Step Up Your Grain Game! Crop Economics for 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Roy Arnott, P.Ag . & Darren Bond , P.Ag. Farm Management Specialists
What we already know… • Doing your cost of production for your own farm is the starting point for profitability. • Determining your cost per bushel sold 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)
CWRS ranged from $5.60/bu - $8.65/bu; Average - $6.54/bu Source: Manitoba Agriculture
Canola ranged from $9.42/bu - $11.82/bu; Average - $11.00/bu Source: Manitoba Agriculture
Soybean ranged from $9.83/bu - $11.72/bu; Average - $10.90/bu Source: Manitoba Agriculture
Source: Manitoba Agriculture
Source: MASC & Manitoba Agriculture
2018? Good, Bad or Ugly? CAUTION: CAUTION: Objects in the Mirror are Objects in the Mirror are Closer Than They Closer Than They Appear! Appear!
Price vs Cost ‐ Fertilizer Pricing • Price – How much money do I need to hand you to buy my fertilizer. • Cost – What did I have to give up to get this price. • Expense vs. Investment: • Investment provides a return over what you’ve paid, an expense will not. • Questions : • Is it really cheaper for you to buy in the fall (cost of money, bins etc.) than in the spring? • Is it really cheaper to buy from the ‘new’ dealer 20 miles down the road for $5 per tonne less?
$323.25 per acre 80% insurance coverage per acre / 40 bu per acre = $8.08 covered risk per bushel
Breakeven price per bushel $10.20 B/E price per bushel minus $8.08 covered risk per bushel = exposed risk aka. = “AFW” $323.25 per acre 80% insurance coverage per acre / 40 bu per acre = $8.08 covered risk per bushel
Market price per bushel $11.25 Mkt price per bushel minus $10.20 B/E per bushel = $1.05 Reward Breakeven price per bushel $10.20 B/E price per bushel minus $8.08 covered risk per bushel = exposed risk aka. = “AFW” $323.25 per acre 80% insurance coverage per acre / 40 bu per acre = $8.08 covered risk per bushel
Rotation Economic Analysis Data Source – MASC Harvest Production Reports (2010-2015) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Rotation Wheat ‐ Wheat ‐ Wheat ‐ Total Example Rotation #1 Hard Red Hard Red Hard Red Marginal Spring Canola Spring Canola Spring Canola Return Rotation Yield Premium 100% 102% 101% 102% 101% 102% - Net Profit (Loss) $12.01 $50.99 $15.77 $50.99 $15.77 $50.99 $197
Rotation Economic Analysis Data Source – MASC Harvest Production Reports (2010-2015) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Rotation Wheat ‐ Wheat ‐ Wheat ‐ Total Example Rotation #1 Hard Red Hard Red Hard Red Marginal Spring Canola Spring Canola Spring Canola Return Rotation Yield Premium 100% 102% 101% 102% 101% 102% - Net Profit (Loss) $12.01 $50.99 $15.77 $50.99 $15.77 $50.99 $197 Rotation Wheat ‐ Total Example Rotation #2 Hard Red Marginal Corn Canola Spring Soybeans Corn Canola Return Rotation Yield Premium 100% 112% 101% 101% 103% 112% - Net Profit (Loss) $42.13 $95.99 $15.77 $53.91 $59.05 $95.99 $363
Rotation Economic Analysis Data Source – MASC Harvest Production Reports (2010-2015) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Rotation Wheat ‐ Wheat ‐ Wheat ‐ Total Example Rotation #1 Hard Red Hard Red Hard Red Marginal Spring Canola Spring Canola Spring Canola Return Rotation Yield Premium 100% 102% 101% 102% 101% 102% - Net Profit (Loss) $12.01 $50.99 $15.77 $50.99 $15.77 $50.99 $197 Rotation Wheat ‐ Total Example Rotation #2 Hard Red Marginal Corn Canola Spring Soybeans Corn Canola Return Rotation Yield Premium 100% 112% 101% 101% 103% 112% - Net Profit (Loss) $42.13 $95.99 $15.77 $53.91 $59.05 $95.99 $363 Rotation Wheat ‐ Total Example Rotation #3 Hard Red Sunflower Marginal Spring Canola Oats Soybeans Corn Confection Return Rotation Yield Premium 100% 102% 101% 100% 103% 119% - Net Profit (Loss) $12.01 $50.99 $15.67 $49.71 $59.05 $119.24 $307
Rotation Economic Analysis Data Source – MASC Harvest Production Reports (2010-2015) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Rotation Wheat ‐ Wheat ‐ Wheat ‐ Total Example Rotation #1 Hard Red Hard Red Hard Red Marginal Spring Canola Spring Canola Spring Canola Return Rotation Yield Premium 100% 102% 101% 102% 101% 102% - Net Profit (Loss) $12.01 $50.99 $15.77 $50.99 $15.77 $50.99 $197 Rotation Wheat ‐ Total Example Rotation #2 Hard Red Marginal Corn Canola Spring Soybeans Corn Canola Return Rotation Yield Premium 100% 112% 101% 101% 103% 112% - Net Profit (Loss) $42.13 $95.99 $15.77 $53.91 $59.05 $95.99 $363 Rotation Wheat ‐ Total Example Rotation #3 Hard Red Sunflower Marginal Spring Canola Oats Soybeans Corn Confection Return Rotation Yield Premium 100% 102% 101% 100% 103% 119% - Net Profit (Loss) $12.01 $50.99 $15.67 $49.71 $59.05 $119.24 $307 Rotation Wheat ‐ Wheat ‐ Total Example Rotation #4 Hard Red Hard Red Marginal Soybeans Spring Canola Soybeans Spring Canola Return Rotation Yield Premium 100% 108% 102% 100% 108% 102% - Net Profit (Loss) $49.71 $42.15 $50.99 $49.71 $42.15 $50.99 $286
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 $2,800 per acre x Long Term Investment Rate (5yr) 2.75 % + Property taxes $15.00 per acre Total Cash Land Rental $92.00 per acre
Analysis specific to your own farm
Farm Software & Worksheets (Crops) • Farm Machinery Custom & Rental • http://www.gov.mb.ca/ Rate Guide Calculator ‐ 2016/17 agriculture/business ‐ • Crop Land Purchase Values – 2017 and ‐ • Crop Land Rental Rate ‐ 2017 economics/financial ‐ • Crop Share Lease – 2017 management/farm ‐ • FertPlan ‐ 2018 software ‐ and ‐ • Grain Bin and Farm Building Rental worksheets.html Cost Planner • Grain Drying Cost Calculator • Sclerotinia Treatment Decision Tool (Canola and Sunflower versions)
Obviously you’re telling me… • Those who produce the most, profit the most. • The more accurate your own numbers, the greater your chances are for profitability. • It’s vital to know the risks and rewards of the different crops. • Before seeding, compare crops for profit probability . • After seeding, update your actual costs to keep on top of profitability
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: Roy Arnott, P.Ag. Darren Bond, P.Ag. roy.arnott@gov.mb.ca darren.bond@gov.mb.ca Killarney Ag Office Teulon Ag Office 204.523.6424 204.861.2581
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