Beating your cost per bushel in organic production

Photo: Thinkstock

By Laura Rance
OrganicBiz editor

Making a seeding plan is a complicated process — whether you are an organic or conventional farmer.

But an organic farmer who has his or her cropping system humming could find it easier to achieve profitability given market conditions in 2017, according to annual crop production budgets published by Manitoba Agriculture.

The province produces budgets, based on average costs of production, which are an estimate of market prices and generally accepted management practices for crops grown under conventional and organic management. Farmers can look at these budgets and compare them their own production costs to get an idea of the relative profitability of different crops. If the provincial budget is showing a negative profitability, the farmer has to consider whether his or her production skills can beat the average.

The top crops are radically different between the two production systems. Hemp ranks at the bottom of the list of options for a commodity farmer, showing a net profit of minus $1.61 per acre. For an organic producer, it’s ranked number one, with a whopping net profit of $499.35 per acre.

The best pick for conventional farmers is navy beans, showing a net profit of $155.16 per acre, followed by soybeans at $65.64, confectionary sunflowers (the kind you spit) at $41.69 per acre and winter wheat, which is planted in the fall and harvested the following July, at $37.58 per acre. Spring milling wheat ranks way down on the commodity farmer’s list right next to hemp.

However, on the organic list, wheat ranks No. 2 with a net profitability of $338.79 per acre, followed by spring-seeded milling wheat at $249.07 per acre, flax at $176.62 per acre and oats at $160.30 per acre.

These budgets illustrate the huge difference in per acre profitability between conventional and organic systems once cost of production, differences in yields and market prices are considered.

For example, 160 acres of organic winter wheat could put more than $54,000 into a farmer’s bank account after production expenses. Under conventional systems, that crop will generate about $6,000.

What’s your cost per bushel?

While these estimates can serve as a reference point, Roy Arnott, a farm management specialist with Manitoba Agriculture emphasized at a recent seminar in Brandon that farmers need to calculate their own production costs on a per bushel basis. After all, farmers sell on a per bushel basis, not per acre.

The two systems diverge on break even yields. In the organic system, a farmer could break even with a yield of 19 bushels for wheat, 8.6 bushels per acre of flax, 40 bushels per acre on oats, and 12 bushels per acre for soybeans.

Arnott said those yields appear to be achievable even considering the fact that yields on organic farms tend to be lower.

On a conventional farm, the breakeven yield for wheat is 50 bushels per acre, flax 22 bushels, oats 87 bushels per acre, and soybeans 28 bushels per acre.

“That could be challenging to reach depending on market conditions,” Arnott said.

“It appears from a numbers perspective, that the organic system has less risk than the other scenarios,” Arnott said.

Insurance risk

However, when it comes to insuring their crops, organic farmers absorb more of their own risk. Under the current programs available through the Manitoba Agricultural Insurance Corporation, they pay higher premiums and receive lower coverage.

The organic budget factors in the reality that farmers using this production system must grow their own fertility, which means investing some of their land into green manure crops for part of a four-year rotation cycle.

Livestock and forage are important considerations for organic farmers because of the role they play in nutrient cycling and weed control.

The profitability differences between all the crops however, suggest that a farmer operating under an organic system could still generate a living from a section of land, a feat long gone in commodity agriculture. It also explains why commodity farms keep getting larger. Generating the same income from conventionally produced winter wheat would take nine times more acres.

Organic production isn’t for everyone. It is both labour and management intensive, and marketing and risk management options are more limited. If all farmers went organic, there’s a likelihood market premiums would collapse. That said, demand for organic production still far exceeds the available supply, so those market premiums are unlikely to disappear anytime soon.

Arnott said it’s not about one system being better than the other. It’s about recognizing the organic system is a “totally different package” that requires a different management mindset.

“But as a production and marketing system, it appears to be financially viable,” he said.