Looking for Profit? Choose Crops That Are Proven Winners

By Elmer Heinrichs

Manitoba Agriculture data suggested that many crops will be profitable in 2023, assuming average yields.

However there is a potential scenario where crop prices weaken and input costs remain high, said a farm management specialist with the department.

No one can predict the future, but producers should think about softer grain prices and persistently high prices for crop inputs, said Darren Bond.

“If that happens, what’s [the] plan going to be?” asked Bond, who spoke at a Manitoba agriculture meeting held in recently.

Every year, Manitoba Agriculture publishes a cost of production guide, one for crops and another for livestock. In sharing from the 2023 crop production report,

Bond said the data shows that the financial risk of crop production has changed dramatically compared to a few years ago.

From about 2016-19, the costs of fertilizer, pesticides, fuel and other crop inputs were fairly stable. They were increasing, but at a steady rate. Then input costs went through the roof.

“If we look at fertilizer per acre on canola in 2021, $88. [Then] up to $184 in 2023,” Bond said. “Pesticide has also doubled, or just over doubled. And fuel has also doubled.”

In 2018, the total cost (operating and fixed costs) of growing crops was around $300 to $500 per acre. Now, in 2023, its $500 to $800 per acre he noted.

Crop prices are still strong and there’s an opportunity for growers to make money in 2023. But the math isn’t the same, Bond said.

“We had those $40 to $50 profits per acre and $400 production costs,” he said.

With average yields, similar profits can be had in 2023, but production costs are now about $700 per acre.

“In the past, we’ve only looked at profitability when we made our… cropping choices. Now we need to factor in this risk,” Bond said.

One way to manage the risk is a forward contract, to lock in a price for a portion of the farm’s production. But there are other ways, such as choosing crops with stable yields.

As an example, the cost of production guide said potential profits from soybeans and canola are similar, assuming average yields: with a yield of 44 bushels per acre and a price of $17 per bu., the esti- mated profitability of canola is $44.59 per acre. Assuming a yield of 36 bu. per acre and a price of $16 per bu., the profitability of soybeans is $35.33 per acre.

But, explained Bond, that doesn’t tell the whole story. In certain regions of Manitoba, soybean yields can be highly variable, maybe 25 bu. one year and 45 bu. the next. In a year with extremely high input costs, that sort of instability is too risky.

However, “Some farmers do produce consistent soybean yields,” Bond said.

“Farms that have decent soybean yields… will definitely find themselves in a [situation] where soybeans have a better risk-reward relationship.”

Given the financial risks, many producers may opt to grow crops that are proven winners on their farms.