crop production costs for 2017 - gov
TRANSCRIPT
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Crop Production Costs for 2017
St. Jean Ag Days – January 4, 2017
Roy Arnott, P.Ag.
Farm Management Specialist
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Planning Should Start with COP’s
The corner stone of your Production , Management, or Marketing plan should start with calculating Cost of Production (COP).
Knowing your COP (per bushel) is the first step in deciding what is a profitable or breakeven price.
Cost : Benefit needs to be evaluated for every change to your crop plan.
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Outline:
Grain Markets & Yields
Fertilizer Costs
COP Summary & Analysis
AgriInsurance Analysis
Fixed Costs • Land
• Equipment
MYFARM Calculator *NEW* &Other Tools
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Grain Market Outlook For 2017??
CAUTION:
Objects in the Mirror are
Closer Than They
Appear!
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New Crop Prices (Sept. Delivery)
• December 2015
• Canola – $10.25
• RS Wheat – $6.53
• Oats - $2.95
• Flax - $12.08
• Soybeans - $10.02
• W Wheat - $5.45
• Barley - $4.00
• Corn - $4.55
• Peas - $8.82
• December 2016
• Canola – $10.75
• RS Wheat – $6.25
• Oats - $3.20
• Flax - $12.50
• Soybeans - $11.50
• W Wheat - $5.00
• Barley - $3.50
• Corn – $4.25
• Peas - $7.00
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40.0
57.0
75.0
38.0
110.0
125.0
$10.75
$6.25
$5.00
$11.50
$3.20
$4.25
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Canola Wheat Winter Wheat
Soybeans Oats Corn
$ P
er
Un
it
Yie
ld P
er
Acr
eRA#12 Yield per Acre - 2017
Yield $/unit Manitoba Agriculture
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$257.87
$194.14 $181.58$197.51
$151.58
$313.74
$120.16
$122.17$124.83
$119.63
$128.17
$130.84$30.00
$30.00$30.00
$30.00
$30.00
$30.00
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
$500.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/A
cre
RA#12 Crop Production Costs ($/Acre) - 2017
A. Operating Costs B. Fixed Costs C. Labour
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$0
$20
$40
$60
$80
$100
$120
$140
$160
$/A
cre
HRS Wheat Costs (1990-2017)
Seed & treatment Fertilizer Chemicals
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$0
$50
$100
$150
$200
$/A
cre
Canola Costs (1990-2017)
Seed & treatment Fertilizer Chemicals
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Managing Risk - Fertilizer Pricing
• Timing of fertilizer purchases has been as important to overall profitability as better than average commodity marketing.
• Moving forward, we have to treat fertilizer as we treat our commodities….must be strategically purchased in our farm plan.
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Fall vs. Spring Purchase
• True or False – Fertilizer is always priced lower in the previous fall than in the spring?
• Almost True – but not always.
• Based on long term data - Roughly 15%
increase from fall to spring.
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$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Pri
ce ($
/MT)
Urea Nitrogen Fall vs. Spring Prices (2001-2017)
Previous Fall Spring Previous Fall Trend Spring Trend
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$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,6002
00
1
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Pri
ce ($
/MT)
11-52-0 Fall vs. Spring Prices (2001-2017)
Previous Fall Spring Previous Fall Trend Spring Trend
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13.3%
17.5% 17.3%16.6%
20.7%
13.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Average Increase 2001-2017
Average without 2009
Average without 2008 and 2009
% P
rice
Ch
ange
Fertilizer Spring vs. Fall Price Change
46-0-0 11-52-0
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$144,160
$21,596 $32,000
$90,564
$41,600
$8,985$10,000
$22,615
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
Savings Interest Cost Storage Cost @
$20/MT
Net Savings
10 year Total Benefit of Fall Buying Fertilizer Average MB Farm that buys - 160 MT 46-0-0 & 50 MT 11-52-0
46-0-0 (160 MT) 11-52-0 (50 MT)
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$0
$10
$20
$30
$40
$50
$60
$70
$/A
cre
Canola Seed Cost (1990-2017)
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$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/A
cre
RA#12 Crop Marginal Returns ($/Acre) - 2017
Gross Revenue Margin Over Operating Margin Over Operating & Fixed
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24.0
31.1
36.3
17.2
47.4
73.8
35.2
50.6
61.3
27.6
87.4
104.6
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
Canola Wheat Winter Wheat Soybeans Oats Corn
Yie
ld P
er
Acr
eRA#12 Breakeven Yields (per Acre) - 2017
Breakeven Yield Over Operating Costs
Breakeven Yield Over Op & Fixed Costs
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$6.45
$3.41
$2.42
$5.20
$1.38
$2.51
$9.45
$5.55
$4.09
$8.35
$2.54
$3.56
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/U
nit
RA#12 Breakeven Price ($/unit) - 2017
Operating Costs Operating & Fixed Costs
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105.3%102.9%
111.4%
125.8%
113.6% 111.9%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
Canola Wheat Winter Wheat Soybeans Oats Corn
RA#12 Breakeven Yields (per Acre) - 2017
Target or Average Yield as % of B/E Yield
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$113.60
$101.61
$138.04
$155.24
$122.13 $124.33
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/A
cre
RA#12 Crop Marginal Returns 'Stress Test' - Price Down 10% & Yield Down 5% ($/Acre) - 2017
Margin Over Operating Costs
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($6.56)
($20.55)
$13.20
$35.61
($6.04) ($6.51)
($30.00)
($20.00)
($10.00)
$0.00
$10.00
$20.00
$30.00
$40.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/A
cre
RA#12 Crop Marginal Returns 'Stress Test' - Price Down 10% & Yield Down 5% ($/Acre) - 2017
Margin Over Op & Fixed Costs
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$11.85$9.11
$6.45
$12.61
$8.40
$28.92
3.51%3.28%
2.13%
4.73%
3.40%
6.40%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
Canola Wheat Winter Wheat
Soybeans Oats Corn
$ P
er
Acr
eRA#12 - 80% Insured Value AgriInsurance Risk
Analysis - 2017
80% Insured Value Premium $/Acre Premium % of Insured Value
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$0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$40.01 $38.86
$3.66
$50.58
$32.60
$0.00
$30.00 $30.00
$30.00
$30.00
$30.00
$22.49
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
Canola Wheat Winter Wheat Soybeans Oats Corn
$/A
cre
RA#12 Costs Not Covered By 80% Insured Value AgriInsurance - 2017
Operating Costs Fixed Costs Labour
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$338.03
$277.44$302.76
$266.56$247.15
$452.09
131%
143%
167%
135%
163%
144%
83% 80%
90%
77%80%
95%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
$500.00
Canola Wheat Winter Wheat
Soybeans Oats Corn
$ P
er
Acr
eRA#12 - 80% Insured Value AgriInsurance Risk
Analysis - 2017
80% Insured Value Coverage of Operating Costs Coverage of Total Costs
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$295.77
$242.76$264.91
$233.24$216.26
$395.58
116%
127%
148%
120%
145%
129%
73% 71%
79%
68% 70%
85%
0%
20%
40%
60%
80%
100%
120%
140%
160%
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
Canola Wheat Winter Wheat
Soybeans Oats Corn
$ P
er
Acr
eRA#12 - 70% Insured Value AgriInsurance Risk
Analysis - 2017
70% Insured Value Coverage of Operating Costs Coverage of Total Costs
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$211.27
$173.40$189.22
$166.60$154.47
$282.56
85%
93%
107%
88%
106%
95%
53% 51%
57%
49% 51%
62%
0%
20%
40%
60%
80%
100%
120%
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
Canola Wheat Winter Wheat
Soybeans Oats Corn
$ P
er
Acr
eRA#12 - 50% Insured Value AgriInsurance Risk
Analysis - 2017
50% Insured Value Coverage of Operating Costs Coverage of Total Costs
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Fixed Cost Management
Operating Costs 65%
Margin Over Operating
35%
• Gross Revenue = Price x Yield Per Acre
• Margin Over Operating Cost = Gross Revenue – Operating Costs
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Fixed Cost Management
Operating Costs 65%
Land Cost 18%
Equipment Cost 12%
Owner Withdrawl
5%
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Land – Buy More, Rent More, or Neither?
Land prices in MB have risen significantly over the past number of years.
Cash rental rates have also increased.
Can we afford to farm land at these rent prices or afford to buy land at these prices?
Fast answer is…………..depends.
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Cash Rent Based on Gross Revenue
• Average range of cash rent across western Canada is 18 to 22% of gross revenue.
• 2017 = $350 to $500 per acre gross revenues.
• $63 to $110 per acre cash rent
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Cash Rent Based on Investment Return on Land Value
(Landowner check & balance)
Gross Revenue x 5 = $1,750 to $2,500/ac x 6 = $2,100 to $3,000/ac x 8 = $2,800 to $4,000/ac x10 = $3,500 to $5,000/ac
Too Cheap Reality? Insanity
Do you believe that farmland values are solely based on profitability??
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Cash Rent Based on Investment Return on Land Value (cont.)
(Landowner check & balance)
Land market value $2,100 per acre x Long Term Investment Rate (5yr) 2.5 % + Property taxes $12.00 per acre Total Cash Land Rental $64.50 per acre
Based on “Reality”
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Cash Rent Based on Investment Return on Land Value (cont.)
(Landowner check & balance)
Land market value $4,000 per acre x Long Term Investment Rate (5yr) 2.5 % + Property taxes $12.00 per acre Total Cash Land Rental $112.00 per acre
Based on “Reality”
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Cash Rent Based on Gross Revenue
• Average range of cash rent across western Canada is 18 to 22% of gross revenue.
• 2017 = $350 to $500 per acre gross revenues.
• $63 to $110 per acre cash rent
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Land Planning – Based on Gross Revenue or Margin Over Operating?
• What if we have: Flat or falling commodity prices?
Increasing interest rates?
Increasing production costs?
• How long can we make decisions on land and equipment based only on gross revenue??
• Shrinking ‘Margin Over Operating’ is going to be a real challenge down the road.
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Machinery Investment – What is Acceptable? (12 to 15% of Gross Revenue/acre)
Machinery Investment range for most farms is 50% to 200% of gross revenue ($175 to $700) per acre.
Generally, lower investment costs should be accompanied by higher
repair costs in your budget.
4WD Tractor,
$100
Combine &
Swather, $175
Drill & Planter,
$75
Sprayer, $75
Trucks, Grain Cart,
Augers, Harrow, etc., $75
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Based on the Crop COP (simple & easy to use)
Cash costs on annual basis (bushel, ac & total)
Use it for: pre season planning; growing season management; & crop marketing before and after the crop is in the bin.
NEW !!
MYFARM Crop Management Calculator
2017 Crop Year
Cost of Production / Marketing / Management
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MYFARM Crop Mgmt Calculator
• Cost of Production:
Costs per bushel, per acre, & total farm.
Gross revenue estimates.
• Marketing:
Breakeven prices & yields
Avg. price sold to date.
B/E price on remaining unsold production.
• Management:
Fertilizer, seed and grain storage required.
Op. Expense ratio.
AgriInsurance values and coverage estimates.
Avg. & B/E land and machinery payment per ac
What If? Analyzer
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What If? Printed: 2015-12-16
Crop Price (Change %, +/-) 0%
Crop Yield (Change %, +/-) 0%
Fuel Cost (Change %, +/-) 0%
Fertilizer Cost (Change %, +/-) 0%
Added Machinery Lease Annual Payment ($) $0
Added Machinery Purchase Annual Payment ($) $0
Acreage Change - Land Purchase (Additional Annual Payment) $0 0 Acres Purchased
Acreage Change - Land Sale (Reduced Annual Payment) $0 0 Acres Sold
Acreage Change - Land Rental Payments Per Acre (+/-) $0 0 Acres (+/-)
Land Rental Rate (Change $/acre, +/-) $0
Hired Labour Cost (Change +/- $) $0
Owner Withdrawl (Change +/- $) $0
Canadian Dollar Exchange Rate - USD (Change $, +/-) $0.00 (0 cent change from current value, affects fertilizer cost and grain market values)
Reset Initial
Default Values
MYFARM – What If? Analyzer
Calculates the impact of the ‘what if’ changes on costs, revenues and marginal returns.
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Reseeding Decision Tool - Canola*** Enter/select changes to items in BLUE only ***
Farm Information:
MASC - Risk Area RA #2
MASC - Soil Zone E
MASC - Individual Productivity Index (IPI) 1.00
MASC AgriInsurance Coverage level 80%
Calculated MASC Probable Yield (bu/ac) 34.6
Original Crop Canola
Reseeded Crop Canola
Estimated Market Price ($/bu) $10.89
Damaged Canola Plant Stand Evaluation: Plants/m2
Field Sample Plant Counts/m2
15
* enter up to (5) plant counts in the boxes to the right
* leave entries blank if less than (5) counts were taken
* 10.8 plants/m 2 = approx. 1 plant/ft 2
Average Plant Count/m2 15.0
Plant Count - Yield Factor 0.75
Estimated Yield (bu/ac) 26.0
Estimated Gross Revenue ($/ac) $282.60
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Reseeding Decision Tool - Canola
Canola Reseeding Evaluation:
Reseed Date 1st week June
Date - Yield Factor 0.8953
Estimated Reseed Yield (bu/ac) 31.0
Estimated AgriInsurance Reseeding Indemnity ($/ac) $75.36
Estimated Seed Company Reimbursement ($/ac) $0.00
Reseed Seed Costs ($/ac) $60.00
Reseed Machinery Costs ($/ac) $15.00
Estimated Gross Revenue ($/ac) $337.95
(net reseeding indemnity, reimbursements & expenses)
Estimated Benefit (Cost) of Reseed Decision ($/ac) $55.35
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*** Enter/select changes to items in BLUE only ***
Risk Factor Possible Answers Risk Points
One to two years 10
Low (1% to 10%) 5
Normal 5
Less than 10 mm (0.4") 0
Variable 10
Low Numbers 10
Estimated Canola Yield 40 bu/ac
Estimated Price $10.75 $/bu
Estimated Fungicide Cost $21.88 $/acre
Estimated Application Cost $8.00 $/acre
Number of Years Since last
Canola Crop
Disease Incidence in Last Host
Crop Density
Rain in the Last Two Weeks
Weather Forecast
Regional Risk for Apothecia
Development
Sclerotinia Treatment Decision Tool
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Sclerotinia Treatment Decision Tool
Low High
Potential Infection Range 15% 25%
Potential $ Return/acre $2.37 $23.87
Potential Return on Investment 8% 80%
Profit Probability
Spray Decision -
Sclerotinia Treatment Profitability Analysis
Likely Beneficial to Spray
100%
Created and maintained by Manitoba Agriculture Farm Management December, 2017
Darren Bond Roy Arnott
Farm Management Specialist Farm Management Specialist
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Farm Software & Worksheets (Crops)
• http://www.gov.mb.ca/agriculture/business-and-economics/financial-management/farm-software-and-worksheets.html
• Farm Machinery Custom & Rental Rate Guide Calculator - 2016/17
• Crop Land Purchase Values – 2016
• Crop Land Rental Rate - 2016
• Crop Share Lease – 2017
• FertPlan - 2017
• Grain Bin and Farm Building Rental Cost Planner
• Grain Drying Cost Calculator
• Sclerotinia Treatment Decision Tool (Canola and Sunflower versions)
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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 me:
Roy Arnott, P.Ag. [email protected] Killarney GO Office - 204.523.6424