Austenson, H.M.

Lee, G.E.

Storey, G.G.

English

eCommons@USASK

Economics of grain-fallow rotations in Saskatchewan

University of Saskatchewan Research Archive

- 23 -Economics of Grain-Fallow Rotations in Saskatchewan G.·E. Lee, G.G. Storey and H.M. Austen'son * College of Agriculture, University of Saskatchewan FoF· a number of years the acreages of various crops in Saskatchewan has not given farmers m'uch scope for crop. rotation in the sense that sequences of different crops are grown in succession (Table l)• About 40% of the croplan.q.; has qeen sown to wheat;' 20% t,;;o other crops, and, 40% has been summerfallowed. ~any farmers follow a simple rotation of alternating summerfidlow and wheat or other cereal. This practice is common even in areas where the risk of crop failure due td drought on stubble land is very low. The q1J.ota system of marketirig .has encouraged farmers to sumtn'erfallow a high' 'percentage of their !arid' in years when carryovers are large. The matket outlodk for 1973-74 arid 1974-75 is very different £~om recent years and farmers should consider cropping more,of their stubble land in 1974. Although wheat acreages around the world will be large i_n 1974-7 5 the world carryovers at July 31, 1974 ,will be the lowest in many years, and are considered dangerously low by so!'lle standards. Unless grainyields are at least up to average in the major producing ~ountries prices may r~main at or near their present historically high levels. · , For farmers to switcq from a half crop system to a two-tqirds crop system there are a numbet of farm management deCisions to be tnade. , In the first place he should measure his soil moisture reserves to assess his probability of growing a satisfactory stub9le crop with normal summer rainfall. He should have a soil test and be prepared to fertilize accordingly, particularly on his stubble land. If his stubble land has heayy residues remaining from 1973 it will require extra tillage to prepare a seedbed and incorporate pre-emergence herbicides. Before spring arrives he should decide whether stubble cropping will pay, at what might be considered likely yields and prices. Following is an example of how this can be calculated for a six-quarter section farm in central Saskatchewan. Table 2 shows an estimate ~f the cash operating costs for fuel, repairs, lubrication, etc., and the overhead (interest, depreciation) costs of typical ·farm implements commonly found on a 900-acre gratn farm. * Presented by H.M. Austenson - 24 -Table 1. Crop and summerfallow acreages in Saskatchewan Crop 1962-71 1973 Acres % of total Acres % of total Wheat 16,859,600 39.5 16,200JOOO 37.0 Oats 1 2,404,400 5.6 2,400,000 5.5 Bar ley 2,539,500 5.9 4,300,000 9;8 Rye 384,660 0.9 260,000 0.6 Flaxseed 624,000 1.5 650,000 1.5 Mixed grains 138,800 0.3 210,000 0.5 Buckwheat 12,533 2 3,500 Peas, dry 2,500 6,500 Rapeseed 901,400 2.1 1,450,000 3.3 Potatoes 8,380 3,000 Tame hay 1,240,900 2.9 1,900,000 4.3 Summerfallow 17,585,000 41.2 16,400,000 37.5 Total 42,701,673 43,783,000 1 Includes oats for grain and hay 2 Broken period average Source: Statistics Canada, Cat. No. 22-002. Preliminary estimates of crop and summerfallow acreages, Canada 1973. Field Crop Reporting Series No. 13. July 27, 1973. - 25 -Table 2. Estifnated machinery operating and overhead costs at tnid-1973 prices. 23 Economics of Grain-Fallow Rotations in Saskatchewan * G.E. Lee, G.G. Storey and H.M. Austenson College of Agriculture, University of Saskatchewan For a number of years the acreages of various crops in Saskatchewan has not given farmers much scope for crop rotation in the sense that sequences of different crops are grown in succession (Table 1). About 40% of the cropland has been sown to wheat, 20% to other crops, and 40% has been summerfallowed. ~any farmers follow a simple, rotation. of alternating summerfallow and wheat or other cereal.· This practice is common even in areas where the risk o£ crop failure due to drought on stubble land is very low. The quota system of marketing has encouraged farmers to summerfallow a high percentage of their land in years when carryovers are large. · The market outlook for 1973-74 and 1974-75 is very different from recent years and farmers should consider cropping more of their stubble land in 1974. Although wheat acreages around the world will be l~rge in 1974-75 the world carryovers at July 31, 1974 will be the lowest in many years, and are considered dangerously low by some standards. Unless grain yields are at least up to average in the major producing countries prices may remain at or near their present historically high levels. For farmers to switch from a half crop system to a two-thirds crop system there are a number of farm management decisions to be niade.· In the first place he should measure his soil moisture reserves to assess,his probability of groWing a satisfactory stubble crop with normal sumn:ler rainfall. He should have a soil test and be prepared to fertilize accordingly, particularly on his stubble land. If his stubble land has heavy residues remaining from 1973 it will require extra tillage to prepare a seedbed and incorporate pre-emergence herbicides. Before spring arrives he should decide whether stubble cropping will pay, at what might be considered likely yields and prices. Following is an example of how this can be calculated for a six-quarter section farm in central Saskatchewan. Table 2 shows an estimate of the cash operating costs for fuel, repairs, lubrication, etc., and the overhead (interest, depreciation) costs of typical farm implements commonly found on a 900-acre grain farm. - 26 -Table 3 lists the operations needed to grow a crop on summerfallowed land, together with their cash operating costs. Table 4 lists the operations typically used to grow a second crop. Table 5 lists a set of summerfallow operations. Each of these uses the cash costs associated with the type of machinery found in Table 2. A blank column is provided in each of these tables in which a farmer can insert his own estimate of his costs. The information from these tables is used to fill in the costs of (1) a "one-half crop" system (Table 6) and (2) a "two-thirds crop" system (Table 7). These in turn can be used to fill in Table 8 which compares the net position from each of the two alternatives under various wheat prices. Table 3. Estimated cash cost of producing wheat on summerfallow. Operation Seeding with Discer - seed, 1.25 bus. @$6.00 - 40 lbs. of 11-55-0 @6¢ - Discer operation Preemergent wild oat control on 75% of acreage - chemical 1.25 lbs. @$3.60=4.50) Example Estimate $7.50 2.40 .44 sprayer operation .11) x .75 = 3.60 - harrow twice .20) 24D Application - sprayer - 24D 8 oz @6.1¢ Swath Combine Haul to bin Haul to elevator TOTAL .11 .49 .30 l. 78 .so 18.62 Farmer's Estimate $ per acre - 27 -Table 4. Estimated cash cost per acre of producing wheat on stubble Operation Seeding with discer Seed, 1 bus. @6.00 80 lbs. of 23-23-0 @5.3¢ Discer operation freemergent wild oat: control similar to ~able 3 24D Application ,, Similar to Table 3 Swath Combine Haul to bin Haul to elevator Fatt'~{llage (cultivator) TOTAL li Example Estimate 6.00 4.24 .44 3.60 .60 .. 30 1. 78 .50 1. 25 ~ 19.13 . Farmer's Estimate Table 5. Estimated cash cost per acre for summerfallow tillage Discer 2 Cultivations 2 Harrowings 2 Rod weedings TOTAL Operation I Estimated .Cost .44 .84 . 20 .48 r. 9'6 Farmer's Estimate - 28 -Table 6. Total cost on 900 acres with one-half crop. Operating costs - 450 acres summerfallow crop @$18.63 - 450 acres summerfa1lo\.,ring @$1. 96 Total operating costs Overhead Costs - Machinery Investment & Depreciation - Land ownership cost (960 x $80 x 7%) - Labor - Buildings and general overhead - Taxes @$250 per quarter section Total Overhead costs TOTAL COST Example $8,379 882 ---9,261 4, 714 5,376 6,000 2,000 1,500 19,590 $28,851 Table 7. Total cost on 900 acres with two-thirds crop. Example Farmer's Estimate Farmer's l Estimate ---- ---"-.-. -, -·-- --·- . Operating costs - 300 acres summerfallow crop @$18.62 - 300 acres stubble crop @$19.13 - 300 acres summerfallowing @$1.96 Total Operating costs Overhead Costs - Machinery investment & Depreciation - Land ownership cost (960 x $80 x 7%) - Labor - Buildings and general overhead - Taxes @$250 per quarter section Total overhead costs TOTAL COST $5,586 5,739 588 11,913 4, 714 5,376 6,000 2,000 1,500 19' 590 $31,503 - 2 ~~ -Table 8. Calculation of Net Returns Net returns = (Yield per acre x acres x price) - Total costs Thecfdilowing 'shows estiina'ted net returns with three possible pric~s 1. e': ~ $5 .oo, $:L so anci;, $2. oo per !:>~shel. For one:..nal£ crop 27 b1.1shels (summerfallow yield) x 450 acres x $5.00 = (i2150 bushels) ·~ $3,~0 = 'If X $2.00 = . ' ·~ ' For 't-&o.:.thirds crop , ,;;,) 27 :i;>ushels (su!llffierf::alrlow yield) x 30.0 acres+ X 19 bushels (stubble yield) x 300 acres (13800 bushels) X X Farmer's Estimate $'5.00 3.50 2.00 bushels x Acres x $ ----------- ------------(Gross Return) Net Return ---------* = = $60,750 42,525 24' 300. 69,000 48,300 2} ,too ;_· Net Returns $28,851 = $31,899 28,851 = 13,674 2,8,851 = - 4,551* 31,503 37,497 31,503 = 16,797 31,503 = -3,903* per bushel Total Casts N~t losses are incurred because Total Costs include $6,000 for labor, $5,376 for land ownership costs and $4,714 for interest and depreciation costs on machinery. When grain prices are low all of these costs may not be covered. \ - 30 -In the above example assumptions were made for all cash and overhead costs. A farmer should substitute his own estimates of these costs and try a number of budgets based on different possible yields and prices. With this information he can make a judgement of the practices which will lead to the best outcome for his farm. The whe.at yields used in the above exanple are approximately the 1968-71 average yields on summerfallow and stubble reported by · Statistics Canada for Crop District 6. With these yields the "Two-Thirds Crop" system gave a greater net return at all three projected wheat prices; $2.00~ $3.50 and $5.00 per bushel. Net returns of the "Half Crop 11 arid 11Two-Thirds Crop" systems would be equal at $1.80 per bushel, and below that the "Half-Crop" system would give greater returns (lower losses). Relative returns from rotations with other grains may be calculated by substituting appropriate operating costs, expected yields and prices. - 31 -DISCUSSlPN OF 1'H~ PA,J:lEH BY G.G. STOH;E~., G.E .. LEE, AND .HER!\1AN, AUSTENqQN ENTITLED:. "ECONO.MlC;3 OF GRAI1N-FJ\LLOW; ROTATIONs··rN SASKATCHEWAN'' Comment: There is a comment I would like to make about your figures, Herman, it has to do with the seed cost. Normally when you are selling grain at $2.00/bushel you are not paying $6.00/bushel for the seed. I think secondly, that for every bushel that you buy for seed you are selling an additional bushel off the farm. Now I don't know whether you looked after that for the average yields or not. I think we have to watch this point because it was a very significant figure in your totals and I think that you are out about $4.00 per acre in your calculations. Herman Austenson: Well, if you can buy wheat for $2.00 this spring you will have a lot of customeis. Comment: What I am saying is that when wheat is selling for $2.00/bushel your seed is not selling for $6.00 unless it is a new variety. George Lee: This spring you will be seeding wheat out of this crop year and selling it for a pric~ as yet undetermined. Last year for example, you seeded $2.00 wheat and have a possibility of selling it for $4.00 to $5.00. But when the price turns around, you could have the opposite situation occurring. Herman picked a very low figure, for our publi-cation we used figures of $2.00, $3.50 and $5.00. All of these are possible prices for the crop you sold this spring. $2.00 we hope, is very unlikely. Herman Austenson: Yes, the figures look extreme for 1973 when the price is in fact $5.00. George Lee: And our expectation for the market is not $2.00. Herman Austenson: Well, we hesitate to say what the expectation is, it might be $2.00. In your operating costs, the horsepower cost is incorporated into the discing cultivating costs .. Is this correct? Yes, the tra tor cost is incorporated with the implement operatio~s. 

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Economics of grain-fallow rotations in Saskatchewan

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