BRANDON, Man. – Manitoba farmers may start finding the hog feeder barn in their own backyard a more attractive home for wheat and barley than the export market.
Normand Mabon, a farm management specialist with Manitoba Agriculture crunched numbers using a computer model and found the feeder barn theoretically would have outperformed the export market almost every year out of the past 11.
However, because programs such as the Gross Revenue Insurance Plan boosted revenue for exported production but not grain fed at home, reality was different than theory, he told farmers at Manitoba Ag Days held here last month.
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“If you were a wheat farmer the past 11 years, you probably would have done no better than break even on the hogs because we had all these programs,” Mabon said in an interview.
Now, the price support programs are gone. And Manitoba farmers have also lost transportation subsidies that made it economical for them to grow wheat and barley for export markets.
“Before the pooling and the freight rate changes, it didn’t really encourage going into hogs and feeding wheat and barley,” Mabon said.
“Now that it’s changed, unless we’ve got other subsidies coming back for the grain guy, it is really aiming in that direction.”
Mabon explained average deductions this year for Manitoba farmers equal $48.36 a tonne for wheat and $58.96 for feed barley.
Transportation costs up
“If you look at the change in pooling and the change in the Crow, we are going to look at 70-80 cents a bushel more (for transportation),” he said.
“So if we were already about 50 cents ahead on feeding and you add another 70 cents….
“The scenario is that if you are exporting grain, everybody is passing on the costs of an inefficient system, whereas in hogs, your costs may remain stable or go down.”
He said he was not surprised that his model shows feeding barley to hogs was often a better option than exporting it, but didn’t expect the results he got for feeding wheat.
He used prices for No. 2 Canadian Western Red Spring in the model because farmers don’t generally try to produce feed wheat.
“If we ever go to the volume of hogs that we’re talking about, we’re not going to be feeding just feed wheat,” Mabon said, referring to the provincial government’s goal of four million hogs per year by 2000.
Mabon cautioned farmers to look at the numbers for their own operations before investing in a feeder barn.
And he said it’s worth it only if operations are efficient.
Investing in large, efficient barns can be risky. But Mabon told farmers they can find ways to spread the risk. He cited an example from Minnesota where a young farmer took out a mortgage on the barn and runs it for a fee for service. This way, the farmer can make the bank payments and put food on the table.
A group of more established farmers pays the fees, supplies the grain and absorbs the risk of hog or feed prices rising and falling.
When a market crashes, no one loses their farm.
“We can weather most of the market that way,” Mabon said.
