Agronomist Notes

Hello from Lincolnshire, UK! After three hours in airports, nine hours of air time, three hours driving on the wrong side of the road and 40 roundabouts, I made it to my destination late Sunday afternoon. I spent the next day touring with my host, Nick Ward, around his 2,500 acre farm and had a great conversation with a grain buyer from Cargill. I am currently in what’s called the Midlands, about three hours northeast of London and not far from the coast. At first glance, England is a busy place with a lot of people, narrow roads and fast cars.  

I’ve been here only 30 hours but I’ve stepped foot on one of Prince Charles’s farm properties to have a look at wheat and canola emerging. The majority of crops here are planted in September and harvested in August and that includes winter canola, wheat, barley and fababeans. Winter canola is now in the 5 to 7 leaf stage, wheat is at the 2 to 3 leaf stage and barley is in the 2-leaf stage as they go into dormancy. It was a rare experience to walk across freshly plowed fields with absolutely no residue remaining; certainly a little different to home.

In this week’s Beyond Agronomy News, I’ll give you a quick glance at agriculture in England. Next, I’ll discuss the premiums they offer here for canola oil content and I’ll show you some interesting equipment that combines seeding with deep ripping. Lastly, I’ll turn my thoughts homeward and weigh the costs of buying and applying nitrogen this fall versus waiting till next spring. Bruce Love will update us on the carbon market and we’ll end with fundamental, technical and international market news.

Picture: Nick Ward in winter rapeseed field, Lincolnshire, UK.

Agronomy

A glimpse of farming in England

Imagine for a moment, you’re farming in an area with 26 inches of annual rainfall. You can grow 180 bu/ac wheat, 160 bu/ac barley and 70 bu/ac canola consistently, year after year. Now, to obtain those great yields, imagine running your equipment across each field 12 to 15 times a year. Amid multiple applications of fungicides, insecticides, herbicides, growth regulators, plowing, cultivating, disking, deep ripping, seeding and fertilizing, imagine how much money you’re left with at the end of the day. Not a lot! Welcome to farming in the UK.  

To give you some perspective, England’s land base is five times smaller than Alberta with a population 25 times larger. 50 million people! The glamour of high yields ends when you discuss the lengths farmers go to achieve them. Due to urbanization pressures, farming is highly regulated and policed. As a farmer, you are required to maintain a log of who, what, where, when and how you applied each product. You must keep all these records on hand for five years for inspectors to audit at random. If you have a record out of place or the products purchased don’t correspond to the acres, you are fined a minimum of $5,000 CAN.

Aside from the challenges I’ve mentioned, this Mediterranean climate is favorable for growing cool season crops like wheat, barley and canola. For example, England produces 15 million tonnes of wheat on 5 million acres verses Canada who produces 25 million tonnes on 24 million acres. It’s not hard to do the math and understand that England can really grow grain. The annual rainfall is fairly consistent which makes drought or crop failures very rare. Aside from a nice climate, friendly people, good beer and cool machinery, the cold honest truth is that I really don’t see many advantages to farming here. It seems everyone struggles with the pressures of regulation and the costs of producing grain are quite high relative to the value of their commodities. Once again, I think how grateful I am to work and farm in Alberta compared to any place I visited on my Nuffield travels. SL  

Premiums offered on oil content in canola

I had a great conversation with a Cargill grain buyer near Lincoln, UK today. We discussed grain markets and risk management programs among other things. What caught my interest was the offer of premiums for oil content in canola. The going premium is 1% of the value of canola for each percentage of oil above 40%. I often wonder why we don’t get paid premiums for oil content when the value of canola is in the oil!

Naturally, I really wanted to run the numbers on what we could attain in oil content premiums back home. The average the oil content of canola grown in Western Canada is around 42%. Let’s just take a conservative measure of 1, 2 and 3% above our 42% average at today’s November price to see what kind of premium we’re looking at.

Steve’s quick math

#1 CAN Canola with 42% oil content = $402.80 tonne November futures
43 % oil = $4.02 tonne or $0.09 bu
44 % oil = $8.04 tonne or $0.18 bu
45 % oil = $12.08 tonne or $0.27 bu

So theoretically, if we manage our harvest and swath timing correctly and the weather cooperates, we could see upwards of $0.27 cents a bushel premium for what we produce. This year, we could have gained another $8.00 an acre in oil content premiums. Interesting concept don’t you think? I’d like to know how often we produce canola below 42% oil to see what the risk of not reaching that content would be. I’d bet if there was a premium paid for more oil there would be a discount for producing less. Food for thought. SL

Deep ripping soil while seeding canola a common practice

With 26 inches of rain, heavy clay soils and a dozen trips over a field with equipment, compaction is a limiting factor in production here in England. One method they use to break up compaction is to deep rip down to 14 inches to bust up the hard pan. A common practice is to combine the deep ripper with a Valmar to seed canola and deep rip at the same time.

If you look at the pictures on the left you can see the tall shanks used for deep ripping and the hoses on the back of the implement attached to a red spreader tip placed in front of the press wheels. This technique has improved the depth, size and length of the canola roots, brought up moisture from below and improved germination and emergence. 

I enjoy seeing clever ideas in use and I thought I’d share this one with you. Have a look at the tap root on this canola plant; very impressive at this growth stage. However, as one who promotes controlled traffic, I beg you not to think about deep ripping! Think instead about eliminating the need for deep ripping through controlled traffic. SL

Is fall banding nitrogen worth it in 2009?

With nitrogen and fuel prices at a reasonable level this fall, some producers are looking at fall banding urea or anhydrous ammonia. In some cases, producers can a) capture lower cost nitrogen without having to store it, and b) increase seeding efficiency next spring. Break out the calculator and let’s find out the breakeven cost for fuel and labour if we applied N this fall. Then let’s compare the fall application costs to the potential savings from purchasing urea today verses the spring.

Steve’s quick math

In this example, we will use a 58-foot air drill with a 435 bushel tank using 2-inch openers on 10-inch spacing to band 175 lbs of urea (80 lbs N) per acre at 6 mph.

Labour: $20/hr
Fuel use: $39.60/hr (15 gal/hr at $2.64/Gal or 68 L/hr at $0.70/L)
425 HP 4WD: $49.50/hr 
Acres per hour: 42 ac/hr (6 mph × 5,280 ft/mi × 58 ft ÷ 43,560 ft2/ac)
Acres per fill: 134 ac (435 bu × 60 lb/bu) ÷ 175 lbs × 90%)

The breakeven equipment, fuel and labour cost to run this air drill is $109.10 per hour or $2.60 per acre if 42 acres per hour is possible. The cost of nitrogen today is roughly $380 to $410 per tonne or $0.37 per pound of nitrogen. Therefore, the cost of urea must increase by $30.42 per tonne or $0.03 per pound of N by next spring to recover the equipment, fuel and labour costs. I realize there’s a benefit to seeding efficiency with less fill times in the spring but I think you might be better off to put that $30.42 a tonne towards a hopper bottom bin. SL

Carbon News

Carbon credits: your hedge on the future

November 2, 2009- Agriculture is in a unique position when it comes to climate change. Typically an unregulated sector when it comes to policies and regulations to reduce the greenhouse gas (GHG) emissions, agriculture qualifies as one of the largest potential sources of carbon credits. However, all too often farmers are quick to overlook the real value of carbon credits as a hedge against future uncertainties.

Climate change by its very definition means more unstable weather patterns that will affect agricultural production on a global scale. While this may mean opportunities for greater commodity price volatility, the result may also be that farmers face more production uncertainty. Yes, that’s right, the old supply and demand relationship that has so much to do with prices. As supplies decline prices respond by increasing, but revenue is still price multiplied by the quantity produced, so revenues may suffer if there is less to sell.

Another direct impact on agriculture as climate change policy evolves will be the impact on large final emitters that are regulated to reduce their emissions. The likelihood of economy destroying GHG reduction policy may appear to be declining with the hopes of a global deal on climate change in Copenhagen this December fading, but as seen in previous columns this is only part of the picture affecting North American farmers. Recall that legislation containing restrictions on GHG emissions is moving through the US Senate, it’s focused on energy security, and it’s all about creating jobs. Therefore, the policy to watch is in the US and Canada has agreed to follow promptly behind what ever the US does. It is very likely that Canada’s current GHG emissions are rising, while several studies examining US GHG emissions has them on the decline as a result of the recession, the adoption of more renewable energy sources and mandated improvements in vehicle fuel efficiency. Therefore, a likely conclusion is that whatever GHG reductions are adopted in the US, it will be much tougher for Canada to meet the same reductions on a relative basis.

So why should a Canadian farmer care about GHG policies affecting LFEs? This should be fairly obvious. All the major agricultural inputs are supplied by LFEs. In particular, fertilizer manufactures are LFEs, fuel manufacturers are LFEs, cement manufacturers are LFEs, steel producers are LFEs, all Albertan power companies are LFEs, and well, you get the idea. As GHG reduction policy is implemented their costs will increase, that is what a price on carbon means. Since all LFEs are affected by the GHG limiting policy, it should be expected that they will pass along a good portion of the cost of carbon to their customers.

Some farmers have considered their carbon credit cheques as found money. Let’s think about that for a moment. If the price of carbon increases, so will the LFEs’ costs and so will the prices paid by farmers for their inputs. Given that each farm has only so much potential to create carbon credits, selling them off as found money may not be the best strategy. It is like being given a hedge against rising input prices and selling it off and staying long the risk of input price increases. Add to the mix more unstable weather patterns and increased commodity price volatility and I am sure the farm manager won’t be bored.

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

World Production in Million Metric Tonnes       Oct 09 ending stocks vs five year average

	Production			Ending Stocks			Ending Stocks
	2007-08	Oct-09	Change	2007-08	Oct-09	Change	5 Year Avg
Rapeseed	48.4	56.5	17%	3	4.9	59%	4.6	8%
Barley	133.2	147.2	11%	18	30.4	68%	25.7	18%
Wheat	610.6	668.1	9%	119	186.7	56%	138.6	35%
Corn	792.3	792.5	0%	128	136.2	7%	125.9	8%
Soybeans	220.9	246.0	11%	53	54.8	3%	54	1%

USDA
Updated Oct 16, 2009

Technical Update

Canola: November futures
HRS Wheat: December futures
Canadian dollar: December futures
Crude Oil: December futures

International Crop and Weather News

Western Canada: Harvest activity was limited last week due to cool and wet conditions. Overall progress for the six major crops on the Prairies is largely unchanged. Spring wheat progress increased one point to reach 91 per cent complete, the durum harvest is unchanged at 97 per cent and barley remains at 94 per cent. The small amount harvested was very high in moisture (20-25 per cent). The greatest progress was in northern Alberta, where precipitation was limited to less than 10mm.

United States: On the Plains, light rain is mostly confined to Nebraska. Elsewhere, mild, dry weather favors summer crop harvesting and winter wheat planting, emergence, and development. In the Corn Belt, light rain is falling in an area centered on Lake Michigan. Elsewhere in the Midwest, mild, dry weather is promoting a limited amount of soft red winter wheat planting and corn and soybean harvesting, as field conditions permit. In the South, winter wheat planting and harvest activities are advancing in the southern Atlantic coastal plain, but fieldwork remains at a standstill in many other areas—including much of the lower Mississippi Valley—due to excessively wet soils and lowland flooding.

Middle East: Dry weather favors winter grain planting, although soil moisture is limited for crop establishment.

Europe: Rain boosts reservoir levels and irrigation reserves in previously dry portions of Spain and Italy. Drier weather in Germany and northwestern Poland favors harvesting and winter crop planting. Showers in Eastern Europe hamper summer crop harvesting and winter grain planting.

Former Soviet Union: Showers in Belarus, Ukraine, and western Russia provide additional moisture for winter wheat emergence but slow fieldwork, including summer crop harvesting and late winter grain planting. Dry, unseasonably warm conditions in southern Russia favor summer crop harvesting but reduce soil moisture for winter wheat emergence.

East Asia: Warm, dry weather favors winter wheat and rapeseed planting on the North China Plain and in the Yangtze Valley.

Southeast Asia: Tropical Cyclone Lupit passes north of the Philippines, allowing drier weather for rice harvesting.

South Asia: Dry weather throughout India favors summer crop harvesting but reduces soil moisture for winter rapeseed planting.

Australia: In southeastern Australia, warm, sunny weather and adequate soil moisture aids filling winter grains. Persistent dryness in Western Australia slightly reduces the yield potential of immature winter grains. In east-central Australia, very warm, continued dry weather remains unfavorable for summer crops.

South America: Conditions remain favorable for soybean planting in central Brazil, but unseasonable wetness continues to plague maturing wheat farther south. Rain improves summer grain and oilseed prospects in Argentina’s eastern farming areas.

South Africa: Early conditions are mostly favorable for summer crop planting in the eastern corn belt.