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Which Crop Will be the Most Profitable in 2019?

March 12, 2019

Knowing how grain markets are performing, this time of year provides an excellent opportunity to investigate what crop will be the most profitable to grow in 2019 for a grain farmer. Three crops that are successfully grown in my area of east central Alberta are hard red spring wheat, canola, and field peas. The three components of profitability that I use to compare crops are: yield, costs and their value. It is possible to average each of these, although the average is generally known after the harvest is complete. The value of the crop, however, can be projected based on commodity futures and known deferred contracts available from grain handlers.

 

There is an annual source of compiled yield data published every year by AFSC. The latest is the Yield 2019, which was released in February. Data is grouped by risk area geographies. My farm is in region 12 which includes the area from Camrose through Wainwright up to the Saskatchewan border. There are over a half million insured wheat acres here that produce a weighted average of 49 bushels to the acre. The reported canola yield is 41bpa and for peas, it is 43bpa.

 

Alberta Agriculture has some information available on average production costs for each of these three crops. AgriProfits details volunteered costs reported by acres, as well as a per-bushel breakdown. In the report for 2017, a dryland spring wheat crop grown on farmer-owned ground comes to a per bushel cost of $6.61. The tally for Roundup Ready canola is $9.44 per bushel.  Finally, the cost for dryland peas is $8.43 per bushel.

 

Crop value information on these three key crops I found on the PDQInfo.ca website, provided by the Alberta Wheat Commission. As you know, numerous things affect the price of grain. For my evaluation, I am working with the Northern Alberta location within PDQInfo.ca. Therein, #1 CWRS 13.5 protein grade shows an average deferred price for September 2019 of $6.73 per bushel.  Canola prices are reported for a #1 grade, and the average that is calculated is $10.55 per bushel. Pea prices were not available for new crop just yet on PDQInfo.ca but there is a price of $6.75 per bushel reported for August 2019 delivery.

 

After collecting this information, I did some calculations. The net return per bushel for wheat, canola and peas  is $0.12, $1.11, and $-1.68 respectfully. The next step is to multiply out this number with the respective yield. This total represents our dollar return per acre. Canola is the clear winner at $45.51 per acre. Wheat places second with $5.58per acre. And starkly, peas post a loss of $72.24per acre.

 

To wrap up, this evaluation was based on realistic numbers accessible to the public. The exercise illustrates a big difference in the profit potential that can occur between commodities. Other crops such as flax, barley, or faba beans could be compared as well. Attempting to account for more details would make this a little bit more of a cumbersome analysis, but for some farms, it’s likely worth the extra effort. An interesting next step of this analysis would be  to evaluate variances from these average numbers. Producers are of course able to generate their own expectation on these variables (namely crop input costs) which will indicate which crop will be more profitable for them in 2019.

 

 

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