There’s no money to be made with a poor crop

Maybe it’s so obvious that no one bothers to talk about it. Maybe the full gravity of the situation is yet to sink in. Whatever the case, thousands of farms in dry regions of the Prairies are facing poor crops and big monetary losses.

For example purposes, let’s assume yields that are near or just above the 80 percent crop insurance guarantee for typical farms in southern regions. And let’s apply current prices to see how gross revenue stacks up.

On both wheat and durum, many crops will struggle to yield 25 bushels an acre. Spring wheat prices have strengthened over the summer while durum prices have been stagnant. Both are in the range of $6.80 a bu. depending upon the local market. That’s $170 an acre, enough to cover cash costs, but certainly not enough to also cover fixed costs.

Feed barley is one of the few crops showing price strength. Price varies according to proximity to the major buyers, but let’s assume $4.50 a bu. A drought-reduced yield of 40 bu. an acre generates a gross return of $180 an acre. That isn’t great, even with the historically high price.

Any indications I’ve seen for malting barley prices aren’t much better than what’s being quoted for feed. The big malt premiums of the past seemed to have evaporated.

Even in dried-out regions, the best return from a major crop would appear to come from canola. The crop has an amazing ability to compensate for patchy germination, and pretty good weed control is still possible in a light crop.

Assuming a yield of 24 bu. an acre and a price of $10.70 a bu. generates a gross return of $257 an acre, far better than the major cereals. However, with the extra costs involved with growing canola, you might still be hard-pressed to cover all the cash as well as fixed costs.

While flax harvesting is still some time away, let’s assume a yield of 15 bu. an acre at the prevailing price of around $12.50 a bu., which produces a gross of $188 an acre. It’s not too exciting despite a price that has remained pretty strong.

But it will be the pulse crops that deliver the big revenue disappointment, particularly on lentils, which were the top revenue crop for many just a few years ago.

I’ve heard about many poorer yields than this, but let’s use a lentil yield of 1,000 pounds, just under 17 bu. an acre. The best price for red lentils seems to be around 16 cents a lb. for a gross return of just $160 an acre.

Green lentil prices are somewhat higher. No. 2 large green lentils are being quoted at about 19 to 20 cents per lb.

Yellow pea prices are also disappointing, currently sitting at around $6.20 a bu. Assuming a pea yield of 25 bu. per acre generates only $155 an acre. It should also be noted that pea prices are usually quoted as delivered prices while lentil prices are typically quoted f.o.b. the farm.

Average yields in each province will be much higher than those used in the analysis above, but there will also be many producers with even lower yields who will be in a crop insurance claim situation.

As harvest advances, the financial gravity of the situation will be difficult to ignore.

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Comments

  • Welderone

    I have driven 100 miles in every direction from where I live and all I see is good crops. I went by canola crops yesterday that looked to have a yield of 60 bushels per acre. Using your numbers Kevin. 60 times $10.70 is $642.00 per acre. An excellent return per acre with canola.

    • ed

      Problem is that the average canola crop is somewhat over 30 bushels /acre and this isn’t one of those years…Dreaming doesn’t help!

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