Harder for farmers to turn profit as costs climb

Opinion

Hey there, time traveller!
This article was published 06/01/2024 (631 days ago), so information in it may no longer be current.

The 2024 cost-of-production estimates newly released by Manitoba Agriculture show a negative return on investment for 10 out of the 16 commonly grown crops in the province.

Despite historically high market prices, the staggering cost of sowing a crop in 2024 will make it harder than ever for farmers to turn a profit.

These budgets offer a crop-by-crop benchmark to use as they calculate the cost, benefits, and risks of their production plans.

The annual exercise also reminds them to include some easily overlooked costs, such as their own labour and living, calculated this year at $27 per acre. After all, a producer would be working and eating whether they are farming or not.

But these costs are nonetheless important to the farm business equation. If the farm isn’t profitable with those costs included, the farmer isn’t really in business. He or she is paying to play.

Those of us in the farm media pounce on these annual budgets when they are released around this time every year, as they offer a glimpse of what story this year’s crop will tell. Last year’s numbers indicated a high potential for profitability on virtually all crops farmers might grow.

This year’s budgets underscore recent Statistics Canada data outlining how much farming costs have risen and the impact on farm incomes.

Data released in December shows that between 2020 and 2022, the cost of putting in a crop rose nearly 33 per cent. Fertilizer costs were up 47.5 per cent, pesticide costs rose by 22 per cent, machinery expenses by 30 per cent and the cost of feeding livestock by 31 per cent.

So even though farm cash receipts rebounded in 2022 after the 2021 drought, those increases were overshadowed by the rise in expenses to result in a 5.9 per cent drop in realized net income. 2023 farm incomes may also be lower as planting costs were higher than ever, while market prices softened and yields were reduced due to another drought.

Farmers can’t control the weather or markets, but they do have some control over their costs.

Controlling costs without compromising yields will be paramount as they make this year’s plans.

That points to a second theme emerging from the Manitoba Agriculture budgets.

The three crops showing the best potential for positive ROIs in 2024 are dry beans (pinto, white and black beans) with soybeans ranking No. 4.

Soybeans are already the third largest crop grown in the province, occupying 1.71 million acres or about 17 per cent of the total seeded acres. While still a distant third behind wheat and canola acreage, the crop stands to gain more ground in this environment.

Dry bean acreage in Manitoba falls into the “other” category of specialty crops, all of which combined make up only seven per cent of the total acreage. Acreages of these crops might increase, but there is unlikely to be a wholesale switch. These crops prefer certain soil conditions and can be fussier to manage.

What makes these four crops interesting from a cost-control and risk-reduction perspective, however, is that, as legumes, they produce their own nitrogen and often leave some behind for the crops that follow.

For example, the cost to fertilize canola is estimated at $142 per acre, which is one-third of the crop’s total operating costs. The cost of fertilizer for soybeans is estimated at $42 per acre, only about 13 per cent total operating costs. The fertilizer costs for the other beans are midway between.

Plus, including dry beans or soybeans in the crop rotation provides multiple spin-off benefits. Those include higher yields and higher protein levels in subsequent crops, better fertilizer use efficiency, reduced weed and disease pressures due to greater diversity in the system, and improved soil health.

On top of all that, the market demand for plant-based proteins continues to grow.

There are multiple factors for farmers to consider before planting, especially if changing their mix means plunging into a crop they’ve never grown before. That’s risky too.

But this could be the year more farmers consider embracing the bean scene.

Laura Rance is executive editor, production content lead for Glacier FarmMedia. She can be reached at lrance@farmmedia.com