WHAT ARE YOU SEEDING AND WHY?

Originally published on May 19, 2005

 

You talk to any farmer at this time of year and it doesn't take long before the conversation turns to spring seeding and crop choices.

Which crop or crop mix will contribute the most dollars to the farm's bottom line?

Is there a Cinderella crop for 2005, one that looks plain in the spring but in the fall is a member of the royal family?

While most crop rotations are finalized well before seeding, it is not uncommon for plans to change over a cup of coffee in the field.

To assist producers to make better crop planning decisions, Alberta Agriculture has made available a planning software tool called CropChoice$.

The free downloaded is available at www.agric.gov.ab.ca under the header "calculators."

The program is designed to forecast revenues and margins for the crop enterprise, as well as the probabilities of achieving those levels. Traditional crop planning tools use only single estimates of yields and prices, while CropChoice$ recognizes that yields and prices are variable.

To reflect this, yields and prices are entered as three different values: lowest possible, highest possible and most likely. These varying data inputs produce different results, which in turn provide a clearer and more accurate forecast.

In applying CropChoice$ to my 2005 crop plans, I ran three differing cropping plans. I used the same combination except for the one additional crop as noted in each example.

The basic sowings were marrowfat peas on 70 acres, Argentine canola on 220 acres, meadow brome on 55 acres and alfalfa on 35 acres.

Scenario 1: oats on 240 acres.

Scenario 2: feed barley on 240 acres.

Scenario 3: malt barley on 240 acres.

 

 

Scenario Analysis - Contribution and Gross Margin
     
  Scenario #1 (oats in crop mix) Scenario #2 (feed barley replaces oats) Scenario #3 (malt barley variety replaces oats)
Expected contribution margin (CM) $56,400 $45,378 $50,867
Standard deviation of CM $15,026 $13,745 $15,671
Coefficient of variation of CM 26.64% 30.30% 30.81%
Expected gross margin $50,983 $39,936 $45,395

 

After entering my soil class and the variable crop yields and prices, the computer program extrapolated my standard costs per crop. Once I reviewed my costing profiles, I was able to request a scenario analysis.

In this analysis, CropChoice$ calculated my expected contribution margin in dollars, my 50 percent probable expected gross margin in dollars and a graph illustrating the probabilities in reaching specific dollar gross margin levels.

To my surprise, oats took first place, malt barley second and the feed barley third. A summary of part of the CropChoice$ output is shown in the attached table.

CropChoice$ allows you to choose from 40 dryland and irrigated crops depending on your soil zone and risk area and handles up to 32 fields. It lets you run up to eight scenarios to directly compare and contrast the risks and returns of each one.

You are also able to differentiate owned land from rented and share crop from cash rent.

While the idea of attaching probabilities to expected returns will be received by some with skepticism, to my way of thinking CropChoice$ is a welcome addition to the farmer's crop planning tool belt.  The rabbit's ear and horseshoe will have to make room.

 

Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at allyn@hth-accountants.ca or website www.hth-accountants.ca. He is also involved in the family farm near Loreburn, Saskatchewan.  The opinions expressed in this column are for information only.