Farmers face dismal prices and dismal returns

At the average yields being projected by Statistics Canada and with prevailing price levels, none of the typical crops in Saskatchewan cover total expenses. Some crops don’t even cover all their variable expenses.

Crop prices used in this analysis come from numerous sources and I try to use an f.o.b. farm price on everything for consistency.

For crop expenses, I rely on the Crop Planning Guide from Saskatchewan Agriculture. The ministry estimates variable expenses, which includes seed, fertilizer, crop protection products and the cost of machinery operation. Its expenses are higher than the average because it targets above-average yields, but the publication provides a consistent source of information.

Its guides also estimate other expenses, the big ones being machinery depreciation, machinery investment and land investment costs.

Its start with canola. Statistics Canada is projecting an average Saskatchewan yield of about 37 bushels per acre, not far off the five-year average. The value of canola at the farmgate is in the range of $9.40 a bu., making an average crop worth $348 an acre.

For the dark brown soil zone, the Crop Planning Guide for 2019 assumes total variable expenses of $304 an acre. That leaves a gross margin of only $44 an acre, which isn’t even close to covering the other expenses that are estimated at $141 an acre.

While that seems dismal, similar gross margins are generated for barley and flax. For barley, my assumption is a farmgate price of $3.70 a bu. for feed and $4.50 for malting. Statistics Canada has pegged the average yield at 61 bu. per acre. With the extra costs assumed for growing malting barley, the gross margin for both is in the $33 an acre range.

Flax prices have held up better than some other crops, but the provincial average yield is only expected to be 22 bu. per acre. A price assumption of $12.25 a bu. generates a gross margin of $37 an acre when using dark soil zone production costs.

Spring wheat at 41 bu. per acre and a price of $5.60 a bu., as well as durum at 34 bu. an acre and a price of $6.80, fall just shy of covering variable expenses.

Oats appear to have one of the more attractive returns. Saskatchewan’s yield is expected to average 88 bu. an acre. Pegging the price is tricky since it varies widely depending upon proximity to millers and the quality of the oats produced.

Using a price assumption of $3 per bu. f.o.b. farm generates a gross margin of $81 an acre. With a price of $2.75, the gross margin falls to about $59 an acre.

Pulse crops are disappointing if you only produce an average crop. Red lentils with a yield of 1,445 pounds an acre and a price of 16 cents a lb. have a gross margin of just $5 an acre. Large green lentils at 20 cents per lb. generate $40 an acre despite higher variable costs.

StatsCan pegs the average pea yield at 36 bu. an acre. A yellow pea price of around $5.70 at the farm generates a gross margin of minus $31 an acre. In other words, the return is well short of covering variable expenses. Green peas at an assumed price of $7.80 a bu. generate a positive gross margin of around $25 an acre.

While many crops are big losers, no big winners are evident.

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