Crop budget numbers can be misleading

Beware the numbers used when comparing cropping options.

Various government and private players get into the game, and this is the time of year when those estimates garner the most attention. Unfortunately, questionable assumptions skew the results.

The Saskatchewan agriculture ministry recently released its Crop Planning Guide for 2018.

A lot of thought and work goes into the document, but some of the assumptions are questionable.

In this year’s edition, assumed yields have taken a huge jump. Estimated crop yields are 20 percent above the Saskatchewan Crop Insurance five year averages for the soil zone. That same approach has long been used, but the rolling five-year average must have dropped off a low yielding year and added a high yielding year.

In the dark brown soil zone, the estimated yield for spring wheat is 51.1 bushels an acre compared to 47.7 last year. Durum increases to 60.3 from 53.4. Feed barley goes to 72.9 from 65.2 and canola is now 45.2 compared to 41.6 last year.

Herbicide costs used in the guide “reflect the practice of herbicide layering for prevention or management of herbicide-resistant weeds.” While herbicide layering is a good management practice, some crops have many more modes of action than others, and this affects the relative profitability.

The herbicide cost assumed for red lentils stands out at $86.21 an acre in the dark brown soil zone. On top of that is another $58.27 for insecticides/fungicides. The standard caveat is that producers need to plug in their own numbers, but if many of the assumptions are wonky, usefulness is reduced.

There are also numbers that appear to be in error. For instance, the yield assumption used for large kabuli chickpeas is 2,621 pounds an acre. According to another publication from Saskatchewan Agriculture — the 2017 Specialty Crop Report — the average yield of chickpeas in the province over the past five years is 1,641 lb. per acre.

Adding the 20 percent bump to the average brings it up to 1,969 lb., a far cry from 2,621.

On top of this, the price estimate of 60 cents a lb. is overly optimistic. While 60 cents may be in the ballpark for current bids, new crop contracts for large kabuli chickpeas have been in the 40 to 45 cent a lb. range, and that would seem to be a more reasonable assumption for budgeting purposes.

On the expense side, a fungicide cost of only $49.91 an acre is assumed. Most producers growing chickpeas budget for a lot more fungicide than that.

The cumulative result of the questionable assumptions is a return over total expenses of $1,064 an acre. No other crop in the book comes close to this level of return.

Using proper assumptions, large kabuli chickpeas still pencil out as the most potentially profitable option for producers in the brown soil zone, but this high risk crop isn’t the windfall portrayed by the Sask Ag publication.

When presented with anyone’s crop budgeting numbers, it’s always important to scrutinize the assumptions being used.

More information on production margin estimates can be found in this week’s Markets section, starting on page 6.

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