Calculating Cost of Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ben Hamm , P.Ag. Farm Management Specialist
What we already know… • Doing your cost of production for your own farm is the starting point for profitability. • Determining your cost per lb DM will allow you to build an effective marketing plan. • Each year is different! Profitability and risk is dependent on the relationship between yield/price/costs with your financial situation. (Plan for Prosperity)
Advantages of Corn Silage • Tonnes!!! Excellent energy source • Less land needed • Silage can be harvested in almost any weather conditions • Higher output of nutrients per acre than grain • Can salvage crops damaged by hail, frost and high weed competition • Large quantities of uniform quality feed can be stored • Handling is mechanized from the field to feed • Control of intake and ability to get mineral into the cows • Free summer
Disadvantages of Corn Silage • Requires more labour and equipment • Has an odour that may be offensive if stored near populated areas • Capital investment required for storage facilities, forage harvester • Has limited market potential. Long distance transportation is inefficient because silage is heavy and deteriorates with exposure to air.
Advantages of Baled Silage • Use the same equipment as dry hay • Requires less labour and energy for harvesting compared to chopped silage system • Requires 1/2 to 1/3 the drying time compared to dry hay – Only 13 to 20 hours vs 40 or more for dry hay • Permits harvest at optimum stage despite weather • Opportunity to utilize crops that are hard to dry down – high yielding alfalfa • Less leaf loss – 5% compared to 20 to 30% – Increased feed value • Less feed loss at feeding due to increase in palatability
Disadvantages Increased cost due to plastic and wrapper cost • • Harder on baler – heavier bales • Hard on loaders and front axels of loader tractors – increased repair bills?? • Bales can spoil if plastic punctured by rodents, wildlife, birds, wind, and hail Low moisture forage will not ferment- less than 40% increase risk • of mold • High moisture forage will producer sour silage- greater than 70% • Freezing problems • Have to be used up within 3 days if taken out of plastic • Harder to sell- heavy bales, have to be used up immediately Shorter storage life compared to chopped silage • • Used plastic to deal with
Fertilizer Cost
Protein Cost Comparison
TDN Cost Comparison
Dry Matter Cost Comparison
Risk Analysis
Cost of Protein
Cost of TDN
Most importantly balance the ration!
Cash Rent Based on Gross Revenue • Average range of cash rent across western Canada is 18 to 22% of gross revenue. • But how much is too much???
Breakeven Land Rent Calculation Gross Revenue - Operating Cost - Equipment Cost - Labour Cost / Owner withdrawal - Storage Cost = Cash for Land Rental
Land Rent Based on Investment Return on Land Value (Landowner check & balance) Land market value $1925 per acre x Long Term Investment Rate (5yr) 2.75 % + Property taxes $10.00 per acre Total Cash Land Rental $58.00 per acre
Farm Software & Worksheets (Forage) • Farm Machinery Custom & Rental • http://www.gov.mb.ca/ Rate Guide Calculator - 2018/19 agriculture/business- • Standing Hay Cost Calculator and- • Feedplan economics/financial- • Hay storage cost planner management/farm- • Hay Production Cost 2018 software-and- • Silage Production Cost 2018 worksheets.html • Pasture Production Cost • Cropland Rental Rate Planner
Conclusion • The more accurate your own numbers, the greater your chances are for profitability. • It’s vital to know the risks and rewards of your forage crop. • Before seeding, compare forage mixtures for profit probability . • After seeding, update your actual costs to keep on top of profitability • Business Risk Management Programs – Excellent value in forage insurance programs
Questions ? For more information Visit our website: www.manitoba.ca/agriculture Follow us on Twitter: @MBGovAg View our videos on YouTube: www.youtube.com/ManitobaAgriculture Contact us: Ben Hamm, P.Ag. Roy Arnott, P.Ag. benjamin.hamm@gov.mb.ca roy.Arnott@gov.mb.ca Vita Ag Office Killarney Ag Office 204.392.9350 204.523.6424
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