Agronomist Notes

Welcome back to another year of Beyond Agronomy News! We hope you had a restful holiday and enjoyed spending time with family. This is shaping up to be an exciting year as our publication grows and sees a facelift in the near future along with our website. I kick off my Nuffield Scholarship in Australia February 23rd with an 6-week Global Focus Tour of progressive farms, industry and government. My boots finally touch home soil April 7th. Stay tuned!

On the farming end, commodity prices continue to rise and so do the cost of inputs. This makes the information provided in this newsletter all the more valuable as we discover ways to make more informed decisions. For example, the cost of nitrogen has gone from a low in September of $430 per tonne to today’s price of $615 per tonne. My clients were able to capitalize on the early September price and save $185 per tonne, roughly $75,000 across a 4,000 acre farm! If you read our newsletter, we suggested pre-buying fertilizer in fall and if you did, your $220 investment just yielded a fairly significant return!

This week, we’ll dive into the comparison of precision agriculture to large scale farming. In previous issues I’ve focused on precision ag technologies, however I’ve neglected to justify the reasons for moving forward and spending the time, effort and expense of using these technologies. We’ll also discuss wheat midge and provide informative links to help understand this new insect to our area. Finally, we will end on the topic of farm labour in Alberta. I’ve discovered four companies that search and hire farm labourers in Alberta.

Agronomy

Wheat Midge Confirmed Near Three Hills

I was going through a few dozen wheat samples last November with a grain buyer to take a look at grades and proteins in the area. I noticed a few samples had been downgraded due to wheat midge damage. An independent grading firm had graded the samples and were confident the damage was in fact from wheat midge. This is the first I’ve heard of wheat midge damage this far West before and the grain samples were from a cross section of farms from Drumheller to Three Hills. A recent provincial wheat midge survey near Three Hills found three areas with midge counts that warrant monitoring and control in 2008. Now that midge has been confirmed, I am going to put a monitoring program in place next year to be prepared for yet another new insect to our area. We will discuss the program further at a later date. SL

2007 Alberta Wheat Midge Map: http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/prm11494

For more information on the Wheat Midge see:
http://www.dowagro.com/ca/news/western/18-Jun-01.htm
http://www.gov.mb.ca/agriculture/crops/insects/fad22s00.html  

Precision Farming – Checking Our Motivations

Every once in a while we have to sit back and analyze the motivations behind our decisions. Specifically, we have to ask ourselves why we must purchase equipment, rent land or hire advisory services. The question is, do we make those decisions for improved profitability, quality of life or prestige and status. I’m asking myself this as I venture into the world of precision farming. What is the net gain of our actions?
The ultimate reason behind the adoption of precision agriculture is to increase yield or quality, reduce the environmental impact of farm operations and reduce production costs or all of the above. The alternative is to expand and farm more land with the objective of lowering overall fixed costs and not necessarily increase yields.
So what kind of return can we expect from the adoption of precision technologies? Is it possible to make the same net return by employing precision technologies compared to farming more land and gaining economies of scale?

Let’s do the math on a theoretical example:

Rock Farms is a 4,000 acre farm that nets roughly $20 an acre or $80,000 per year. This is before the accountant advises the purchase of $80,000 in right offs. 

Option 1. Rock Farms expands it’s land base by 2,000 acres and gains $10.00 an acre in reduced costs by spreading his machinery costs over more land. Rock Farms now nets $30 an acre over 6,000 acres which brings him to a total net return of $180,000. 

Option 2. Rock Farms maintains the same 4,000 acre base and employs precision technologies to increase profits. In order to match the same net revenue generated by Option 1, Rock Farms will have to net a return of $45 an acre or $180,000 a year.

Discovering the Numbers
Now the question: is it possible to increase net revenue by $25 ($45 less $20) an acre using today’s $20 an acre net return as the baseline? This is a very difficult question to ask when each farm and each field experiences different challenges. I will simplify things and list potential opportunities to increase revenue with precision technology.

Seeding. A reduction in seedling mortality can be attained through improved precision placement of seed. Reducing the seeding depth variability can improve germination significantly. In canola, if we could reduce seedling mortality by 10% where 50% mortality is the norm, we could reduce seed costs by 0.5 lbs an acre with a 5 lb seeding rate. At $6.00/lb for canola seed that translates to a $3.00 an acre savings in seed costs.

Seedling mortality in cereals is typically around 20%. If we could improve seedling emergence by 10%, we could reduce seed costs by 10%. Therefore a typical 120 lb seeding rate for wheat will translate into a 12 lb/ac reduction in seed or $1.20 an acre in savings.

Research studies evaluating yield improvement through precision seeding have found net gains of 8% to 20%. I will be conservative and use a 5% increase in yield from precision seed placement. A 50 bu/ac wheat yield would equate to a 2.5 bu/ac increase in yield. At $6.00 a bushel, that works out to a net gain of $15 an acre. Canola at 35 bu/ac and $8.00 a bushel is $14 an acre. Feed barley at 80 bu/ac and 3.25 a bushel works out to a net gain of $13 an acre.  

Nutrients. Precision placement and site specific management of fertilizer has the potential to reduce fertilizer costs by 0% to 30%, depending on the field. In this calculation I’ll use a conservative 5% savings in fertilizer. A 5% savings in fertilizer at today’s price with an application rate of 225 lbs an acre will reduce costs by $3.25 an acre.  

Protein. The site specific management of nutrients often raises the protein average across each field by reducing the under application of nutrients in high yielding areas. Using a five-year average of the CWB PRO, a 1% increase from 12.5% to 13.5% in protein can net you $5.00 a tonne. With an average yield of 50 bu/ac or 1.36 tonne an acre, you stand to increase revenue by $6.50 an acre.

Conclusion
Across 4,000 acres on Rock Farms, which rotates 1,000 acres of canola, 2,000 acres of wheat and 1,000 acres of barley each year, we can theoretically gain $22.40 an acre with the examples I’ve provided. Now we must understand that these numbers are theoretical and I would encourage every farm to evaluate their situation independently. Perhaps growing your land base is more economical or feasible than investing into precision technologies. In this example, we are $2.60 short of meeting our target of a $25 increase in net revenue. Precision technology looks better all the time and we’ve really just begun this journey. SL

Finding Farm Labour in Alberta

One of the biggest issues surrounding farm expansion in Alberta today is finding qualified labour. This is a hot topic on the minds of many producers who just squeaked by this year thanks to help from friends and family. Some of my clients have used agencies to bring in workers from Europe, Australia and the Philippines. This can be a hit and miss endeavour when you consider flying someone all the way here to find out they’re not suitable!

We need to find new ways of enticing potential employees by offering creative compensation packages. I suggest contacting your local herbicide representatives, grain buyers or crop input retailers to find out what sort of compensation packages the big companies are offering. I’m sure most would share that information with you. In reality, you are competing with the main line agricultural companies for labour and finding out what makes them enticing to work for may point you in the right direction. 

I’ve provided links to Alberta companies who specifically search to match and place farm labourers. Some even offer a free service for producers looking for someone to do chores while you’re on vacation. A great idea indeed.      

Agri-Connect http://www.agriconnect.com/farmsitters.aspx
AgCall http://www.agcall.com/
JobVolume.com http://www.jobvolume.com/jobs-at/Agricultural-Employment-Alberta-Ltd.----------Placement-Agen/
Agricultural Employment Alberta http://www.wowjobs.ca/BrowseResults.aspx?q=&l=&s=d&sr=&t=&e=Agricultural+Employment+Alberta

Market News

Bullish Food Markets Are Here to Stay
Some analysts are now saying commodity markets are in a "bubble" that is ready to burst. They point out the historically cyclical nature of commodities and how high prices curb demand and always result in greater production. Also, they cite the commodity bubble of the Seventies and the price bust of the Eighties as examples of what’s ahead. Will the economic slowdown into 2008 force other commodities to retreat? Bill Gary believes high priced commodities are here to stay. Some will retreat from record highs, others will languish, and yet others will move to even higher historic levels. Our reasoning is as follows…
Full Story: http://view.exacttarget.com/?j=fe4e1573726c0c747212&m=ff2c13767065&ls=fdfc17777c65077c74147776&l=fec6157372640174&s=fe24137876670275761071&ju=fe1e1576766103757c1d71

Start Shopping For Basis Levels
With bullish markets in the forecast you can bet that basis levels next fall will be very unattractive. You can see the effects right now in canola basis levels. Try finding a zero basis or even a ten under basis for canola right now at $519 tonne futures. I’ve heard many basis levels for January canola sitting around thirty dollars under. Pay closer attention to basis levels in January-February and perhaps hold off on pricing futures a while. SL

Eleven-Year Commodity Lows to Occur Starting 2010-12
Consensus National Futures Inc. predicts commodities to turn lower as we move into the year 2010. Basis this report, commodities like cattle, hogs, corn, soybeans and wheat will have reached their eleven year lows starting in 2010. The US dollar index will return higher in 2010 off todays low.  
http://www.consensus-inc.com/002001i/knay1537/tech/1221tec-hml.htm

Monthly Ethanol Production Continues to Increase
With a new year has come a new all time high for oil prices, noted Renewable Fuels Association president Bob Dinneen. “As world oil reserves continue to dwindle and new reserves become more costly to find and develop, the American ethanol industry is rapidly expanding its ability to help renewably fuel this nation. Increasing domestic ethanol production reduces oil demand including imports, helps expand fuel supplies, and ultimately benefits the American driver by helping keep gas prices lower than they might otherwise be.”
Full Story: http://www.agweb.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=072D7AC127ED4565A4D3A8B51E8B689C

Potential Hot and Dry June-July in 08’
Early climate models suggest a hotter and drier than normal June-July period over the Canadian Prairies in 2008. My weather source Ray Garnett likens 2008 to be comparable to the years 1961 and 1988.
See wheat price in 1961: http://www.wdmatrix.com/ChartRoom/wheat/wz1961.gif 
See wheat price in 1988: http://www.wdmatrix.com/ChartRoom/wheat/wz1988.gif

His weather predictions in 2007 were bang on from the start of seeding until harvest. I’ve grown to trust his predictions. SL 
Source: Ray Garnett Crop & Climate Newsletter

Expert Predicts 2008 Corn Crop Won't Be Enough
The ethanol industry's appetite for corn is going to surge in the coming months, but producers will likely lower corn acreage for the 2008 crop, says Chris Hurt, Purdue University Extension agricultural economist.

"This has two major implications," says Hurt. "First, the corn-based ethanol industry will have excess production capacity and therefore narrow margins, and at times negative margins, for periods during the next two years. Second, corn prices will be historically high for the recently harvested 2007 crop and for the 2008 crop and perhaps for the 2009 crop, too. We're looking at corn in the mid- to-high-$4 range."
Full Story: http://enews.penton.com/enews/cornandsoybeandigest/corn_edigest/2008_01_07_january_7_2008/display#expert_predicts_2008_corn

La Nina to Persist in Brazil
The world is watching Brazil’s weather pattern to determine the impact of La Nina on crop growing conditions. With soybean prices at all time highs, the world cannot afford a production failure of any kind. At this time, only 30% of Brazil’s soybean growing region has received above average precipitation. The soybean crop is most sensitive during January and February during flowering so that’s something to watch for in the coming weeks. Soil moisture concerns exist in 70% of the soybean growing region. The soils in Brazil are very well drained; you can imagine with 80 inches per year, they need to be. Crops must rely on regular rainfall events to keep them from suffering moisture stress during hot periods. SL

China to Tax Grain Exports to Boost Domestic Supply
So why don’t we take more wheat off the international market? China, the world's biggest grain producer, taxed exports of wheat, corn and rice to increase domestic supply and control rising food prices. Exporters of wheat started paying a 20% tax on January 1, while the tax for corn and rice was set at 5%. The government, concerned that inflation may disrupt social stability, has sought to curb price increases by selling grain from stockpiles and by cancelling export tax rebates.
Full Story: http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=aO2aajb1Xwho

Local Feed Barley and Feed Wheat Prices
The price for feed wheat in the Calgary and Red Deer area remains at $200 to $210 a tonne for January delivery. Feed barley prices range from $196 to $200 a tonne for January delivery. There was roughly 500 tonnes of corn DDG’s sold into Lethbridge last week priced in the $216 a tonne for January delivery. Edmonton had No. 2 corn delivered for $235 a tonne. SL

Canadian Grain Commission Update
I have attached the links to the changes in the Western Canadian minor wheat classes (removing kernel visual distinguishability), grain grading and inspection, producer risk-mitigation strategies when delivering grain and clarification on the proposed changes to the Canada Grain Act tabled in Parliament in December.

1. Grain grading http://grainscanada.gc.ca/Pubs/GGG/ggg-e.htm
2. Risk management http://grainscanada.gc.ca/Regulatory/Licensees/manage_risk-e.htm
3. KVD http://grainscanada.gc.ca/Quality/Wheat/classes_chang08-e.htm
4. Proposed changes to the Canadian Grain Act http://grainscanada.gc.ca/Information/cgc_ccg/chang-2008-12-13-e.htm

Source: Canadian Grain Commission

Upcoming Events

Agronomy Update 2008
Location: Capri Centre - Red Deer, AB
Date: January 15th- 16th, 2008
Event Details:
Leading researchers and extension professionals will present the latest information on crop protection products, weed and insect management, crop production for bioenergy markets, and farm-based environmental goods and services.
Registration details http://www1.agric.gov.ab.ca/$department/EFE.nsf/all/efe1186

Resisting Resistance Pest Management Conference
Location: Olds College Alumni Centre, Olds, AB
Date: February 12th, 2008 
Event Details:
Look closer at pest management and know what resistance means to you. Join top speakers in a discussion covering the status of herbicide resistance on the prairies, selection pressure for herbicide resistance, the role and management of fungicides in Alberta cropping systems and insecticide resistance and management. Call to register at 403.556.4677 or toll free 1.800.661.6537 ext 4677
Registration details
http://www.oldscollege.ca/programs/ContinuingEducation/Land_Sciences/resisting-resistance.htm

FarmTech 2008
Find global perspectives from Australia, North and South America and over 35 top-notch speakers from across Canada and the USA. There are 46 concurrent sessions available - focused on issues in technology, environment, agronomy and management. Phone 1.866.327.6832 to register. For more info visit the conference site.