Reviewing cost and benefits production helps in good and difficult times

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This article was published 01/03/2025 (391 days ago), so information in it may no longer be current.

Prairie farmers are facing some black economics as they watch the March sun pull their fields out from beneath winter’s cover.

At this time of year, even a small patch of exposed earth expands exponentially, even on the coldest days. The snow is no match for the sun’s effect on black soil.

Likewise, management decisions that are not based on a solid understanding of their costs will rapidly expose the farm’s vulnerabilities in these uncertain times, a provincial farm management specialist cautioned in a webinar this week.

“This volatility that we’re seeing, volatility in weather, volatility in markets, volatility in geopolitics … it makes management much more difficult, but really it’s much more important,” Darren Bond said. “Managing the high-cost line items effectively, that’s going to be everything.”

Not only are farmers facing unprecedented unknowns, largely due to the Trump effect, but the latest Statistics Canada data on farm cash receipts show they have less to work with to help them navigate and pivot.

Canadian farmers saw a 2.1 per cent decline in farm cash receipts in 2024. Farmers in Manitoba and Saskatchewan took the biggest hits with declines of 4.4 per cent and 6.2 per cent.

Saskatchewan’s decline alone, a drop of $1.4 billion year over year, accounted for two-thirds of the national decline. Crop receipts nationally were down 7.1 per cent, led by declines in wheat, canola and soybeans. One bright spot was livestock receipts, which were up 6.8 per cent.

The 2025 crop production budgets put together by provincial extension staff, based on average yields, costs and price projections, show $30 to $50 per acre losses for virtually all the crops Manitoba farmers grow.

Bond noted farmers who have more equity are likely to fare better in this scenario than young or beginning farmers carrying higher debt loads.

He said the two core strategies farmers have for getting their returns above the breakeven point in a year like this are maintaining their yields and controlling their costs — which is more complicated than it sounds.

Consider fertilizer, for example, one of their biggest expenses. It’s tempting to apply a little less to save a few dollars. But if that comes at the expense of lower yields, the farmer is further behind financially.

However, if they focus on getting the maximum efficiency out of their fertilizer applications, they may be able to accomplish higher yields plus a lower cost per bushel of production.

“This year, I believe that we should be looking at soil testing everything. It’s way too expensive to either over apply or under apply,” Bond said.

Applying more than the crop needs, which what some farmers consider insurance, can hurt yields by causing cereal crops to lodge (tip over). It also risks losing that valuable and expensive resource to the environment, which is why fertilizer is in the crosshairs of the climate change debate.

Bond’s focus is on keeping the farm on the black side of the ledger. From that perspective, it simply makes sense to incorporate the 4R fertilizer mantra of right source, right rate, right time and right place.

There’s an extra cost for equipment that can place fertilizer close to the seed, or for slow-release fertilizer that’s less likely to escape to the environment. But either approach can vastly improve the availability of those nutrients to crops, which makes them an investment in the farm’s long-term viability.

Reviewing the cost and benefits of every production decision — from crop rotations to crop protection to grain storage costs to their selling strategy — will not only help producers get through difficult times but position the farm to be more competitive in good times as well.

“Spending money on things that provide a return is very important. Knowing your cost per bushel sold … reveals the profitable investments in the farm,” Bond said.

Armed with their cost of production, farmers can watch for opportunities to lock in prices above their breakeven, which reduces their exposure if prices fall as many expect. Sure, prices might go higher.

On the other hand, “no one’s lost the farm selling at a profit,” he said.

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