Agronomist Notes

The weather has finally warmed up to -3 oC here which makes farm calls a lot easier and chores much nicer. Other than a couple fertilizer purchases and some herbicide pre-buy opportunities, agronomy-flavored decisions have been few. I’ve been busy getting all my ducks in a row before I leave on January 23rd for New Zealand and Australia. One of those ducks is collecting farm data for Preferred Carbon to aggregate and sell carbon offset credits for the farms I work with.

In this week’s newsletter, I’ll be discussing Canada thistle control options with a twist. We’ll also look at innovative land rental agreement drawn up by one of my clients. Next, I have a carbon market update for you on what’s going on out there with carbon values, supply and demand. Finally, we’ll finish up with market news. Have a great week.   

Agronomy

Running the numbers on Canada thistle control strategies

I was looking at cost effective strategies to control Canada thistle next year in a field I’m planting to wheat. I have a few fields across my territory slated for Canada thistle control in 2009 and the product I recommend most often is Prestige. I’ve had great success in the past with this product but you certainly pay a premium for it. I was curious to see what other options provide the most economical control.

The way I see it, we have a three choices: 1) apply an in-crop herbicide treatment that suppresses Canada thistle and follow up with a pre-harvest glyphosate treatment at 1 L/ac equivalent, 2) apply an in-crop herbicide containing Lontrel, or 3) purchase Eclipse II, a RR canola herbicide containing glyphosate and Lontrel in a pre-pack. 

Option 1
Pre-burn: 0.5 L/ac glyphosate, $7.00 + $7.00 application = $14.00
In-crop: Everest + Frontline XL, $16.00 + $8.00 + $7 application = $31.00
Pre-harvest: 1 L/ac glyphosate, $14.00 + $7.00 application = $21.00
2% wheel track damage: (50 bu/ac × 2%) or (1.36 T/ac × 2%) @ $6.50/bu or $238/T = $6.50
Total cost: $72.50 an acre

Option 2
Pre-burn: 0.5 L/ac glyphosate, $7.00 + $7.00 application = $14.00
In-crop: Everest + Prestige, $16.00 + $16.00 + $7.00 application = $39.00
Total cost: $53.00 an acre

Option 3
Remove the Lontrel out of the Eclipse package and add to the Frontline XL in-crop.
Pre-burn: Eclipse II, $17.80 (contains 0.5 L/ of glyphosate and 113 ml of Lontrel per acre) + $7.00 application = $24.80 
In-crop: Everest + Frontline XL + Lontrel (1/2 of Eclipse), $16.00 + $8.00 + $7.00 = $31.00
Total: $55.80 an acre 

The least cost scenario is option 2 at $53.00 an acre. I thought I could be clever using Option 3 by purchasing Eclipse II and pulling the Lontrel out of it and adding it to the Frontline XL. To my surprise, it costs $2.80 acre more than option 2. I suspect if Prestige is in a shortage next year, you could use this trick but I could never recommend it because it’s not a registered tank mix. It just so happens that the exact same active ingredients are used in a product called Spectrum, but I digress. I like option 2 because it controls thistles immediately and prevents them from robbing nutrients and moisture throughout the growing season. In fact, research from Ag Canada in the table above would suggest you could gain a 12% yield advantage in year two using Lontrel over a pre-harvest glyphosate.
Theoretically, the cost difference between Option 2 using Prestige and Option 1 using a pre-harvest glyphosate is $19.50 per acre. A Canada thistle control program is typically two to three years long. You could apply Prestige in year two and still be ahead by $3.50 over the pre-harvest glyphosate treatment. Food for thought. SL   

Innovative Rental Agreement

I was visiting with a client recently, Doug Miller, and he came up with an interesting twist to the usual 1/3 2/3rd crop share agreement. Aside from wanting to reduce the amount of paperwork that comes along with crop shares, Doug wanted to create a simple cash payment system different to straight out rent. His landlord is getting older and if he passes away suddenly, the children, who have nothing to do with the farm could suddenly receive a bill for $100,000 to pay for crop inputs. How do you think the new landowners would receive this lovely gesture? I suspect they’d sell that land to the highest bidder as soon as possible. However, if they were to receive a cheque each year without doing a thing, I believe they would think twice about selling the land and hold on to the cash generating asset they now own.
So here is how it works. The average gross return in this example is around $300 to $350 an acre. Doug suggests a straight out 80/20 split where the landlord no longer pays for 1/3rd of the crop inputs and simply receives a cheque for 20% of the gross revenue generated on each acre of land.  I’ll go through two examples to show you what the upside and downside this agreement has to offer.

Option 1) Crop share 1/3rd 2/3rds where landlord pays 1/3 of the crop inputs and receives 1/3rd of the revenue.
Revenue per acre:  Landlord pays $35.00/ac for input costs. 
$100 / 1/3rd  = $33 -   $35 =   $2.00
$200 / 1/3rd  = $67 -   $35 = $32.00
$300 / 1/3rd =  $100 - $35 = $65.00
$400 / 1/3rd = $133 - $35 = $98.00
$500 / 1/3rd = $167 - $35 = $132.00
$600 / 1/3rd =  $200 - $35 = $165.00

Revenue per acre:  Landlord pays $64.00/ac for input costs caused by increased fertilizer costs. 
$100 / 1/3rd  = $33 -   $64 = $31.00
$200 / 1/3rd  = $67 -   $64 = $3.00
$300 / 1/3rd =  $100 - $64 = $36.00
$400 / 1/3rd = $133 - $64 = $69.00
$500 / 1/3rd = $167 - $64 = $103.00
$600 / 1/3rd =  $200 - $64 = $136.00

Option 2) If using an 80%- 20% share (landlord receives 20% of gross income from grain sales with no expenses)

Revenue per acre:

$100 x 20% = $20.00
$200 x 20% = $40.00
$300 x 20% = $60.00
$400 x 20% = $80.00
$500 x 20% = $100.00
$600 x 20% = $120.00

The benefit to the landlord under the 80/20 system is the elimination of a negative return. In a drought year where the gross revenue could be $100 an acre, the landlord could potentially lose between $2 and $31 dollars an acre. The average rent in this area is between $60 and $70 an acre. If the average gross return in this area is $300 to $350 an acre, the 80/20 system would pay out between $60 and $70 an acre in rent, so nothing lost to the landlord or renter. Although the 80/20 system limits the landlords upside revenue potential by $45 an acre ($165 - $120) on a $600 year, he has eliminated his downside risk. The landlord will never receive a negative return on his investment. 

The benefit to the renter is that you have eliminated an upside potential payout to the landlord of $200 an acre. On the average, you will pay the landlord $60 to $70 acre in rent, which is what you would have paid anyway for rent in this area. You can claim another $35 to $64 an acre in expenses plus the 20% you pay the landlord. Worst case scenario and you only generate $100 an acre in gross revenue during a drought; you pay $20 acre rent and collect crop insurance.

We had discussed that perhaps an 85/15 split would be more in line. Not everybody pays $60 to $70 rent and not everybody generates $350 an acre on average. I suggest you do the math on your farm to see what split may work for you. I think this is a great idea for this farm. SL

Alberta Carbon Market Outlook - Jan 9, 2009

The Alberta marketplace for compliance grade GHG offsets is starting to show some life as the second compliance periods ends and we enter the true-up period.  This means that Large Final Emitters (LFEs) now have a firm idea of their compliance requirements under the Alberta Act and have until March 31, 2009 to meet compliance though internal reductions, Tech Fund contributions, or offset purchases. A review of the market shows potentially less offsets on offer this year than last.  In addition, LFEs are making inquiries and are on the hunt for high quality offsets to gain some experience with a carbon trading system.  This has shown up in quoted values, but liquidity is low and transactions are infrequent. 

Offset quality has a major impact on value, with low quality offsets currently fetching around $8.00/tonne and high quality offsets approaching the $15/tonne price cap.  Quality is defined by data accuracy and project type.  The market is clearly very short quality offsets and this is obvious in the discount to low quality offsets.  No one likes risk when it comes to compliance!  However, demand is pushing prices generally higher; with $13/tonne a trade-able level for high quality tillage based offsets.  There is also a strong case to be made that we could move even higher as the opportunity to apply offsets to the second compliance period comes to a close.

Bruce Love, Preferred Carbon Land Management Systems 

Comments

This is a comment from last week’s article on the use of sugar to improve microbial populations. 

Liked your bit on sugar and biochar, careful mate next you'll be telling us you’re going organic...  We had been using molasses with our glyphosate for years for the reason you quoted. We also used to add citric acid to lower the pH of the water to 3-ish which improved effectiveness of glyphosate and allowed us to half the rate we used it at, compared to the recommended rate. We applied molasses at a rate of 2 L/ha (809ml/ac). Soluble Fulvic acid powder is also very good at 2.5kg/ha (2.2 lbs/ac). The fulvic acid is better but more expensive.
It's the bacteria that like these simple compounds and also, nitrogen, green leafy material, vitamins and yeast. You’re creating a honey pot effect and the bacteria come in and clean up the herbicide residues. Glyphosate generally has a half life of 47 days but you can speed up the breakdown by doing this. You realize that the glyphosate is killing off the algae in the top soil which is an important food source for bacteria and fungi, so you’re kind of smacking the microbes over the back of the head while offering them a free lunch....   More on glyphosate.  It was originally patented as a chelating agent... can wrap around cations and make them unavailable...  also, often you will find manganese and iron uptake by plants compromised after using glyphosate because the soil organisms that make these nutrients available to plants are knocked out....
For the orchard we also use a lot of humic acid, kelp and fish because tree crops need a fungally dominant soil
Are you combining humates with all your fertilizers? If not this would be the best place to start. Cut your fertilizer rates back by say a quarter and replace the volume with humates. Humates are natural chelators and will stabilize (ie keep the nitrogen, phosphorous, boron... available for longer) and help buffer against the burning effects of your acid fertilizers.
Jason Jarvis, Twin Apple Packhouse, Western Australia

Market News

Updated USDA report January 12th, 2009.

Technical Indicators

I have set up these weekly updates to include market entry indicators to help you improve the timing of your grain marketing. Also, I added market trend indicators to give you a sense of the short and long term market trends.

Canola Chart http://futures.tradingcharts.com/chart.php?cbase=CA&market=RS&cterm=39

Support: $405.47 Tonne
Resistance 1: $425.67
Resistance 2: $445.87

Market Entry
The Bollinger Bands are indicating an oversold condition. The market is in oversold territory.
Market Trend
The Relative Strength Index for March canola is now in neutral territory at 52.98. The RSI is somewhat overbought at 52.98 but this by itself isn't a strong enough indication to signal a trade. Look for additional evidence before getting too bearish here.

The MACD is in bullish territory, but has not issued a sell signal here. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. MACD is in bullish territory. However, the recent downturn in the MacdMA may indicate a short term decline within the next few bars.

Feed Barley Chart http://futures.tradingcharts.com/chart.php?cbase=BA&market=AB&cterm=39

Support: $143.67
Resistance 1: $145.67
Resistance 2: $147.67

Market Entry
The Bollinger Bands are indicating an oversold condition. The market appears oversold, but may continue to become more oversold before reversing. Look for some price strength before taking any bullish positions based on this indicator.

Market Trend
The Relative Strength Index is somewhat oversold at 37.92. However, this by itself isn't a strong enough indication to signal a trade. Look for additional evidence before getting too bullish here. The long term trend, based on a 45 bar moving average, is DOWN. The short term trend, based on a 9 bar moving average, is DOWN.

Hard Red Spring Wheat http://futures.tradingcharts.com/chart.php?cbase=MW&market=MW&cterm=39

Support: $5.95
Resistance 1: $6.46 
Resistance 2: $7.00

Market Entry
The Bollinger Bands are indicating an oversold condition. Volatility appears to be declining, as evidenced by a decreasing distance between the upper and lower bands over the last few bars. The market appears oversold, but may continue to become more oversold before reversing.

Recently the market has been extremely bullish; however the market has lost some of its bullishness due to the following: the fast moving average slope is down from the previous bar, price is below the fast moving average, and price is below the slow moving average. It’s possible that we may see a market pullback here. If so, the pullback might turn out to be a good buying opportunity.

Market Trend
The Relative Strength Indicator RSI is somewhat oversold at 49.54. This by itself isn't a strong enough indication to signal a trade. Look for additional evidence before getting too bullish here.

The MACD is in bullish territory, but has not issued a buy signal here. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. However, the recent downturn in the MacdMA may indicate a short term decline within the next few bars.

Canadian Dollar http://futures.tradingcharts.com/chart.php?cbase=CD&market=CD&cterm=39

Support: $0.8034
Resistance 1: $0.8277
Resistance 2: $0.8520

Market Entry
Bollinger Bands: The Bollinger Bands are indicating an oversold market. The market appears oversold, but may continue to become more oversold before reversing. Look for some price strength before taking any bullish positions based on this indicator.

Market Trend
The Relative Strength Index is somewhat oversold at 49.01. However, this by itself isn't a strong enough indication to signal a buy. Look for additional evidence here before getting too bullish here.

The MACD is in bullish territory, but has not issued a signal here. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is DOWN. MACD is in bullish territory. However, the recent downturn in the MacdMA may indicate a short term decline within the next few bars.

Glossary of Technical Terms: http://www2.barchart.com/education/learning.asp 

International Crop and Weather News

United States: On the Plains, snow is spreading across northern areas in association with an Arctic cold front. Farther south, breezy, unfavorably dry conditions are maintaining stress on the southern Plains’ winter grains. In the Corn Belt, dry weather temporarily prevails between storm systems, except for snowy, windy conditions overspreading western portions of the region. This winter’s cold, often snowy or icy conditions have stressed livestock, especially across the northern Corn Belt.

Europe: Periods of rain along the Mediterranean Coast slow late winter grain planting. Overwintering conditions remain favorable for dormant winter crops across central and northern Europe, although most crop areas have minimal protective snow cover.

Former Soviet Union: Bitterly cold weather overspreads winter grains in Ukraine and Russia. An adequate snow cover in areas of extreme cold protects winter grains from widespread winterkill.

Southeast Asia: Heavy monsoon showers cause harvest delays for oil palm in Indonesia.

South Asia: Dry weather across India promotes rice and cotton harvesting.

Middle East: Rain covers key winter grain areas of central and western Turkey. Above-normal temperatures in northwestern Iran leave winter wheat exposed to potential bitter cold.

Northwest Africa: Rain returns, slowing winter grain planting in Morocco and Algeria. Dry weather in Tunisia decreases moisture supplies for emerging winter grains.

Australia: In eastern Australia, seasonably warm, showery weather favors cotton and sorghum development. Elsewhere in Australia, mostly dry weather allows winter grain harvesting to progress uninterrupted.

South America: Showers ease dryness in southern Brazil, bringing some relief to corn and soybeans. Dry pockets persist in key summer grain and oilseed areas of central Argentina, although conditions have improved in Cordoba, an important producer of corn, soybeans, and peanuts.

South Africa: Much-needed rain falls in western sections of the corn belt. Conditions remain generally favorable for summer crops in eastern farming areas.