond to fertilizer (potassium) unless the soil test is very low — 78 to 112 kg per ha of (potassium, 70 to 100 lb. per acre) or 35 to 50 p.p.m.”
This is sound advice, yet many fertilizer dealers and agronomists continue with the philosophy, “it won’t hurt to put a little on.” Maybe not the yield, but it does hurt your balance sheet.
Another example is the use of fungicides. Last year, tens of thousands of acres were treated for fusarium head blight, even though the forecasted risks were very low based on prediction models.
Why? Because growers had fusarium the year before and they were going to do everything in their power to avoid it in 2017.
The bottom line is this isn’t the year to throw everything at your crop, hoping that enough will stick to pay for the rest. Stick to the tried and true basics. Everything else? Well, to borrow from Obi-Wan Kenobi’s comments to Luke Skywalker in Star Wars: “trust the force.” In our case, I’m suggesting that you “trust the science.”
Thom Weir, PAg. is an agrologist with Farmer’s Edge. He can be reached by emailing email@example.com.