Making Sound Cropping Decisions So, You’re Telling Me Agriculture Is Hard?
03 10 14
Making Sound Cropping Decisions Galynn Beer
Making Choices: The Appropriate Nutrients for Your Crops John Leif
So, You’re Telling Me Agriculture Is Hard? Stephanie Zelinko
**Pro-Germinator is sold as PrG in the state of California. Pro-Germinator is not available in California. **LiberateCa is sold as microLink Ca in Canada. LiberateCa is not available in Canada.
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Making Sound
Cropping Decisions
By Galynn Beer Senior Sales Manager Making planting decisions is a challenge. Weather uncertainty always exists and that alone can result in a conservative approach to inputs. Price fluctuations weigh in, as well. How many farmers actually calculate break-evens to help with marketing grain? I’m guessing a relatively low percentage. Doing The Math
The quickest math to calculate, and probably the math that drives a lot of decisions is gross revenue. I’ve done it and so have
most farmers. We intend to be more thorough, but that quick calculation will move us toward seeking information to support that quick decision. A little more analysis is beneficial and helps separate the intuitive, or emotional decision from a more thorough process. Making Good Decisions
How do we make sound cropping decisions? Some of this has to be analyzed at the micro or individual level. Rental agreements, land costs, equipment costs and other expenses impact break-even prices. With annual crops, we have a great degree of latitude to change, but how does one decide between wheat, corn, soybeans, cotton, hemp, or other annuals? First, what crops can realistically be grown? It can be tempting to grow crops on the fringes of the growing geography and assume all will turn out.
Gross revenue calculation 200 bu/A corn X $3.50 per/bu 80 bu/A beans X $8.50 per/bu
$700/A $680/A
(less N expense) 3
One success story usually is over-generalized to become assumed success in all years. Big mistake. The world of statistics is littered with events that happen on each end of the ‘unlikely’ spectrum. It’s dangerous to make a change based on this. Probabilities for success need to be considered.
Permanent crops require deeper analysis because of the large capital requirement and the time it takes to begin to pay back. A net present value (NPV) should be done since permanent crops can’t be changed with crop dips and changed weather patterns. NPV=Today’s value of the expected cash flow− Today’s value of invested cash
When we have made our mind up to do something different, we tend to look for evidence to support that decision rather than seek information for a good choice.
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Next, where is the closest market . . . where can I turn my inventory into cash? Is it distant? Will freight charges erode the projected profits? And the buyer of my grain - where is his market? If it is far away, even an export market, he will likely protect that distance and risk by lowering what he’ll pay. Is the market for what you are growing big? Can it easily be over-done and create excess supply? Crops like quinoa can look attractive, but a swing of 100,000 acres is huge in a specialized crop. Consider these possibilities. Is the crop insurable in your area? If not, how will you protect your risk? Also, you have to consider the impact
to capital. Don’t assume that your banker will agree with what you consider a good decision. Some crops are just more capital intensive, and a great deal of risk is accepted up front. It isn’t cheap to grow corn. Cotton takes a lot of trips across the field. If you don’t have capital to finish what you start, then the outcome will fall short of expectations. Establish An Expected Value
It’s easy to evaluate an opportunity based on the best or worst outcome. We typically remember outlier events and not averages. 300 bu/acre corn, 5 bale cotton, 100 bu/acre soybeans, these results stand out. But averages are where decisions should be made. By looking at averages, we can establish an expected value. If 3 bale cotton at 60 cents a pound is a 10 year average and 220 bushel corn at $3.80 is also a 10 year average, now you can begin to make a decision. If we look at these normal yields, we can then calculate realistic break-evens and profit margins. If 3 bale cotton, with typical quality, will result in $150/acre and 200 bushel/acre corn will produce $100/acre profit, the decision seems clear. But here is where historical averages matter most. Optimum quality for cotton doesn’t always occur. There are likely years where yield is achieved, but quality isn’t and we don’t reach the profit per acre we expected. If quality and yields align to produce $150/acre profit 50% of the time, but 200 bushel corn produces the $100/acre 80% of the time, the winner, believe it or not, is corn.
Cotton
3 bal/A
60¢/lb.
How, for cryin’ out loud? 150 versus 100 is easy math; $150>$100 so the seemingly obvious winner is cotton. But this is about what profit we can typically expect, so $150/acre that happens 50% of the time produces an expected value of $75/ acre while $100/acre occurring at a rate of 80% of the time produces an expected value of $80/ acre. When you evaluate it this way, $80>$75 and corn wins. This is why consistency often wins out over the long haul. The more variables that need to come together to produce the profit you are evaluating, the lower the success rate. Protein in wheat, a certain size of potato, a certain timing for watermelons and strawberries to hit the market; these are all factors that can influence the realistic profit we can expect. But in fairness, if cotton produces $250/acre profit only 40% of the time, that’s still an expected value of $100/acre and would beat the $80/acre of corn. Cotton may not win as often, but when it does, it wins big. Just be realistic about yields, profits and percentages of wins. Switching Costs
If you’ve never planted potatoes, or sugarbeets, or sesame, it’s unlikely the equipment you need is parked out back. You’ll have to buy it. Are you buying during a heavy conversion toward a crop? You’ll pay a higher price for the needed equipment because demand is elevated. If the market for the crop goes south, you’ll likely want to turn those assets into cash when everyone else
50%
probability
$75/A profit
WINNER
Corn
220bu/A
$3.80/bu
80%
probability
$80/A profit
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does, resulting in reduced prices because of the supply of equipment. And some equipment is very specific, such as a cotton stripper. You can’t decide to harvest wheat with it. So how long do you need for the cost of switching to this crop and equipment to pay off? Markets don’t stay high forever and can influence how soon we thought we’d pay that piece of equipment off. So make sure to re-read the previous paragraph to decide if switching costs are worth it. Cash
The last part of a decision we’ll discuss here is critical, and often overlooked . . . the impact to cash. If cotton hits $1/lb and you evaluate all of the above and decide it’s a good decision to plant cotton, sometimes we forget to think about the impact to our cash flow. If you are growing corn, you can choose to convert the grain inventory into cash as soon as you harvest it. Cotton is much more complex. Payment generally doesn’t start until after the cotton is ginned. That can be months after it is harvested. Then, generally there are marketing pools that pay the remainder out over several more months. So a simple switch can negatively impact cash flow. Capital that might be available in November of the current year with corn, may not totally be realized until November of the following year if you switch from corn to cotton. Depressed wheat prices can dissuade
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planting, and turn those acres into corn, cotton, or something else. However, wheat provides cash flow at a time when most other crops don’t. There may be a time when a lower profit might be a preferred choice because it creates cash flow at an important time. Also, there is the cash cycle to consider. If you plant cotton in May of one year and get your money in November of the following year, then your cash cycle, the time period from when money leaves your bank account until it returns, is 18 months. Corn planted in April and liquidated in November of the same year means your cash cycle is only seven months. A long cash cycle can result in periods of a cash crunch. The other aspect of this is hidden for sure. Inflation, even if it is low, results in reducing the purchasing power of money. If you liquidate your inventory of corn in November of one year at a profit of $100/acre and get a profit of $100/ acre back from cotton the following November, it is $100 in both scenarios and seems the same. But the $100 profit from cotton won’t have the buying power of the $100 profit from corn; time and inflation will have eroded the buying power of the $100 from cotton. The profit from cotton is much more likely to have a buying equivalent of $97 or $98 since the 12 months of inflation will have reduced its purchase power. This often goes unnoticed.
The Final Word
Don’t take crop decisions lightly. A lot of variables should be considered. Gross revenue and net profit are generally what is relied on, but there are other considerations that are important. We remember outlier events, but you should base decisions on averages, along with other impacts to the business. Seek advice from others. This can help to alleviate biases. But seeking someone who is convinced of the same decision as you won’t provide a different perspective. Try to find someone who will challenge your decision. Emotional decisions can be the enemy of long-term success. You owe it to yourself to be thorough.
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Bruce Keck Sales Account Manager (208) 240-1968 bruce.keck@ agroliquid.com
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Joh Sale (40 john agro Ser
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hn Adams es Account Manager 03) 415-5874 n.adams@ oliquid.com rving Western Canada
anager
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Making Choices:
THE APPROPRIATE NUTRIENTS FOR YOUR CROPS
By John Leif Field Agronomy Manager Seed and crop protection selection has changed dramatically over the past 20 years, but crop nutrition planning is sometimes based on past history rather than on knowledge of the soil and needs of the crop (“it’s what I’ve always done”). The agricultural economy can make it tempting to take a few shortcuts and not purchase inputs or services that were purchased in the past. The challenge is making the best use of financial resources but not cutting inputs that will make money. As growers consider their crop nutrition needs it is tempting to forgo something as basic, and important, as soil testing. Soil testing allows the grower to determine the current condition of the soil, including imbalances, deficiencies, and excesses. It also helps identify how much nutrition is already available in the soil so that fertilizer applications can be optimized. A multi-year testing program allows the grower to monitor changes in the soil over time. Yes, soil testing does cost money – around $25 per sample for a complete test that includes soil characteristics, nutrient levels and base saturation. However, if one soil sample represents 20 acres in a field and the field is sampled every three years, the cost of soil sampling averages out to be about $0.41 per acre per year. Not a bad investment, considering the amount of information received from that test. Nutrient levels in soil will change over time. Nutrient level reductions can be the result of crop removal, changes in fertilizer use, and loss through erosion or leaching. Nutrients that weren’t well managed 20 years ago, such as sulfur or micronutrients, have become more
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prominent as nutrients that can be limiting to yield. Soluble nutrients such as manganese and boron are difficult to build up in the soil, and higher crop yields of today take more crop nutrition than the yields of 20 – 30 years ago. “Free� sulfur from manufacturing and power generation facilities is not as available as it was before the Clean Air Act was implemented. Simply applying the same fertilizer mix you have always applied may not provide the best production or economic return. The soil test report can be used to develop a complete nutrient management program for a field, including soil amendments to adjust nutrient imbalances as well as determine the fertilizer application needs for the crop. Using products that can be mixed to address the needs of a field will provide the best opportunity for economic return. An excellent example of using soil test information to optimize crop nutrition choices is a field experiment conducted by MGS Farms (formerly AgroSpray Research Farm) near Innerkip, Ontario. The soil test report for the field showed low levels of both phosphorus and potassium. A common, standard program in the area is an application of 5 gallons/acre of 6-24-6 liquid fertilizer that provides phosphorus and a small amount of potassium. That treatment was compared to 2.5 gallons/acre of Pro-Germinator to meet the phosphorus need or 2.5 gallons per acre each of Pro-Germinator and Sure-K to meet the phosphorus and potassium need. Addressing the phosphorus and potassium need as indicated by the soil test provided higher yield and higher net return compared to either no phosphorus or phosphorus fertilizer alone.
Liquid Starter Fer7lizer Comparison on Corn 214.2 bu/A $57.50 additional return*
2.5 gal/A Pro-Germinator + 2.5 gal/A Sure-K
208.1 bu/A $52.65 additional return*
2.5 gal/A Pro-Germinator + 2.5 gal/A Water
196.0 bu/A $6.10 additional return*
5 gal/A 6-24-6
188.0 bu/A
Nitrogen Only 170
175
180
185
190
195
200
205
210
215
Average Yield bu/A Source: MGS Farms, 2015 field research results. *Additional return is based on yield increase compared to the nitrogen only treatment minus the cost of the fertilizer. Corn price used for this calculation was $3.50/bu and fertilizer prices were estimated average retail prices.
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In addition to selecting nutrients needed to grow the crop, a soil test report will show relationships among nutrients in the soil. If one nutrient is in excess, other nutrients may not be available to the crop, even if the values of those nutrients are high. An excellent example of this is manganese and iron. If the manganese level is higher than the iron level, there is a risk that iron will be less available to the crop and supplemental iron nutrition is recommended. Excess levels of calcium can reduce the availability of several nutrients, including phosphorus, potassium and manganese, among others. Mulder’s Chart graphically describes some of those relationships.
e an ng
s
) Mn e(
· Calcium (Ca) · P ot a ssi um
(K
)
M a
MULDER’S CHART OF NUTRIENT INTERACTIONS
·
·
sp Pho
nesium (M · M ag g) ·
horus (P) · Copper
(Cu )
Fe) n( Iro
g en tro Ni
· Zinc (Zn) · (N) Mo l y bd e
High level of a nutrient increases the demand by the plant for another nutrient
nu
m
If you have any questions about soil testing and developing a crop nutrition program, contact your AgroLiquid representative or visit us at agroliquid.com.
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·
Stimulation
)
Decreased availability of a nutrient to a plant due to the action of another nutrient
(B
(M
o)
·
Bo ro n
Antagonism
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So, You’re Telling Me Agriculture Is Hard? By Stephanie Zelinko Sales Agronomy Manager This year is reminding us exactly how challenging farming can be. In addition to the usual market fluctuations and other challenges we have come to expect, Mother Nature handed us a spring that will be remembered for a long time. The good news is, there are resources available to help make the best management decisions for your operation in any given year. One tool available to help with decisions is research data. With over 25 years of scientific research completed at AgroLiquid’s North Central Research Station (NCRS), in addition to countless trials through contract researchers and grower field comparisons throughout the country, no other crop fertility product is more researched. What can research data do for you? 1. Fine tune your fertility program As John Leif discusses in his article, soil testing is a great way to help develop a fertility program to help ensure an economical return. Having a soil test is the first step, but understanding the results is the more critical second step in the process. How do you know where or
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what to cut back on when you need to make economics-based decisions? Here is where research results come into play. That extra gallon of Pro-Germinator® may give you a few extra bushels, but maybe yield is “good enough” without it. The NCRS has results on rates studies of Pro-Germinator®, Sure-K®, Micro 500® and nitrogen to help make those decisions. Research helps determine the likelihood of return on the fertilizer dollar spent. Yield increase over no Pro-Germinator® 2 gal Pro-Germinator 15.1 bu 4 gal Pro-Germinator 23.9 bu 6 gal Pro-Germinator 25.9 bu 2. In-season applications can pay In-season applications offer a lot of flexibility to a fertility management program. It provides opportunity to cut back or upgrade a fertility program, based on the season and current crop need. As weather and markets change, in-season applications allow for the chance to capture more yield if conditions are right. This includes applications such as additional Kalibrate® or AccesS™ at sidedress on corn, or a foliar application of Sure-K® and micronutrients
on soybeans, wheat or fruits and vegetables. These in-season applications delay purchasing decisions later into the season, thus helping spread out cash flow. Yield increase over sidedress nitrogen only 1 gal Pro-Germinator 7.8 bu 2 gal Kalibrate 8.6 bu 1 gal AccesS 9.1 bu 3. Maximize return through proper timing The 4R’s of nutrient management have embedded in our heads that the right timing of nutrients is necessary to achieve top yield and ensure what is being applied is available for the crop when it needs it. Before planting, at planting, in-season early or late are all good options, depending on crop and growing conditions. Split applications of nutrients, especially those that are at risk of environmental loss, have shown through research to improve yield. Fertilizer is expensive; knowing the best time to apply will help make sure the dollars spent go to the crop, rather than being lost or tied-up in the soil. Yield increase over 100% PRE broadcast 2 Applications 4.3 bu (33% PRE 67% V5) 3 Applications 8.1 bu (33% PRE, 34% V5, 33% V10)
4. Embrace technology AgroLiquid is a leader in innovation. This includes the products we manufacture and sell, and also keeping up with changes in liquid fertilizer application technology. Teaming with companies like 360 Yield Center® and Precision Planting®, we put these tools to the test at the NCRS, which helps our AgroLiquid representatives and field staff make better recommendations. Keeping up with the latest technologies in fertilizer application, along with which nutrients fit them best, helps ensure the crop nutrition is being applied in the best possible way to provide a positive return. Yield increase over 100% in-furrow (IF) Split: IF/360 BANDIT 5.8 bu Split: IF/360 YDROP 9.6 bu Just as there are many decisions to make when determining which crop is most profitable, there are many factors to consider when determining how a fertilizer budget should be spent. Utilizing research from AgroLiquid will help provide you some of the background and support needed to make a more informed choice. And this part of agriculture is easy…. AgroLiquid research results from the NCRS and other sites across the country can be found on our website at research.agroliquid.com.
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