. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Crop Production Costs For 2017 (& Other Stuff)

BASA AGM, Cartwright – December 12, 2016

Roy Arnott, P.Ag. Farm Management Specialist

204-523-6424 roy.arnott@gov.mb.ca

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.

Outline: Grain Markets & Yields Fertilizer Costs COP Summary & Analysis AgriInsurance Analysis Fixed Costs

• Land • Equipment

MYFARM Calculator *NEW* &Other Tools

Grain Market Outlook For 2017??

CAUTION: Objects in the Mirror are

Closer Than They Appear!

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

42.0

55.0

36.0

80.0

100.0

120.0

$10.75

$6.25

$11.50

$3.50$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 Soybeans Barley Oats Corn

$ Pe

r Uni

t

Yiel

d Pe

r Acr

e

RA#5 Yield per Acre - 2017

Yield $/unit Manitoba Agriculture

$249.17

$191.00 $190.29 $174.71$149.25

$310.64

$120.16

$122.17 $119.63$125.50

$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 Soybeans Barley Oats Corn

$/Ac

reRA#5 Crop Production Costs ($/Acre) - 2017

A. Operating Costs B. Fixed Costs C. Labour

$0$20$40$60$80

$100$120$140$160

$/Ac

re

HRS Wheat Costs (1990-2017)

Seed & treatment Fertilizer Chemicals

$0

$50

$100

$150

$200

$/Ac

re

Canola Costs (1990-2017)

Seed & treatment Fertilizer Chemicals

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.

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.

$0

$100

$200

$300

$400

$500

$600

$700

$800

$90020

01

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Pric

e ($

/MT)

Urea Nitrogen Fall vs. Spring Prices (2001-2017)

Previous Fall Spring Previous Fall Trend Spring Trend

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,60020

01

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Pric

e ($

/MT)

11-52-0 Fall vs. Spring Prices (2001-2017)

Previous Fall Spring Previous Fall Trend Spring Trend

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

Chan

ge

Fertilizer Spring vs. Fall Price Change

46-0-0 11-52-0

$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)

$0

$10

$20

$30

$40

$50

$60

$70

$/Ac

re

Canola Seed Cost (1990-2017)

-$100.00

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

Canola Wheat Soybeans Barley Oats Corn

$/Ac

reRA#5 Crop Marginal Returns ($/Acre) - 2017

Gross Revenue Margin Over Operating Margin Over Operating & Fixed

23.2

30.6

16.5

49.9 46.6

73.1

34.4

50.1

26.9

85.8 86.7

103.9

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 Soybeans Barley Oats Corn

Yiel

d Pe

r Acr

eRA#5 Breakeven Yields (per Acre) - 2017

Breakeven Yield Over Operating Costs

Breakeven Yield Over Op & Fixed Costs

$5.87

$3.43

$5.21

$2.15

$1.47

$2.54

$8.74

$5.65

$8.53

$3.72

$2.75

$3.63

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Canola Wheat Soybeans Barley Oats Corn

$/Un

it

RA#5 Breakeven Price ($/unit) - 2017

Operating Costs Operating & Fixed Costs

113.2%

100.2%

121.6%

84.8%

104.1%108.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

Canola Wheat Soybeans Barley Oats Corn

RA#5 Breakeven Yields (per Acre) - 2017

Target or Average Yield as % of B/E Yield

$115.92

$101.61

$161.71

$63.02

$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 Soybeans Barley Oats Corn

$/Ac

reRA#5 Crop Marginal Returns 'Stress Test' - Price

Down 10% & Yield Down 5% ($/Acre) - 2017

Margin Over Operating Costs

($4.24)

($20.55)

$42.08

($62.49)

($6.04) ($6.51)

($80.00)

($60.00)

($40.00)

($20.00)

$0.00

$20.00

$40.00

$60.00

Canola Wheat Soybeans Barley Oats Corn

$/Ac

reRA#5 Crop Marginal Returns 'Stress Test' - Price

Down 10% & Yield Down 5% ($/Acre) - 2017

Margin Over Op & Fixed Costs

$5.61 $6.04

$11.88

$7.82$6.13

$25.88

1.64%

2.41%

4.98%

3.39%

2.77%

6.79%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Canola Wheat Soybeans Barley Oats Corn

$ Pe

r Acr

eRA#5 - 80% Insured Value AgriInsurance Risk

Analysis - 2017

80% Insured Value Premium $/Acre Premium % of Insured Value

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00

$26.95

$62.76$71.58 $69.69

$55.80 $60.49

$30.00

$30.00

$30.00 $30.00

$30.00$30.00

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Canola Wheat Soybeans Barley Oats Corn

$/Ac

reRA#5 Costs Not Covered By 80% Insured Value

AgriInsurance - 2017

Operating Costs Fixed Costs Labour

$342.38

$250.40 $238.34 $230.52 $221.62

$380.99

137%131%

125%132%

148%

123%

86%

73% 70% 70% 72%

81%

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 Soybeans Barley Oats Corn

$ Pe

r Acr

e

RA#5 - 80% Insured Value AgriInsurance Risk Analysis - 2017

80% Insured Value Coverage of Operating Costs Coverage of Total Costs

$3.23 $3.70

$9.06

$5.13 $4.23

$19.85

1.08%

1.69%

4.34%

2.54%

2.18%

5.95%

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

Canola Wheat Soybeans Barley Oats Corn

$ Pe

r Acr

eRA#5 - 70% Insured Value AgriInsurance Risk

Analysis - 2017

70% Insured Value Premium $/Acre Premium % of Insured Value

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00

$67.32

$91.67$98.48 $95.76

$81.56

$101.94

$30.00

$30.00$30.00 $30.00

$30.00

$30.00

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

Canola Wheat Soybeans Barley Oats Corn

$/Ac

reRA#5 Costs Not Covered By 70% Insured Value

AgriInsurance - 2017

Operating Costs Fixed Costs Labour

$299.58

$219.10 $208.54 $201.70 $193.91

$333.37

121%116%

111%117%

132%

109%

75%

64% 62% 62% 63%

72%

0%

20%

40%

60%

80%

100%

120%

140%

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

Canola Wheat Soybeans Barley Oats Corn

$ Pe

r Acr

eRA#5 - 70% Insured Value AgriInsurance Risk

Analysis - 2017

70% Insured Value Coverage of Operating Costs Coverage of Total Costs

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

Fixed Cost Management

Operating Costs 65%

Land Cost 18%

Equipment Cost 12%

Owner Withdrawl

5%

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.

Cash Rent Based on Gross Revenue

• Average range of cash rent across western Canada is 18 to 22% of gross revenue.

• 2017 = $350 to $450 per acre gross revenues.

• $63 to $100 per acre cash rent

Cash Rent Based on Investment Return on Land Value

(Landowner check & balance)

Gross Revenue x 5 = $1,750 to $2,250/ac x 6 = $2,100 to $2,700/ac x 8 = $2,800 to $3,600/ac x10 = $3,500 to $4,500/ac

Too Cheap Reality? Insanity

Do you believe that farmland values are solely based on profitability??

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”

Cash Rent Based on Investment Return on Land Value (cont.)

(Landowner check & balance)

Land market value $3,600 per acre x Long Term Investment Rate (5yr) 2.5 % + Property taxes $12.00 per acre Total Cash Land Rental $102.00 per acre

Based on “Reality”

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.

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

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 YearCost of Production / Marketing / Management

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

What If? Printed: 2

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 ($) $0Acreage Change - Land Purchase (Additional Annual Payment) $0 0 Acres Purchased

Acreage Change - Land Sale (Reduced Annual Payment) $0 0 Acres SoldAcreage Change - Land Rental Payments Per Acre (+/-) $0 0 Acres (+/-)

Land Rental Rate (Change $/acre, +/-) $0Hired Labour Cost (Change +/- $) $0

Owner Withdrawl (Change +/- $) $0Canadian Dollar Exchange Rate - USD (Change $, +/-) $0.00 (0 cent change from current value, affects fertilizer cost and grain mark

Rese Defau

MYFARM – What If? Analyzer

Calculates the impact of the ‘what if’ changes on costs, revenues and marginal returns.

Reseeding Decision Tool - Canola*** Enter/select changes to items in BLUE only ***

Farm Information:MASC - Risk Area RA #2MASC - Soil Zone EMASC - Individual Productivity Index (IPI) 1.00MASC AgriInsurance Coverage level 80%Calculated MASC Probable Yield (bu/ac) 34.6Original Crop CanolaReseeded Crop CanolaEstimated 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 15.0Plant Count - Yield Factor 0.75Estimated Yield (bu/ac) 26.0Estimated Gross Revenue ($/ac) $282.60

Reseeding Decision Tool - Canola

Canola Reseeding Evaluation: Reseed Date 1st week JuneDate - Yield Factor 0.8953Estimated Reseed Yield (bu/ac) 31.0Estimated AgriInsurance Reseeding Indemnity ($/ac) $75.36Estimated Seed Company Reimbursement ($/ac) $0.00Reseed Seed Costs ($/ac) $60.00Reseed Machinery Costs ($/ac) $15.00Estimated Gross Revenue ($/ac) $337.95 (net reseeding indemnity, reimbursements & expenses)

Estimated Benefit (Cost) of Reseed Decision ($/ac) $55.35

*** 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/acEstimated Price $10.75 $/bu

Estimated Fungicide Cost $21.88 $/acreEstimated 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

Sclerotinia Treatment Decision Tool

Low HighPotential Infection Range 15% 25%

Potential $ Return/acre $2.37 $23.87Potential 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, 2017Darren Bond Roy ArnottFarm Management Specialist Farm Management Specialist

Livestock Price Slide Calculator Printed: 2016-11-23

*** Enter changes to values in BLUE only

Input Data:Contracted Price ($ per cwt.) $ 188.50 Base or Projected Weight (lbs.) 550Weight Increments (lbs.) 25Price Slide - Initial (cents per lb.) 10Price Slide - Increments (cents per lb.) 2

Weight $/cwt Price/Hd $/cwt Price/Hd $/cwt Price/Hd $/cwt Price/Hd $/cwt Price/Hd500 $ 191.50 $ 957.50 $ 192.50 $ 962.50 $ 193.50 $ 967.50 $ 194.50 $ 972.50 $ 195.50 $ 977.50

525 $ 190.00 $ 997.50 $ 190.50 $ 1,000.13 $ 191.00 $ 1,002.75 $ 191.50 $ 1,005.38 $ 192.00 $ 1,008.00

550 $ 188.50 $ 1,036.75 $ 188.50 $ 1,036.75 $ 188.50 $ 1,036.75 $ 188.50 $ 1,036.75 $ 188.50 $ 1,036.75

575 $ 187.00 $ 1,075.25 $ 186.50 $ 1,072.38 $ 186.00 $ 1,069.50 $ 185.50 $ 1,066.63 $ 185.00 $ 1,063.75

600 $ 185.50 $ 1,113.00 $ 184.50 $ 1,107.00 $ 183.50 $ 1,101.00 $ 182.50 $ 1,095.00 $ 181.50 $ 1,089.00

625 $ 184.00 $ 1,150.00 $ 182.50 $ 1,140.63 $ 181.00 $ 1,131.25 $ 179.50 $ 1,121.88 $ 178.00 $ 1,112.50 650 $ 182.50 $ 1,186.25 $ 180.50 $ 1,173.25 $ 178.50 $ 1,160.25 $ 176.50 $ 1,147.25 $ 174.50 $ 1,134.25

Lbs. Price/cwt.Baseline Market Weight (lbs.) 550 $ 188.50 Ending Market Weight (lbs.) 650 $ 181.88

Calculated Current Market Price Slide (cents per lb) 6.62

Price Slide Calculation

Current Market Value Price Slide

6 Cent Price Slide 8 Cent Price Slide 10 Cent Price Slide 12 Cent Price Slide 14 Cent Price Slide

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)

Farm Software & Worksheets (Critters)

• http://www.gov.mb.ca/agriculture/business-and-economics/financial-management/farm-software-and-worksheets.html

• Price Slide Calculator - 2017 • Calf Creep Feed Calculator - 2016 • Cow Replacement Value - 2016 • Cow Overwinter Cost – 2016 • Cow Share Lease - 2016 • FeedPlan • FencePlan • Hay Storage Cost • Pasture Rental Rate – 2016 • Standing Hay Cost - 2017

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. roy.arnott@gov.mb.ca Killarney GO Office - 204.523.6424