Agronomist Notes
Spring is quickly approaching and pre-seeding visits are just around the corner. Soon we’ll be making final adjustments to pre-burn herbicides, seeding rates and crop rotations. Spring fever has struck the Larocque household!
Fertilizer prices (pickup, not delivered) are hovering around $560/T for urea, $720/T for MAP phosphate, $950/T for potash and $450/T for sulphur. There’s been talk of fertilizer shortages but I’ve been informed by one large company that they have their spring needs secured plus a little extra. I hope that’s the rule for all retailers. The one nutrient that may be in short supply is sulphur, which fell short in some areas last year.
In this issue of Beyond Agronomy News, we’ll focus on equipment and give you a quick and easy tool to calculate fuel costs based on horsepower requirements. We’ll take a lengthy look at something I refer to as “overkill your drill” to determine the added costs of owning and running oversized air drills. Next, Bruce Love will provide Alberta’s only weekly Alberta carbon market update. Finally, we’ll finish up with fundamental and technical grain market news and international crop weather. Have a great week. SL
Agronomy
Roy Currie’s fuel use calculator
During my time in New South Wales last month, I had the opportunity to travel with Roy Currie, irrigation specialist and 40-year veteran of the industry. We traveled to a number of farms looking at irrigation designs and pumps. While looking at a diesel generator for a large irrigation system, Roy reached for his calculator and with a flick of his fingers determined how many litres of fuel the engine would burn per hour. His estimate was confirmed by the owner who was more than impressed, as was I.
Luckily for me, he’s passed along his formula to share with you. So, let’s put it to use and have a look at the approximate fuel costs of the equipment we run at seeding time. The example below is of a CAT 3406 running at 1750 RPM, pulling a 40-foot air drill with 4-inch low draft openers rated at 9 HP per opener on 12-inch spacing.
Calculator example:
Cat 3406 engine with a fuel burn rate 0.220 g/k/W hr @ 1750 RPM
40, 4-inch low draft openers rated at 9 HP per opener = 360 HP
360 HP x 0.746 k/W/HP = 268 k/W
268 k/W x 0.220 g/k/W hr = 58.96 kg/diesel/hr
58.96 kg/diesel/hr ÷ 0.839 g/L of diesel = 70 L/hr
70 L/hr x $0.55/L = $38.50/hr
Therefore, it would cost you $38.50 an hour in fuel to run a CAT 3406 at 1750 RPM pulling a 40-foot drill with 4-inch low draft openers on 12-inch spacing, not including slippage. If you include 10% slippage then the running costs would be about $42.77 per hour.
Notes:
- To convert HP to k/W you must multiply HP by 0.746
- 1 litre of diesel weighs 0.839 grams
- For information on specific gravity (grams/litre/diesel) log on to http://tractortestlab.unl.edu/testreports.htm (Nebraska Tractor Test Laboratory)
- Engine Operating Parameters can change between summer and winter fuel and also suppliers.
- Keep in mind that this calculation is for power at the tyne, allowance must be made for wheel slip losses (minimum of 7%) and ground speed. As speed increases, tyne power requirement increases as does wheel slip.
- Some of the new electronic control engines can drop below 0.200 gram per k/W hour.
Reference: Roy Currie, irrigation specialist and Beyond Agronomy News reader, NSW, Australia
Overkill your drill: does it pay to go big or go home?
We often hear the experts tell us to lower our fixed costs by maximizing the number of acres we cover with our equipment. Don’t you think, though, that there’s a hidden value in operations like seeding, where a farm could benefit by having an oversized drill to speed up seeding, increase yield and reduce frost risk? Would you settle for lower efficiency to gain on yield and quality?
The rule of thumb is to divide your annual cropped acres by 100 to come up with the optimal seeding tool width. For example, if you seed 4,000 acres annually, you would require a 40-foot drill to reach 100% efficiency. I’m curious to know the additional cost of owning an oversized air drill running at 100%, 80% and 66% efficiency. Let’s run the numbers.
In the examples below I’ll compare the costs of owning and running a 41, 50 and 61-foot hoe drill on 4,000 acres. I will use the JD 1830 hoe drill and fully loaded 1910 air tank with dual wheels and VRT capable pulled by the JD 9430T, 9530T and 9630T, respectively. Also, to keep things constant, each hoe drill will have 12.5-inch spacing and 4-inch low draft openers that are included in the price of the drill at $200 per opener. Each unit will be financed at 6% over 5 years. Diesel usage will be calculated using Roy Currie’s fuel use calculator at today’s price of $0.55 per litre.
JD 1830 41 ft with 1910 air cart pulled by 425 HP 9430T
$87,900 + $112,000 + $318,487 = $518,387 or $123,063 per year
Acres per hour: 5 mph × 5,280 ft/mile × 41 ft ÷ 43,560 ft2/ac = 25 ac/hr
Acres per day: 25 ac/hr × 13 hr/day = 325 ac/day
Fuel cost per hour at 1750 RPM at 5MPH: 83 L/hr x $0.55/L = $45.65/hr
Fuel cost per acre: $45.65/hr ÷ 25 ac/hr = $1.82/ac
Cost per acre (fuel + equipment) = $1.82/ac + ($123,063/yr ÷ 4,000 ac) = $32.58 per acre
JD 1830 50ft with 1910 air cart pulled by 475 HP 9530T
$114,000 + $112,000 + $335,513 = $561,513 or $133,301 per year
Acres per hour: 5 mph x 5,280 ft/mile x 50 ft ÷ 43,560 ft2/ac = 30 ac/hr
Acres per day : 30 ac/hr × 13 hr/day = 393 ac/day
Fuel cost per hour at 1750 RPM at 5 mph: 92 L/hr x $0.55/L = $50.60/hr
Fuel cost per acre: $50.60/hr ÷ 30 ac/hr = $1.68/ac
Cost per acre (fuel + equipment) = $1.68/ac + ($133,301/yr ÷ 4,000 ac) = $35.00 per acre
JD 1830 61ft with 1910 air cart pulled by 530 HP 9630T
$125,200 + $112,000 + $360,569 = $597,769 or $141,908 per year
Acres per hour at: 5 mph x 5,280 ft/mile x 61 ft ÷ 43,560 ft2/ac = 37 ac/hr
Acres per day: 37 ac/hr × 13 hr/day = 481 ac/day
Fuel cost per hour at 1750 RPM at 5MPH: 103 L/hr x $0.55/L = $56.65/hr
Fuel cost per acre: $56.65/hr ÷ 37 ac/hr = $1.53/ac
Cost per acre (fuel + equipment) = $1.53/ac + ($141,908/yr ÷ 4,000ac) = $37.00 per acre
Now, before I begin the conclusion, you’re probably thinking that $32 to $37 an acre for a seeding tool is crazy! What I’ve done is left out the residual value of the equipment after five years on purpose. The fact is these pieces of equipment could be worth $150,000+ at the end of five years and overall costs per acre would drop in half to the $15 to $17 an acre range. I needed to keep things simple and constant! In the end, the cost of ownership and fuel to run a 41, 50 and 61-foot air drill on 4,000 acres would be $32.34, $35.00 and $37.00 per acre, respectively. That’s a difference of $4.66 per acre to go from a 41-foot air drill running 425 HP to a 61-foot drill running 530 HP. You could theoretically seed 45% faster using a 61-foot drill compared to a 41-foot. In reality, 45% faster means you can seed 4,000 acres in 8.3 days using a 61-foot versus 12.3 days using a 41-foot.
In the grand scheme of fixed costs, I believe the additional $2.66 or $4.66 per acre luxury of having an oversized drill is worth the money. A larger drill allows you to finish seeding earlier, easily adding a few percentage points to yield. When you factor in that most crops have the highest yield potential when seeded before May 7th, a 3 to 5% yield gain is reasonable if you find yourself seeding anytime after May 7th. The struggle in our area is that we start seeding at the end of April when the ground thaws which means we have roughly 14 days to get the entire crop in, including rain and snow delays. In my opinion, a few percent in added yield can easily provide a return on your overkill drill investment. SL
Is there a best before date on early action Alberta GHG offsets?
March 16, 2009- One of the most commonly asked questions by those not intimately involved in the Alberta Green House Gas (GHG) offset system is “do my early action GHG offset credits expire soon?” The straight answer is no, the Climate Change and Emissions Management Act (http://www.qp.gov.ab.ca/documents/Acts/C16P7.cfm?frm_isbn=9780779723386) that led to the creation of the Alberta GHG offset system came into force July 1, 2007 is not set to expire until 2014. The regulations under this Act, or the Specified Gas Emitters Regulation (SGER) (http://www.qp.gov.ab.ca/documents/Regs/2007_139.cfm?frm_isbn=9780779725403) that defines the use of GHG offsets by Large Final Emitters (LFEs) to meet compliance requirements is also not set to expire until 2014. Although there is the possibility that the Alberta GHG offset system will need to be harmonized with a Federal system in the future, this will only happen after a stakeholder consultation period. There has been no announcement to date of a consultation period to review the Act or the SGER due to pending Federal regulation or anything else for that matter. Therefore, early action GHG offsets (2002 to 2007) remain good currency in the Alberta GHG Offset system and this has not changed since the Act was created back in 2007.
Now that we know our earlier action GHG offsets won’t expire immediately, what can we expect going forward? This is a really good question and one we can only speculate on at this point in time. While there appears to be significant interest and momentum growing for a national and even a continental system to reduce GHGs, nothing definitive has been announced yet. As seen in our earlier columns, Canada has been extremely reluctant to adopt a national system to reduce GHGs or place a price on carbon. The reality of it in our opinion is that Federal Government of Canada will have to become convinced (it isn’t today) that President Obama will be successful in making GHG reduction policy law in the USA. So stay tuned for when we see the Federal Government change its mind.
So for now, the focus is on the Alberta Offset market and what lies ahead. The second true-up period under the SGER is drawing to a close. This means that LFEs have until March 31, 2009 to submit their required GHG intensity based reductions for compliance (GHG offsets, internal reductions, performance credits, and Tech Fund contributions) for the year ended December 31, 2008. Most, if not all, LFEs will complete their compliance based transactions by the end of this week and close off the books for 2008.
Recent market indications support our earlier call that the price spread of GHG offsets to the Tech Fund price cap of $15/tonne would narrow as the second compliance period draws to a close. Market sources have quoted GHG offset values considered good-for-compliance in a range from $11 to $13.50 per tonne as tradable levels. Of course the quality of the GHG offset and the counterparty affect prices, but what is interesting is how the low end of the range has come up.
Reference: Bruce Love, Preferred Carbon
Disclaimer: The views expressed in this article are those of the author only and are not intended to represent financial advice.
Market News
Fundamental Analysis
World Production in Million Metric Tonnes
|
Production |
Ending Stocks |
Ending Stocks |
|||||
|
2007-08 |
Mar-09 |
Change |
2007-08 |
Mar-09 |
Change |
5 Year Avg |
|
|
Rapeseed |
48.4 |
57.5 |
19% |
3 |
6.1 |
97% |
4.6 |
|
Barley |
133.2 |
154.5 |
16% |
18 |
29.5 |
63% |
25.7 |
|
Wheat |
610.6 |
684.4 |
12% |
119 |
155.9 |
31% |
138.6 |
|
Corn |
792.3 |
787.1 |
-1% |
128 |
144.6 |
13% |
125.9 |
|
Soybeans |
220.9 |
223.3 |
1% |
53 |
49.9 |
-6% |
54 |
Updated USDA report March 11th, 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.
May Canola http://futures.tradingcharts.com/chart.php?cbase=CA&market=RS&cterm=59
Support: $398.57
Resistance 1: $404.77
Resistance 2: $410.97
Market Entry
Volatility appears to be declining. The market appears overbought, but may continue to become more overbought before reversing. Look for some price weakness before taking any bearish positions based on this indicator.
Market Trend
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 UP. MACD is in bullish territory.
May Feed Barley http://futures.tradingcharts.com/chart.php?cbase=BA&market=AB&cterm=59
Support: $142.37
Resistance 1: $145.57
Resistance 2: $148.77
Market Entry
The market appears overbought, but may continue to become more overbought before reversing. The market is EXTREMELY BULLISH. Everything in this indicator is pointing to higher prices. Look for some price weakness before taking any bearish positions based on this indicator.
Market Trend
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.
May Hard Red Spring Wheat http://futures.tradingcharts.com/chart.php?cbase=MW&market=MW&cterm=59
Support: $5.93-1
Resistance 1: $6.24-7
Resistance 2: $6.56-5
Market Entry
The Bollinger Bands are indicating an overbought market. Volatility appears to be picking up a bit. The market is EXTREMELY BULLISH. Everything in this indicator is pointing to higher prices.
Market Trend
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 UP. Momentum is in bullish territory and an upside move is likely. Open Interest is in a downtrend based on a 9 bar moving average. While this is normal following delivery of nearer term contracts, be cautious. Decreasing open interest indicates lower liquidity.
Mar Canadian Dollar http://futures.tradingcharts.com/chart.php?cbase=CD&market=CD&cterm=39
Support: $0.787
Resistance 1: $0.788
Resistance 2: $0.788
Market Entry
The Bollinger Bands are indicating an oversold market.
Market Trend
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 UP. MACD has issued a bullish signal, suggesting that the short term upward trend may continue, and may indicate a pending reversal in the long term trend.
Glossary of Technical Terms http://www2.barchart.com/education/learning.asp
International Crop Weather News
England weather update
“UK weather warmer and drier. Field work progressing and another dry week is forecast which should allow herbicide programmes to be completed in good conditions on winter sown crops. Nitrogen applications are going ahead onto good moist soil conditions for uptake and efficacy. Spring crops going into good seedbeds at near ideal timings. Still some very moderate looking crops around that will soon look much better (if only from the roadside) as nitrogen takes effect.” Nick Ward, England
West Central Brazil harvest update
“Here in Lucas do Rio Verde, Mato Grosso, crops are coming to the end. Many Farmers say that this harvest has seen approximately 2 bu/ac less soybeans than last year. Last crop averaged 39 bu/ac and this crop will average 37 bu/ac. The harvest weather has been very nice. Farmers could gather soybeans and not lose them from excessive rain. Farmers are now planting corn but it hasn’t rained much in March and corn needs water in this period. We have two seasons: one is very dry that not rain and other that rain a lot. Dry period: (May, June, July, August, September) Wet period: (October, November, December, January, February, March and April).” Guilherme Kummer, Mato Grosso, Brazil
United States: In the West, rain and snow showers are mostly confined to the northern Rockies and the Pacific Northwest. Mild, dry weather prevails across the Intermountain West and the Southwest. On the Plains, warm, dry weather prevails. Today’s high temperatures will exceed 80 degrees F across parts of the central and southern Plains. On the drought-stricken southern Plains, recent rainfall was heaviest and most beneficial for pastures and winter grains in central and eastern Texas. In the Corn Belt, spotty rain showers are confined to the eastern half of the region, where lowland flooding persists along some rivers in the wake of early-March downpours. In the South, a band of generally beneficial rain stretches from the southern Mid-Atlantic region to the central Gulf Coast. However, unfavourably dry conditions persist across much of Florida.
Europe: Rain in Italy and on the Iberian Peninsula reduces irrigation demands for vegetative winter wheat. Cool, showery weather in England and France maintains adequate moisture reserves for greening winter grains and oilseeds. Showers in Germany are favorable for greening winter wheat, although crops in eastern growing districts remain dormant.
Former Soviet Union: Rain and snow in Ukraine and southern Russia boost moisture reserves for dormant winter grains. Light snow over northern Russia maintains a moderate to deep snow cover in winter grain areas.
Southeast Asia: Showers in Indonesia slow rice maturation and oil palm harvesting. Drier weather eases wetness in the southeastern Philippines, while moisture conditions remain favorable elsewhere for rice and corn. Warm, sunny weather aids winter-spring rice development and harvesting in Vietnam.
South Asia: Warm, dry weather accelerates wheat development in northern portions of India and Pakistan. Locally heavy showers in southern India slow rabi (winter) rice and groundnut harvesting.
Middle East: Rain in Turkey and Syria maintains favorable conditions for vegetative winter grains. Dry weather lingers in northwestern Iran, although the crop-water requirements of greening winter wheat and barley are still relatively low.
North Africa: Widespread showers maintain abundant soil moisture for vegetative to heading wheat and barley.
Australia: In eastern Australia, relatively dry weather reduces soil moisture for immature cotton and sorghum but helps spur the maturation and harvesting of more fully developed crops.
South America: In Argentina, soaking rain increases moisture for second crop soybeans, but some flooding is likely in the lower Parana Valley in and around Entre Rios. Warmer, drier weather fosters dry down and harvesting of soybeans in key production areas of Brazil.
South Africa: Mostly dry, seasonably mild weather promotes development of corn and other filling summer crops.
Canada: Seeding commences in mid-April in Southern regions and early May in Northern regions.
