Paul Kuntz is the owner of Wheatland Financial and offers financial consulting and debt broker services. Paul graciously agreed to share his article with me. I believe his views are justifiable and provide a deeper understanding of our dependence on this profitable crop. Here’s the question in need of an answer: “Is your farm built for long term sustainability?
Paul is also a Certified Agricultural Farm Advisor through the Canadian Association of Farm Advisors (CAFA). You can read Paul’s credentials here.
Many things can lull us into a false sense of security. Let’s be sure our canola crop isn’t one of them. Take a few minutes to determine whether the information applies to your farm operation.
Is canola lulling us into a false sense of security?
As we get ready to plant our 2017 crop, I can guarantee that a good portion of seeded acres across Western Canada will be canola. If you take a drive in July, there will be many yellow blooming fields. And why not, the crop has great technology put into it, there are great weed reduction systems, we have advanced fungicides to apply, our weather pattern provides the plant what it needs and the market wants our product. In the area where I am, we have three crushing plants close by that offer aggressive pricing, low basis levels and great delivery options. What is not to love?
The economics of this crop are hard to beat. Yields have been increasing at a rapid pace while pricing still remains strong. It is tough to find a crop that makes as much money as canola does. But how much can we grow on our farms? How often are we growing it? Are we making business decisions on poor agronomic practices?
I will put a caveat on this article: I am not an agrologist or plant scientist. My training and what I practice every day is the financial business of farms. So I am approaching this from a financial concern.
One of my clients had a discussion with me a few years ago right after harvest. Some new land had come available and he rented a complete section. You could actually farm it as a 640 acre block. It is a beautiful piece of land. He grew a canola crop that averaged 70 bushels/acre. In our area, that is huge. A 50 bushel crop is a great canola crop so 70 is unheard of. His discussion with me was not of optimism and great joy over the bumper crop he harvested, it was about rental rates.
You see there was a few quarters of land available in this area and the owners had done 1 year leases with some farmers. My client was a local producer but there were other parcels of land that were rented out to farms from quite a far distance away. These other farms would be considered very aggressive. My client had rented this land for $60/acre and was hoping to secure a long term lease at that rate. The other farmer had already made it know that they would be offering $100/acre.
At 70 bushels and prices over $10/bushel, there is no issue with paying $100/acre rent. All the numbers would be just fine. The problem is that we should not grow canola every year. We shouldn't grow it every second year. We should only grow it every third year. The growing conditions for the 70 bushel crop were also perfectly ideal. We should not expect that every year.
The problem is that whether my client wants to follow what is considered a proper rotation or not, the actions of the other farmer are forcing his hand. Rent in that area will rise because of profitable crops. If we took the economics of wheat and put that into the equation, no one would be rushing to rent land. But what happens if you have to grow some wheat for rotational purposes? The economics are already set out and you will lose money.
If you can grow a good crop of canola on most of your acres, you will be profitable. I do not have to conduct an analysis of your farm. Based on my clients I know that an average canola crop will always pay the bills. So why don't we just grow it on every acre?
If you look to the real experts on growing canola, you will see that the recommendations given are not followed by producers. The Canola Council of Canada recommends to have at least one year, preferably two or three years of other crops in between canola crops. The reasons cited are to avoid diseases of Blackleg, Sclerotinia, and club root. But the article goes on to say that clubroot spores stay in your field for 7 years, so rotation does not help. Sclerotinina is windborne so with so much canola grown, rotation will not help prevent this either. So that leaves blackleg. But I thought all varieties are blackleg resistant? Well they are, but resistant to what strain of blackleg?
At a recent Pioneer Dupont grower meeting, they revealed that in almost every test plot there is blackleg. There is not enough to cause noticeable damage, but nonetheless, there was black leg there. So maybe we can't save our canola from blackleg just by planting the newest and best varieties.
Garth Hodges, vice president of marketing and business development with Bayer Crop Science told the Canola Council of Canada that short rotations are weakening the crop's ability to withstand pressure from clubroot, blackleg, weeds pests, and other challenges. He asked the question "How do we go back to some of the basics like saying we have to go into good crop rotation and be better at crop rotation?"
Keith Downey, one of the researchers who created canola, is suggesting municipalities to use existing legislation to stop farmers from growing canola too often. He is concerned about only having three clubroot resistant genes and not being able to find new ones quick enough.
Hodges went on to say he is worried that growers assume that the industrial giants like Bayer Crop Science will simply develop new varieties and products that minimize the problem. "It's hard to invent new chemistry" was Hodges comment.
So how bad are we doing? Are farmers really pushing the envelope? In Saskatchewan's canola growing capital, the north east, in 2015 46% of the acres were seeded to canola. Almost half of the acres in that region are in canola. The quick math on those numbers show only one crop is being grown in between canola crops. Every second year is canola.
There isn't a farmer out there that wants to be unsustainable. Every producer wants to be able to make money today and grow great crops for years to come. The current economics make it very difficult to make good rotation decisions.
Part of the problem is that the bad behavior is being rewarded. If you grew a great canola crop on a field that had canola on it two years ago, you will continue the practice. Producers are not seeing dramatic drops in yield when they push their rotation. If they did, they would change the practice immediately.
My fear is that I believe proper crop rotations can be compared to our health and nutrition. If you have one cigarette, you do not get lung cancer. If you eat a bacon cheeseburger with french fries, you don't have a heart attack. If you have a soft drink, you do not get diabetes. But the research shows that there is a direct link to all of those activities and the negative outcome. The same can be said about rotations. We all know there is a risk, but it is off in the future somewhere and the bills are due now.
Your seeding plans for 2017 will be set in stone by the time you read this. I want to challenge your financial crop numbers: Calculate your cost of production for your farm and run a crop scenario that has you growing canola every fourth year rather than every second or third year. Could you generate enough income to cover all of your costs? If you can, then your farm is built for long term sustainability. If you cannot, then maybe canola has lulled you into a false sense of security.