Input Costs Associated with Growing a Commercial Grain Crop
The social media feeds were buzzing over a large Federal Carbon Tax levy on a propane bill from a Saskatchewan grain drying company. Angry commenters were concerned that the cost was going to be transferred to the consumers. Not to worry, grain is sold on the open market and it is the farmer who has to eat this cost. They do not have the luxury of passing their input costs along to the consumer.
Here’s a quick exercise in cost comparisons for the consumer versus the farmer. In 1920, adjusted for inflation a dollar was worth about $11.91. White bread was about 10¢/loaf (1lb) or $1.19/loaf in 2019 dollars. Compare that to about $1.88/one pound loaf today. For the farmer, their wheat/bushel has dropped in value over the last 100 years from about $17/bushel to today’s value of $7.
That increase per loaf has not been going to the farmer. The middle men have been passing along their increasing costs along to the consumer. Meanwhile, the farmer’s input costs have been steadily rising and they have been forced to become more and more efficient or just simply go under.
In order to better understand the costs to farmers associated with growing cereal, pulses, or oil seed crops, presented here is a list of all the major inputs. The Manitoba government releases a very detailed guide each year to help farmers estimate their upcoming costs. As a rough guide, in order to be profitable a crop of wheat needs to produce in the range of 30 bushels/acre. Again, the farmer is unable to pass any of these costs along to anyone else. They only receive what the market will pay when it is time to sell their crop.
Also, as a note, although farm fuel (known as marked or purple gas & diesel) was exempted from the Federal Carbon tax (only after concerns were raised), it does not mean that farmers are not paying significant extra costs due to this draconian tax.
- Land Costs – for older farmers, their land is no longer mortgaged. For younger farmers or for a farm to expand, agricultural land is becoming prohibitively expensive and harder to carry mortgages on. Farmers from Europe, BC, Alberta are selling their land and coming to Manitoba to buy our relatively cheap land and driving up the cost. Here is an article illustrating the climbing value of SK farmland. Many farmers also rent land which in Manitoba can run at $60/acre and up.
- Crown Land Costs – Many farmers lease Crown land from the government as a method of using land at a relatively low cost. In Manitoba, the long leases are being dropped to 15 years and changes are coming where highest bidders may be able to snap up leases. Farmers are concerned about being squeezed out of the market if they cannot compete against these increased costs.
- Land Taxes – As land becomes more valuable, the assessed value for taxes increase. Municipalities are receiving windfalls from large landowners and see them as cash cows when applying special levies. The mantra is ‘if you can afford to have land, you can afford to pay more tax.’
- Land Improvement Costs – Although there is sometimes some assistance from the Municipality or Watershed organizations, if a farmer wants to improve drainage, plant trees, or improve their land, the costs and paperwork are borne by the farmer.
- Fertilizer Costs – This is one of the highest input costs and is most subject to Carbon Tax pressures. Farmers spread or inject a variety of fertilizers onto their fields depending on soil need, crop grown, or time of year. A main component of most fertilizer blends is nitrogen. Nitrogen fertilizer in MB is made with natural gas at the Koch Fertilizer plant in Brandon. This plant is the highest CO2 emitter in MB and is firmly in the government’s crosshairs regarding emissions. Due to it being a large emitter, private sweetheart deals were being negotiated with companies like these regarding the Carbon Tax. Fertilizer prices themselves fluctuate regularly due to a number of factors, so it has been difficult to determine what increases have been passed down to the farmers. Koch is a private company and is reticent regarding this issue.
- Seed Costs – Farmers source their seeds from a wide variety of outlets. Our farm happens to plant our own wheat seed and buy canola and soybeans. But even with our own seed, we pay a mobile seed cleaning company to clean it in order to remove poor seeds and weeds. Canola and soybeans are bought as treated seed. A 50lb bag of canola seed will cost $600-$700 and is sown at about a 4-5lb/acre rate.
- Planting Costs – most farmers plant their own fields with their own equipment. But in certain cases, such as corn which needs a special seeder, it may not be worth it for the farmer to have their own machinery. In these cases, a custom outfit would be hired.
- Machinery Costs – most major pieces of farm equipment for preparing the field, seeding, maintaining, harvesting, and transporting grain to the buyers cost hundreds of thousands of dollars each. Farmers cannot share too much equipment as everyone’s fields and crops need attention at the same time, so each farmer needs their own machines. In addition, farms need to replace and upgrade machinery on a timely basis or the cost of the upgrades becomes prohibitive.
- Maintenance Costs – farm machinery needs regular maintenance and is prone to breakdowns due to the adverse conditions they are run in. Filters can be $100 a piece. Oil and lubrication has to be constantly monitored. Bearings burn out and have to be replaced. The list can be endless. Plus, back when machinery was less sophisticated, a farmer could fix most of their own gear. Now, technicians from the dealerships frequently visit the farms to set sensors, conduct mobile tire repairs, update GPS monitors, etc. Also, in many cases, the machine must be transported to the shop for major repairs.
- Fuel Costs – this is a major bill on any farm. Thankfully, marked fuel or purple has a cost discount plus it was exempted from the Carbon Tax. Originally, the Liberals were going to include it but an uproar helped change their minds. But added into the fuel bill category, is a liquid called Diesel Exhaust Fluid (DEF). Many newer engine equipped machines come with DEF tanks which are designed to reduce the pollution created by diesel engines. Some machines such as our combine are unable to run if the DEF tank goes empty. Unfortunately, DEF freezes at zero degrees and it creates obvious problems during Prairie winters. It’s just another cost built into the system.
- Spraying costs – without the use of herbicides/pesticides there would be no use in even planting a crop. As a side note, organic operations also use these products which are typically more toxic than synthetic products. Mother Nature throws everything she’s got at the farmer to knock down his crop from pests, to fungus, to weeds, etc. Sometimes the farmer can spray their own fields, sometimes they may need to contract aerial spraying, and sometimes they may need to contract high clearance sprayers all for various needs.
- Harvesting and Storage costs – special equipment in the form of combines, grain carts, grain trucks, augers, and grain bins are needed to bring the crop in. None of these items are cheap and when the crop is ready, it is taken. Also, with certain crops such as corn, again the farmer may hire a custom outfit due to the specialized machinery. A very handy invention are the grain drying systems that run on forced air (with some systems, heated by propane or natural gas) are available. This allows the farmer to harvest damper crops and dry them as opposed to being caught by the weather and unable to get the crop off. Mother Nature can be a bitch, so technology can aid the farmer greatly. The Liberals are also bitches and did not exempt those fuels from the Carbon tax.
- Labour costs – during busy times of the grain cycle, the farmer may hire temporary help. When it’s time to go, the farmer can’t dilly dally as prime conditions do not last long and there are only so many hours in the day.
- Transport costs – when the Prairies started producing grain in earnest and the rail systems started to crisscross the land, little towns with elevators were placed every 5 to 10 miles along the tracks. This was to accommodate the farmer’s horse drawn grain carts. With large scale mechanization after WWII, trucks became more common and elevators spread out to every 10 to 20 miles. With time, the trucks are larger, rail tracks were torn up, the grain companies consolidated, and the little elevators have all disappeared to be replaced by centralized inland grain terminals which are 100 to 200 miles apart. Some farmers transport their own grain still but many hire trucking companies with B-trains to custom haul. The fuel for those haulers is not Carbon Tax exempt and that extra cost is passed to the farmer.
- Subscription & Advisor Service costs – long gone are the days when I was a kid running across the field with a string acting as a reference point for Dad as he tried to run me over with the sprayer. GPS and auto-steer functions run the larger equipment now. The precision needed is a service that needs to be paid for. Also, farmers keep up with the torrent of farm information available and subscribe to periodicals and crop advisor services. Crop advisors can cost $3-4/acre and will constantly monitor the farmer’s crops.
- Insurance costs – Again, Mother Nature is frequently a stone, cold bitch and frequently attempts to wipe out a farmer’s crops. Crop and hail insurance is a vital component required by farmers otherwise a bad year or two in a row would wipe them out. Insurance claims do not replace the entire amount of your losses but take the sting out of them.
- Banking costs – the banks and other loan companies make sure to take their little slices of the farmer’s bottom line for the privilege of using their services.
- Hopes & Prayers costs – Thankfully, these are free! To be a farmer, you have to be an eternal optimist, ready to bounce back from constant adversity from all corners be it Mother Nature, costly government regulations, or meddling townies who feel they know better.
Blair is a personification of a ‘Jack of All Trades and Master of None’. He has held several careers and has all the T-shirts. Time to add the title Blogger to the list.