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Corn and oats most profitable in Man., but corn most risky

Looked at one way, oats and corn are the obvious best big-acreage crops to sow this spring.

Looked at another way, the two crops are both likely to be profitable for farmers on the eastern Prairies.

Looked at still a different way, oat crops look super-safe to grow and corn looks super-risky.

It’s all a matter of perspective, and the angle you attack a crop’s outlook from can tell you a lot, a little or nothing about what rewards, risks and complications you’re taking on when you put acres into any crop.

That’s the value of the great work Manitoba Agriculture’s Farm Management team provides every year at this time during the winter season when farmers are making their plans, assessing their opportunities and sorting out their risks.

Its 2020 Cost of Production booklet contains a wealth of analysis, from the simple to the complex. The title is a bit misleading, since it uses costs of production as the basis against which to run many types of risk analysis, including profitability using forward prices and crop insurance coverage compared to operating and total costs.

This magisterial work, simple but packed with understandable charts, is where I found their projection that corn is likely to be the most profitable large acreage crop in 2020, followed by oats. Worst is barley, which looks like a real money-loser.

(Disclaimer: all their projections are based on reasonable expectations, made at the end of 2019, of summer 2020 yields, costs and prices. They are also based on Manitoba average production, so they don’t apply well to the rest of the Prairies.)

However, profitability is merely the simple number left at the end of a complicated equation, and that’s where stark differences between risks and rewards jump out.

Oats are cheap to grow. Corn is expensive. Corn grosses a lot of revenue. Oats produce little.

Oats have great crop insurance coverage. Corn is the most underinsured crop of everything Manitoba farmers can grow. In fact, while corn is No. 1 on the list of insurance risks, oats is No. 17, making it the best insured crop of any crop a Manitoba farmer can seed this spring. Corn has only 69 percent of its total costs covered by AgriInsurance, while oats get 85 percent covered.

That might make planting corn appear to be a crazy idea, except for those who have lots of experience and great conditions for growing the crop.

But look at the comparison from another angle. Crop insurance is vital in a disaster year, but what if it’s just a disappointing year, with yields down five percent and prices down 10 percent.

In that situation, oats lose the least money and corn the second least of all the big acreage crops. Canola and all categories of wheat lose at least twice as much as corn in that sort of a dreary but not disastrous situation.

The Farm Management team also throws open windows on two other crop influences that often aren’t incorporated in risk management thinking: seeding date and rotation.

Every farmer knows seeding dates are important, but how many have a good grasp of the way earlier and later seeding dates affect crop-to-crop profitability comparisons? Manitoba Agriculture’s analysis shows that optimal seeding dates of oats, canola, spring wheat and soybeans place oats at the top, followed by wheat, canola and soybeans.

But as spring moves on, those placements change, with wheat plunging, oats hanging on well, canola gently declining and soybeans improving before slumping.

Remember that those relative, crop-versus-crop impacts could lead to different seeding decisions in non-ideal circumstances.

Robust rotations can also have a major impact on profitability, with small changes in yield and cost having an outsized influence on profitability over the course of a few years. Incremental improvements in production can lead to huge gains in profitability, and vice versa.

Every region is different, every soil is different and every farm is different, so there’s never going to be any simple menu for production choices that works for all or even most farmers.

But this approach of cracking the profitability/risk egg makes a lot of sense. Often we’re just cracking it and letting the contents pour out into the pan.

But if you hard-boil it, you can peel off the shell and slice it nice and thin. It might not be as delicious as a fresh fried egg, but for analytical purposes, it’s probably more pleasant to look upon and savour.

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