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Profitability could be easier to achieve through organic: 2017 COP analysis

Per-acre profitability is markedly different compared to conventional, provincial estimates of production costs show

Organic farmers potentially have a shorter road to profitability than their conventional neighbours in 2017, according to provincial costs of production budgets released recently.

The most promising crops between the two systems are radically different and there’s marked difference in per-acre profitability, according to numbers shared by a Manitoba Agriculture farm management specialist at an Ag Days organic event in Brandon.

This is the third year Roy Arnott has put together the same analysis for organic farmers as he does for conventional. His budgets aim to help make cost of production, after differences in yields and market prices are factored in, the basis for deciding what to grow.

Don’t use his numbers alone to make cropping decisions, Arnott cautioned growers at the beginning of his presentation.

“Focus on the concept, not the actual numbers. Focus on calculating your own numbers at home,” he said.

What his numbers shared with growers assembled for Organic Day show is that top crops to choose are very different between conventional and organic.

On the conventional side, for example, soybeans is the highest-margin crop to produce, whereas it’s the lowest-margin organic crop by his comparison.

Hemp would be an organic grower’s top choice showing potential for a net profit of $499.35 per acre. Conventionally grown hemp would be the last thing a farmer would put in, showing a net profit of -$1.61 per acre.

Right behind hemp, organic growers would be eyeing winter wheat, which ranks No. 2 with a net profitability of $338.79 per acre, followed by spring wheat at $249.07 per acre, flax at $176.62 per acre and oats at $160.30 per acre.

By contrast, the best choices for conventional farmers look to be navy beans, ($155.16 per acre), followed by soybeans at $65.64, confectionery sunflowers at $41.69 per acre and winter wheat at $37.58 per acre. Spring milling wheat ranks right down on the bottom of the conventional growers’ list, next to hemp.

Arnott’s analysis shows operating costs for most organic crops to be between $200- to $250-per-acre range, with total costs coming in at $325 to $400 an acre.

On the conventional side, operating costs are between $150 to $350, and total costs around $300 to $450.

Arnott, who stressed that knowing COP on a per-bushel basis is key — “we sell on a per-bushel basis” — also shared numbers showing break-even yields for organic.

His analysis shows organic farmers, who typically have lower yields, could break even with yields of 19-bushel wheat, 8.6-bushel flax, 40-bushel oats, and 12-bushel soybeans.

Comparatively, break-even yields for conventional growers are much higher at 50 for wheat, 22 for flax, 87 for oats and 28 for soybeans.

“The break-even yields (on the conventional side) could potentially be a lot more challenging to reach, depending on production and market conditions,” he said.

Break-even prices for organic production systems are wheat at $8.56, flax at $19.48, oats at $3.70 and soybeans at $21.60, Arnott said adding those numbers should be achievable.

“Comparing to the conventional side, again, we’re looking at a bushel of wheat selling at $5.72, flax at $11.21, oats at $2.80 and soybeans at $9.10,” he added.

Notably, there are other risks to organic growers, however, including paying higher crop insurance premiums for lower coverage under current programs available through Manitoba Agricultural Insurance Corporation.

Even as an organic system appears to have less risk “from a numbers perspective,” Arnott said any farmer eyeing a switch to this system must be asking bigger questions of themselves about how they want to farm.

It’s not about one system being better than the other. An organically managed farm is “a totally different production mindset,” he said.

“It (organic) is a production and marketing option that appears financially viable. That’s where we’re at,” he said.

The guideline for estimating organic crop production costs is found online as a PDF on the Manitoba government website.

-With files from Laura Rance

About the author

Reporter

Lorraine Stevenson is a reporter and photographer for the Manitoba Co-operator with 25 years experience writing news and features. She was previously a reporter with the Farmers Independent Weekly and has also written for community newspapers in Winnipeg and Manitoba's Interlake.

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