Economics according to my dictionary is the Science dealing with the production, distribution, and consumption of wealth, and financially feasibility. I've chosen to focus on the financial feasibility part of the definition. The question, then, is can you make winter cereals pay and will they pay as well as other crop choices.
Farm Management tradition often causes us as farmers to look at our range of crop choices in a very narrow and individual fashion. We make comparisons between crops as competitors. Our traditional means of comparing one crop to the other choices can lead to under and over estimation of benefits and costs and more importantly it can lead to the complete exclusion of critical factors. I think we should be looking at crop choices not as competitors but as team players which all can contribute to overall farm success. Looking for synergy between crop choices will maximize the advantage of making a particular choice. The problem is there aren't many tools that can do the required whole farm analysis based on whole farm data.
When I took on the task of preparing for this presentation I was enthusiastic about exploring winter cereal economics and I made a search for information that would help do the job. I hadn't looked for this type of information since the middle 1980's when we started to grow winter wheat on our farm. I can tell you that the pickings are fairly lean. The U of S has little economic information on winter cereal production, although there is a large amount of agronomic information. Saskatchewan Agriculture and Food doesn't even list one of the winter cereals in their publications of crop choices. I'm amazed at the almost total lack of information that producers can draw on to make their economic decisions on winter cereals.
In my presentation I am going to talk about three economic aspects of winter wheat production:
1. The partial budget comparison to other cereals
2. The rotational or whole farm (synergistic) advantages of winter cereals
3. The time economy of winter cereals
My first step in talking about winter cereal economics will be to look at the standard method of comparing two crops using a type of partial budget. Getting good information to go into the enterprise budget turned out to be a challenge so, I decided to use information from my own farm based on eight years of experience growing winter wheat. In my presentation I haven't made any attempt to compare winter cereals with non-cereal crops. On our farm this doesn't make any sense because the agronomic limitations of crop rotation and crop sequencing force us to compare crops within their rotation component. We don't find much value in comparing wheat to lentils as we are certain that our crop production system needs both cereals and pulses to work in the long haul. One other thing to note is that starting in 1996 our farm will not grow spring wheats as winter wheat now fills the wheat component of our crop sequence.
This partial budget comparison is based on several assumptions. First the comparison isn't made on the basis of total cost for each crop, only the cost areas that are different from one crop to another are compared. Machinery cost for each operation is considered to be the same for all crops. The only differences on machinery is in operations performed. We don't track our fuel and equipment hours by field so the cost of seeding, for example, is assumed to be the same for both spring and winter wheat. Fixed costs are also considered to be the same for all crops. There are some differences, such as increased costs for storing grain for crops that yield higher, but we haven't calculated these.
So, the partial budget comparison looks only at those things
that are different between crops. On our farm we compare winter
wheat with spring wheat. The areas that are different between
these crops are: yield, price and therefore income; fertilizer,
herbicide, seed, insecticide, and machinery operation. There are
some additional subtle differences such as cost of crop and hail
insurance but we did not include these. Here's how the comparison
shakes out:
|
Income
Yield |
Higher by 25 to 50% |
| Price | #1 HRW - #2 HRS |
| Total Income | Higher by 0 to 40% |
| Average grade |
#3 (now Canada Feed) for Winter wheat
#2 for spring wheat |
|
Expenses
Fertilizer |
|
| Nitrogen | Higher by 50% - higher N to realize high yield Potential |
| Phosphorous | No difference |
| Sulfur | No difference |
| Pesticide | |
| In crop Herbicide | Lower by 0 to 80% - almost no grassy herbicide in winter wheat |
| Pre-seeding Herb | Lower by 100% - no pre-seeding burn off on winter wheat |
| Insecticide | Lower by 100% - no insecticide on winter wheat |
| Seed Treatment | No difference |
| Machinery Operation | Lower by 10-20% - less pesticide application and no swathing |
| Total Cash Costs | Lower by 10 to 30% |
| Net Income | Higher by about 20% - 50% |
Yield - Winter wheat has a much lower risk of flooding losses due to summer storms than spring wheat. This factor alone can make a substantial yield advantage for winter wheat on years with heavy summer rains. Also winter wheat is very tolerant to early spring flooding. Winter wheat has no risk of loss to wheat midge. Winter wheat has a risk of loss to rust which was substantial on our farm in one year in the last 10. Winter wheat has almost no risk to fall frost. Highest winter wheat yield so far is 60 bus/acre in 1995. Lowest was 10 bus/acre in 1988.
Price - Winter wheat is discounted relative to spring wheat. Protein premiums for #1 and #2 high protein are not expected to be as high as for spring wheat. Pricing of winter wheat is likely to improve as we increase production and have substantial product to develop markets around.
Grade - It is harder to grow high grade winter wheat than spring wheat. The main cause of low grade winter wheat has been inadequate nitrogen fertility leading to starchy kernels. This is the result of the spring wheat mentality creeping into winter wheat production practices.
Fertility - Winter wheat is much more sensitive to nitrogen management than spring wheat. If you cheap out on nitrogen you'll sacrifice production and quality. Our rule of thumb is to take herbicide saving and spend it on N.
Overall Production Risk - High with winter wheat until you
learn how to grow the crop. Compromising on critical production
factors such as seeding date, seeding depth and fertility
management have serious consequences most times.
I've already mentioned several rotational advantages of including winter wheat but I'll be more specific. On our farm we seek a rotation which maximizes profit overall. I checked with a few economist types and asked what information was available that looked at comparing whole farm systems and rotations. Well, there isn't a whole lot of information in this area so, what I'm going to present are my opinions and thoughts on this area.
Maximizing profit each year and from year to year is a rather complicated issue. We have several philosophical views on how to accomplish this on our farm and are currently putting them to the test. I should point out that like anything else our views tend to change with experience. Our philosophy for maximizing profit each year and from year to year is to:
Winter wheat fits into almost every one of these points. With winter wheat we are able to reduce our overall cash costs. Winter wheat produces a very high return on added inputs, particularly on nitrogen fertilizer and winter annual herbicide applications. Winter wheat is a winter annual and has tremendous competitive advantages over spring annuals. Winter wheat can out compete wild oats and can be very effective in out competing volunteer crops like barley (and flax if you manage to seed winter wheat on flax stubble). The wet spring syndrome, which has been a bit of a curse in the 1990's on our farm, works very well with winter wheat. It's ideally suited to a cool wet spring followed by dry times in late summer.
Adding winter wheat in the rotation can reduce machinery investment and depreciation costs by maximizing machinery efficiency. About one quarter of our acres are in winter wheat which has helped us to get by with a smaller drill and has reduced the need for a bigger combine to improve harvest timeliness. Machinery operating costs are also reduced in two ways: less spraying operations and no swathing. ( We also hope to eliminate swathing for most of our other crops but aren't there yet).
Winter wheat is one crop which really proves that spending money makes money or conversely if you don't spend money it costs you big time. Spending money on winter annual control and on nitrogen fertilizer is essential for success.
Incorporating winter wheat into our rotation has required us
to look at our current actions in light of their effect on us
next year. We can no longer just look at this year in isolation.
It's essential to look at this year in combination with next and
the year after. The main tangible economic effect of winter wheat
on next years crop is weed control. On some occasions (but
definitely not all) we've observed a reduction in grassy weeds
the next year and elimination of volunteer problems in the next
years broad-leafed crop. Winter wheat does volunteer but fall
germinated plants are taken out by pre-seeding roundup and any
late spring germinated plants don't present a volunteer problem
because they remain vegetative.
The time economy is one of the biggest discussion points on our farm and the overwhelmingly most important reason for placing winter wheat in the rotation. Our farm is 880 acres, I do nearly all the field work, with my wife doing nearly all of the management work and things like grain hauling and trucking. I work full time, and, while my employer is very flexible on annual leave, I have serious problems finding time to put in 300-350 tractor and combine hours every year in a timely fashion.
The key bottlenecks for us are pre-seeding spraying, seeding in spring particularly when its wet, spraying in June and harvest in September. When we incorporated winter wheat into our rotation it made our time economy work much better by:
In my opinion the often used argument that it isn't possible
to find seeding time during the harvest season is a result more
of attitude than anything else. Seeding winter cereals requires a
fairly major change in attitude and a fairly major change in
planning objectives but its not only possible it can even get
easy.
Every farm has its own conservation goals that are unique to the personalities and attitudes of the individuals who steward the land. Our interest in conservation goes way past just the soil, and, at the risk of being branded an environmentalist I'd say that we're trying very hard to be exactly that. In my opinion winter cereals are the epitome of conservation in an annual cropping system. Placing winter cereals in our rotation has helped us conserve our soil, has conserved herbicide, has conserved machinery, has conserved fuel, has conserved money (and has made us more) and has conserved time. What's more it's one of the annual crop choices that helps conserve waterfowl which just happens to be another very important interest of mine. About the only thing we haven't conserved by growing winter wheat has been bin space and bin space isn't a bad thing to have.
Winter wheat is an economically feasible alternative to spring
cereals in our crop rotation. While winter wheat has its share of
production challenges it is agronomically feasible as well. The
bottom line is that winter cereals pay!