Agile farming for canola profit

| Date: 19 Jun 2008

Tony Good and Tim Hutchings, Consulting Agronomists, HDRAS/MS&A, Harden
Paul Parker, District Agronomist, NSW DPI, Young

Background paper presented at the Wagga Adviser Update (13/2/08) by Tony Good, consultant Harden

Most farmers are quietly excited about grain price prospects for the next few years. However, price increases for fertiliser, glyphosate and diesel have not been as well received. It appears that fixed and variable costs will increase by 50% to 70% for the 2008 cropping season.
This is leading many farmers to challenge if there will be a profit in growing canola. This is a fair and reasonable question. The answer to this question is ‘Yes, possibly’. With the increase in both grain and input prices there is the potential for larger losses if things go wrong.
More so than ever having agile farming systems and understanding your cost of production (CoP) will be paramount. When asked, most people agree that CoP is an important business indicator. Often, those same people will not be able to tell you what their CoP is. If you do not know what it is for each enterprise make a point to work it out. It is a useful tool in identifying areas for cost saving and helping understand risk profiles.
The record canola prices forecast by most commodity brokers and on offer with swaps, the lifting of the GM moratorium and the improved understanding of blackleg should be helping to push canola areas up. Unfortunately, the cumulative financial and morale decline caused by drought and accumulated losses could prevent many from responding to the positive price signals because of fear of crop failure and the perceived risk. This is a real and understandable concern.
The following discussion summarises how farmers in the Harden district of NSW have been able to overcome the risk of a total crop loss and therefore have kept district canola plantings at over 30% of the crop area for the last five years. In 2008, 40% of the crop area will be canola, why?
Do not dismiss this article because Harden is viewed as different and always achieves good yields – read on. The message is clear and applicable to most areas of southern NSW.
Experience within the Harden and District Advisory Group over the past two years has cemented canola into the rotation. The 2006 and 2007 crop seasons were decile 0.2 and 2.0 rainfall years respectively, with no fallow moisture for 2007 and new record low rainfalls. The Harden district is in the 650 mm belt and about 400 to 450 m above sea level. Most Harden farmers are graziers who crop. It does have a geographic advantage in being close to the Hume Highway between Sydney and Melbourne and is close to tablelands beef and coastal dairy cattle areas with demands for dry matter in drought years.
In the last two years most canola crops have been cut for silage or hay - in 2006 almost all crops were cut and in 2007 about 80% were cut.
In 2008, early crop plans are indicating an increase in the canola area to around 40% of the total winter crop area. Why? It remains the No1 gross margin crop because the farming system around it has become agile with risk management in place. The local growers would prefer to harvest for grain but are not afraid to cut for silage or hay; and are now working on winter grazing varieties to fill the void created by the loss of grazing wheat because of Wheat Streak Mosaic Virus.
In 2007, well-grown canola crops cut for hay yielded 3 to 5 t/ha with returns of $220/t (farm gate) common. This gave a gross return of $660 to $1,000 or more per ha in the second worst year on record. These returns are 50% to 100% above what many growers are presently getting for cereals! The yields and returns were lower in 2006. However, the relativities are the same. No attempt has been made here to do a full cost comparison between grain and silage or hay. It is fair to say that the time and cost to make and sell hay is close to twice that of harvesting grain.
The decision to cut and bale is not always easy and is best done with consultation, and an eye on the weather. Many grain growers are not experienced at making hay, where quality is critical when selling. Most growers in the Harden Group chose a mix of silage and hay to reduce risk profiles. Silage is harder to sell yet easier to make. The other difficult decision is which paddocks to cut – low dry matter paddocks, say less than 1.5 t/ha are uneconomic to cut (and bale) and are generally best grazed if they are failing.
Patient people can make good quality canola hay. Some people waited up to six weeks for it to cure and then got a baling dew. Others mowed, conditioned and watered windrows for a two week dry down period. Others baled dry and got what you would expect – bales of unsaleable sticks.
The general quality of silage and hay was good with crude protein levels of 12 to 17% and metabolisable energy levels above 9 MJ/kg DM being common.
It has not all been wonderful. This year later cut canola for hay has had up to 50 mm of rain before baling. Unfortunately, most of this has failed to meet the quality specifications listed on contracts. Discussions are presently underway on how to sell this high protein low energy hay.
Tactics for curing and wetting windrows need to be discussed elsewhere. Needless to say it was common to flood windrows with between 400 and 1,000 l/ha of water with the addition of a food grade gum, like Driftguard®, to get the best hay samples. Yes, flood not spray. Experience within the group is that spray droplets with a non-ionic surfactant like BS 1,000® will dry out rather than wet windrows.
Would we do it again? If it is frosted or there are weed escapes - silage yes. Hay in September? – after doing it two years in a row, No.
The take home message is that local growers recognise the need to keep canola in our farming system. With an agile risk management approach they are doing this whether harvested for grain or for dry matter.
So in 2008 with increased risk because of grain and input prices the farmers in Harden are responding with increased canola plantings. Will you follow their lead?
One thing they will not be doing this year is panicking and planting into poorly prepared or problem paddocks – the risk of failure is too high. The other noticeable trend is an increasing awareness of Withholding Periods (WHP) for all pesticides in case cutting and feeding to stock is required.
An unplanned benefit has been with Integrated Weed Management (IWM) and resistant weeds. Having now cut some paddocks three years in the last seven and sprayed remaining annual ryegrass survivors, many farmers are confident that resistant ryegrass populations to Group A & B grass herbicides are controlled. In response to this, the area planted to TT canola locally will decrease from almost 90% to about 60% this year (not counting GM canola). Depending on wild radish populations the switch will be to either conventional or IMI (Clearfield) tolerant lines to pick up the extra oil and yield potential that is available – surely a useful adjunct. Similarly, by maintaining rotations and growing profitable crops in tough times their drought recovery will be quicker.

Contact: Tony Good