Profitability Should Guide Cropping Choices

EDMONTON - Apr 4/14 - SNS -- Farmers need to be careful to place profit before emotion when deciding which crops to plant, especially when evaluating anything new or trendy.

"First off, at the beginning of crop planning, determine the various costs of production," says Harry Brook, crop specialist, Alberta Agriculture and Rural Development, Stettler. "By knowing your total production costs, you can find out where the combination of crop yield and price becomes profitable."

Brook says it's extremely important to select crops that are profitable and acceptable to both the producer and their banker.

"Why grow something that guarantees a loss? Anyone can make money at $14/bushel canola, but what about at $9 with a less than average yield? Once the production costs are all known, you can then use them as a tool to find cost savings without foregoing too much yield."

The same analysis is required for any new crop a producer wants to try, says Brook.

"What are the anticipated costs, returns and unusual costs associated with the crop? Usually, there is a learning curve with any new crop and it is rare for a new grower to even make the industry average yields. And when it comes to some of these smaller acreage crops, you should be aware that marketing may be the most important part of growing them. The value of the crop is usually restricted to a small, select market and it is important you understand the market you're growing for."

Contracting at least half of the crop ahead of time is essential as there may not be any alternate uses for the crop. "Prices in certain, small market crops may look attractive now but it doesn't take a lot of additional acreage to flood those markets and bring prices down. Contracting with a buyer also gives you an assured market for a least a portion of the crop."

Above all, Brook advises caution. "Spend time researching a new crop. Talk to people who already produce it. Crunch the numbers on anticipated costs and returns to make sure the experiment doesn't end up costing too much. Learn from other's mistakes.

"By taking care of the details when planning cropping changes, you can do everything you can to make ensure a profitable outcome, and not just a bill for the education."