Darren Bond wants farmers to stop thinking in dollars per acre.
The farm management specialist with Manitoba Agriculture says cost per bushel sold is a more valuable number when farmers go to develop a marketing plan.
Farmers sell their product per bushel, making it easier to track and predict profitability if cost uses the same terms, Bond told the crowd during his Jan. 17 Ag Days seminar.
Bond is a big believer in knowing both risk and reward, something he says can be expressed using cost per bushel.
Profitability projections alone leave out critical risk information that might affect the actual bottom line, he said.
That can help making planting decisions, but the benefits don’t stop there. He also says using this metric to measure your business performance makes it easier to make decisions in-season too.
“Once the seeder has done its job, [we should be assessing] what our investment decisions are throughout the growing season in terms of risk and reward,” he said.
Using December prices (numbers that he admits have dropped about 50 cents per bushel since) and provincial cost of production numbers, Bond compared expected return with the level of risk a producer can expect to have covered by insurance.
Canola and soybeans emerged with both the highest return (10.3 per cent and 13.4 per cent respectively) and the highest expected coverage (with 72 per cent and 82 per cent of risk expected to be covered, respectively).
Margins were tighter for both corn and northern hard red spring wheat, the next runners up in terms of reward (8.1 per cent and 8.5 per cent reward respectively, but only 64 to 65 per cent expected risk coverage).
It was a bad news story for both barley and winter wheat, both of which dipped into negative return (-18.6 per cent in the case of barley and only 50 per cent expected coverage), although coverage for winter wheat hit 70 per cent.
When broken down, Bond said that a 40 bushel per acre canola crop at $323.25 cost per acre and 80 per cent expected coverage can expect $8.08 of their cost per bushel to fall under insurance. Another $2.12 (labour and fixed costs) are exposed to risk, leaving $1.05 per bushel sitting above the breakeven for that crop.
Only soybeans beat out canola in a similar analysis, at $1.47 profit, while wheat returned 47 cents per bushel profit for northern hard red and 22 cents per bushel profit for hard red.
“This is using our numbers. Of course, your numbers are more important than my numbers,” Bond said.
Bond pointed to a number of tools on the Manitoba Agriculture production cost website, as well as online calculator CropPlan, which are meant to guide producers through cost of production for their farm.
Read more information from Ag Days 2018 in upcoming issues of the Manitoba Co-operator.