OMAFRA provides yearly crop budget estimates that can help farmers decide on a rotation, marketing strategy, or negotiate land costs
By Jackie Clark
As we inch toward spring, farmers across Ontario are making plans for the 2020 planting season. The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) provides several budgeting tools for farmers, including the 2020 Field Crop Budgets which can be used to help strategize crop acres for the coming season.
The Field Crop Budgets provide cost estimates for inputs such as seed, fertilizer, machinery, and pest control for individual crops and management styles. Detailed worksheets are included for organic and conventional corn and soybeans, as well as different types of wheat and other common grain, cereal, legume, and forage crops.
The Field Crop Budgets are “a planning tool for trying to get an enterprise mix for the 2020 year,” John Molenhuis, business analysis and crop production specialist at OMAFRA, told Farms.com.
Predicting input prices is not an exact science, but can be done through surveys and tracking trends.
To predict input costs, OMAFRA officials use “a combination of the input price survey at Ridgetown and input supplier surveys that we do,” Molenhuis said.
Staff at the Ridgetown Campus of the University of Guelph conduct “an input price survey three or four times a year, so we have a look at that. It tracks fertilizer, fuel, pesticide and seed costs,” he explained.
“We’re doing this in October and November of the year prior; we’re trying to estimate out and get a gauge of where the prices may be in the coming year,” he added. “For information that we don’t have … we’ll survey a few input suppliers around Ontario just to get an idea of where costs may be for 2020.”
Similarly, OMAFRA officials will call grain elevators in the province to get storage and drying cost estimates for the coming year.
“Most of the costs kind of track along inflation,” Molenhuis said. Fuel, fertilizers, and some other inputs tend to follow world economic trends and commodity markets.
“When commodity prices for corn, soybeans and wheat go up, for example, then you’ll see the seed prices tick up as well,” Molenhuis said.
One factor that tends to vary from farm to farm is the cost of machinery operations.
In the “(Field Crop) Budgets we’re using custom rates,” Molenhuis explained. “Actual farmers’ machinery costs can really differ depending on the capitol investment they’ve got and the amount of acres they’re running.”
Generally, seed prices are a more uniform and predictable input.
In terms of output, the 2020 budgets report the five-year average yield for the crop in Ontario. In previous years they used a ten-year average, however, the five-year trend is thought to be a more accurate predictor.
Commodity market price is the major unknown factor in the calculations.
Farmers can use the Field Crop Budgets sheets to input their own costs and predicted yield.
“That’s what these (worksheets) are really positioned to do,” Molenhuis said.
“I often say that the most important column is the blank one because that’s the one where the farmer puts their numbers in. These are estimates based on our best guess as to what it might look like, and it’s based on our production recipe as well,” he added.
Seeding rate and management could be different depending on the farmer’s particular management style.
“We don’t include land and overhead cost” because those factors are extremely variable, and “the land and overhead will be the same across all the acres,” Molenhuis explained.
“The main purpose of the budget is a planning tool to see where profitability may be in 2020,” he said. “If (a farmer has) some flex in the rotation,” the Field Crop Budgets can help identify what may be more profitable, he added.
The Field Crop Budgets can help a farmer decide what to plant, but also assist in planning how crops will be marketed to cover the cost of production or quantify a suitable land cost.
“The hope is as well that (farmers) can take this and add their land and overhead cost they can get to that total cost of production, so then they can start setting a marketing plan,” Molenhuis explained.
Or “you can keep land costs out of it, and then the number at the end, if you’ve got all the other costs in there, tells you what you can afford to pay for land,” he added. This can inform discussions with landlords or help plan for land purchases.
“It’s a handy tool for trying to determine some of those numbers,” Molenhuis said.