October 8, 2013

Agronomist Notes

Hello Reader

Harvest across my territory is 100% complete in the east and winding down in the west. Producers in the west have had rain delays along with cooler temperatures, which has slowed harvest progress. Many are commenting that it’s hard to get 100 acres a day per machine and are racking up rotor hours. It’s a big, tough crop out there.

Fall NH3 prices are in the high $700’s per tonne with urea around $475 a tonne. Fertilizer purchases have been slow lately but I suspect it will pick up with year-ends coming up before December. Some producers are applying sulphur fines this fall with prices around $370 a tonne plus application.

This week we’ll unravel the climate behind this year’s massive wheat yields. Next, we’ll look at fall NH3 as an option to address seasonal issues and take the pressure off of seeding. Last, we’ll finish with some awesome tax strategies this fall from Merle Good, tax planning guru. We’ll finish with technical grain market news.

Pictured above: Wheat harvest at Hi Heat Ltd. near Drumheller, AB. Photo source: Jeff Skytt

Unraveling 2013’s massive wheat yields

For the geek in you that wants to know the how & why

2013 will go down in the record books for the highest yielding wheat production in our history for this area, beating the records set in 2011. From Calgary to Drumheller and Three Hills, soils with 3-4% organic matter and constraints like heavy clay or sand were hitting spring wheat yields in the mid 80’s to 95 bu/ac. So what made this year’s wheat crop so massive? Let’s look at the weather stats to make sense of this amazing year.

I reviewed the monthly and daily weather patterns for temperature, precipitation, growing degree-days and solar energy. All these weather factors play a role in optimizing wheat production. The average temperature is simply the daily max and min divided by two. The solar energy measured in mega joules was the daily average value inside each month and is a measure of total sunlight energy or cloudless days. The precipitation was the monthly total in mm.

2013 May June July August
Precip 42mm 92mm 46mm 12mm
Avg Temp 12.3C 15.7C 16.1C 17.6C
Temp Norm 12.9C 14.8C 17.2C 16.4C
GDD’s: 231 294 378 353
Solar Energy 19.6MJ 20.6MJ 22.1MJ 18.9MJ

There are three critical growth stages in wheat that are very sensitive to temperature and moisture to lesser extent. The first growth stage is GS30, which is the beginning of stem elongation. At this stage the number of spikelets formed on each head is strongly influenced by air temperatures above 20°C and to a lesser extent nitrogen and water. As air temperature increases above 18°C during GS30, the number of spikelets (rows) per head decreases and results in lower grain yield potential.

The second critical growth stage is the boot stage. Wheat is very sensitive to environmental stresses at this stage because there is so much going on physiologically. The stems are reaching maximum growth rate, leaves and heads are expanding, pollen and embryos are developing inside each floret and roots are branching. All of these processes create a huge demand on the plant to supply itself with carbohydrates (sunlight + C02) and nitrogen. If temperatures rise above 18 degrees C, cell division occurs too rapidly and florets begin to abort and the potential for kernel development is lost. Research suggests that up to 50% of the potential florets (kernels) never develop. (Kirby 1988)

The third critical growth stage is flowering. Research has shown wheat grown at 25°C during flowering had only 40 percent of the kernel number in the main spike when compared with plants grown at 15°C. Similar to the boot stage, when you ramp up the speed of cell division through warmer temperatures, misfires begin to occur and kernels cease to develop.

Now that we’ve reviewed the effects of high temperature on wheat yield, it’s safe to say that wasn’t the case in 2013. However, it was one of the main reasons behind our incredible wheat yields. The first critical growth stage GS30 coincided with cooler weather during June 7-15th where daily max temperatures rose just above 20C for 2 out of 8 days and below 20C for the remaining 6 days. Heavy rainfall in late May-June totaling 134 mm (5.5 inches) maxed out tiller numbers and encouraged early tiller development. This set the stage for phase two and three.

The boot stage for wheat planted in early May occurred between July 1-5th with flowering right behind around July 9-13th. By this time, soils were locked and loaded with stored soil moisture, soil temperatures were cool after the heavy rains in June and daily July temperatures were not much warmer than June with daily averages around 16C. The most interesting weather event during July was the combination of high solar energy (sunny days) with cool daily temperatures. This is the perfect storm for kernel development and grain weight production.

Plenty of moisture, plenty of sunlight and cooler temperatures all came together at the right time to make 2013 a record year for wheat production. The limiting factor this year was most likely nitrogen, not enough C02 and poor agronomy. There are ways you can manage the effects of temperature through tall stubble, residue cover, proper nutrition and timing, delayed leaf senesence etc but we won't go into that today. Like a vinter knows a good year by tracking weather data in the vinyard, we too should know when a big crop is coming on. The signs were there. SL

Photo source: S. Larocque

Take a second look at fall applied NH3

I know most producers have moved away from a two pass seeding system but I would suggest that fall NH3 is making a comeback. With the pressure to seed quickly, fertilizer rates pushing over 300 lbs/ac and heavy residue loads from previous years, fall NH3 provides a nice option to address each of these issues. I’ve been recommending it to a few growers for fields going into canola.

The economics work well even when you consider the cost of a second pass.

Steve’s quick math
NH3: $780/tonne or $0.43/lb
46-0-0: $475/tonne or $0.47/lb
425 HP 4WD + 50ft applicator: $9.50/ac (fuel, labour, machinery)

If we were to apply 100 lbs of nitrogen using 46-0-0 it would cost $47.00 acre. The same 100 lbs of nitrogen using NH3 would cost you $43.00 an acre this fall. That’s a difference of $4.00 an acre, which pays for just about half the additional cost of the second pass.

I’ve seen some great results with fall NH3 before canola in heavy clay soils that are typically cold and wet in the spring. Even if you have NH3 set up on your air drill for a one pass system, a NH3 application may be worth looking at this fall. Doubling your seeded acres per fill in canola next spring is hard to ignore, never mind a chance to warm up the soil. Maybe it’s food for thought. SL

Photo: Miller Farms pulling NH3 in one pass at seeding. S. Larocque

These taxing times

What to do with a good income problem

With the cattle market surging and grain income holding due to yields, it is imperative that your bill to Revenue Canada does not cause you nightmares. For example, if your corporation has net income exceeding the small business deduction of $500,000 your tax rate explodes from 14% to over 30%. A couple of interesting strategies should be reviewed this year.

Acquisitions of bins through a lease program can result in 5-10 times the write-off compared to a straight purchase.
Creation of a separate corporation with a different year end can be used to shift income between enterprises in some family farm situations.
Unincorporated businesses looking to acquire equipment should instead look at leasing equipment in 2013 personally and then roll the equipment into a newly formed company. After 2014 the corporation exercises the purchase option.
The usual pre-year end deferral of income or pre-payment of crop expenses is critical especially if you are pushed up into the top corporate or personal income tax brackets. Remember there is no longer any income averaging available.
Look at your RRSP carry forward allowance. Some producers have significant contribution room.
Pay your spouse a bonus and let her keep the money. This pays huge dividends eventually!! MG

Thanks to Merle Good for providing the following tax strategies. Merle is a private tax specialist now after retiring as the provincial specialist for Alberta Agriculture. If you have any questions, please feel free to contact him at Merle Good.

Top seven indicators of farm financial health

I haven’t touched on farm economics in while so I thought I’d include a quick summary of the top seven indicators of farm financial health. My job focuses on production and generating the highest return possible for the inputs we apply. However, generating the highest return on capital is equally or probably exceedingly important to the financial health of your farm. With that, the following seven indicators are meant to be a simple way to take a financial health 'snap shot' of your farm.

Operating loan less than 50% of current value of unsold inventory
Operating expenses less than 65% gross revenue (averaged over past four years)
Net Revenue greater than 2x cash rent
Machinery investment owned less than 2x gross revenue per acre (averaged over past five years)
Machinery leases less than 15% of gross revenue
Less than 20% total income from government programs
Net Income > 20% gross (excluding government programs)

Indicators supplied by Merle Good, private tax specialist. If you have any questions you can contact him at merle.good.grs@gmail.com.