Organic obstacles and crop opportunities in 2022

Organic farmers should be thriving, but the sector is facing headwinds right now because of high prices for conventional crops. Marla Carlson, executive director of SaskOrganics, explains the challenges for organic producers and the broader industry in 2022. Oats and canola could be the hot crops this spring, says reporter Ed White of The Western Producer, who has studied the crop production costs and profit estimates from Manitoba Agriculture. Hosted by Robert Arnason.

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Robert Arnason: [00:00:06]  Hello I’m Robert Arnason of the Western Producer, and this is the first Between the Rows of 2022.  For years Organic farming was quite profitable in Canada as growers received prices that were two or three times higher than conventional crops. But right now, prices for conventional canola, oats, spring wheat and other crops are either at record highs or near records. As a result, 2022 could be a difficult year for the organic sector, as some prairie farmers have already left organic or could be leaving soon. But first up on the show, we’ll focus on the crops that could be very profitable in 2022 for conventional farmers in western Canada. Every year, Manitoba Agriculture publishes cost of production data, estimating the cost and potential profits for 17 different crops. As of early January, the data shows that oats look very promising and could produce a return on investment of one hundred and fifty dollars per acre. Joining us now to break down the costs of potential returns is Ed White, a reporter with the Western Producer in Manitoba. But before we get to Ed, let’s first hear a word from our sponsor.

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Robert Arnason: [00:01:54] Now, let’s get back to Ed White, who joined me from his home in Winnipeg. Hey Ed, thanks for coming on Between the Rows. Appreciate it.

Ed White: [00:02:03] Hey, thanks for having me on!

Robert Arnason: [00:02:05] So every year, Manitoba agriculture comes up with these costs of production estimates. Looking at, I think about 17 different crops and what’s what. It’s going to cost farmers to grow those crop crops and also the potential return on investment. Is it your sense that these estimates represent conditions right across the prairies?

Ed White: [00:02:30] No, not at all. These are for Manitoba. They’re specific to Manitoba, and they will not apply in their details to the kind of crops results you might get in Saskatchewan, Alberta or, you know, B.C.. So really, looking at these is probably best for people outside those zones. This is a very good work done by these folks at Manitoba Agriculture’s Farm Management Branch, but it’s best to kind of look at the way that they calculate these kind of likely returns. And there may be factor in your own numbers to that. If you’re out of the province and even within the province, there’s quite different returns from east to west in this province and buy your own farm and your own conditions. So I think this is really good as a best guess for Manitoba based on today’s assumptions, and it’s really a good template for maybe how to think your own likely results out. If you want to do that, take take their way of approaching it and then put it in your own your own estimates.

Robert Arnason: [00:03:29] So just to confirm the way this is done is that the folks of Manitoba agriculture, they look at what would be the average yield for, say, a crop like spring wheat. Look at what the price will likely be in 2022 that farmers would get for that crop. That gives you your your gross, that gives you your gross income. And then they also look at the cost of production from things like obviously fertilizer seed costs, pesticide labor and so forth. And then that that gives you your potential return and growing a certain crop. Is that how it works?

Ed White: [00:04:09] Yeah. Like they also break it out differently between operating costs and then they add fixed costs to it. So you can look at both just the operating costs, which are like your cash costs, things are actually having to pay out. And then they also add on after that land, machinery storage and even a labor component per acre. So you can work out what you actually, you know, long term, our paying to produce crop like this. And then they take an estimate of what the likely price will be for the new crop. And that’s based on forward prices today looking at next fall. And, you know, then coming up with marginal return estimations for both over operating costs and then over total costs.

Robert Arnason: [00:04:59] Ok. Let’s talk about which crops look like winners in 2022. There’s a lot of, I guess, interest right now in oats. Is that a crop that looks really promising for growers in Manitoba and and possibly outside of Manitoba?

Ed White: [00:05:15] Yeah. Like based on their the numbers in the assumptions today, you know, oats looks like the of the big crops, you know, the crops, a significant acreage, oats, you know, number one, canola is up there, which probably won’t surprise anyone. But that’s since that’s such a moneymaker for farmers. That’s probably a happy thing that canola still right now looks really good. You know, kind of in the middle of the, you know, corn is up there, you know, to not look in, you know, too bad in the middle of the pack is kind of, you know, hard red spring wheat, which is, you know, another one of our mainstay crops. And you know, at the bottom, you’ve got things like barley, which really don’t seem don’t seem very happy. Ok, OK. You know, that sort of, you know, way down there in the in the dumps. So.

Robert Arnason: [00:06:10] Right? So one thing that you found out is that you spoke with Darren Bond, who is a Manitoba agriculture. I guess what does he call it, called himself a farm management expert? Or what’s his title exactly?

Ed White: [00:06:25] I believe it’s farm management specialist.

Robert Arnason: [00:06:27] Yeah. So Darren is one of the people who worked on these estimates and developed these numbers, and he told you something interesting and we’re going to listen to that right now, OK?

Darren Bond: [00:06:40] So let’s get one thing that we’re seeing, what we’re really seeing with our cost of production guides is that while we’ve seen a run up in price for the grain and while we’ve seen a run up in inputs, there’s still appears to be some profitability here. However, the thing is risk, and now it’s going to take much more money to grow the crop. And in some cases we’re looking at a similar margin as compared to previous years. So we are spending more money to make the same margin in some cases that that reflects in risk. And and there’s going to be a lot more risk this coming year, just with the amount of dollars that are on the table for both costing and revenue.

Robert Arnason: [00:07:29] So what Darren was saying there is that obviously farmers are going to be putting out, you know, on an individual farm either hundreds or thousands of dollars or millions of dollars to grow their crops, and that could be like significantly higher than previous years. So the risk here. Is a huge factor, and it could affect some decision making on farm. How do you see this playing out?

Ed White: [00:07:55] Well, you know, that’s going to be interesting to see how farmers manage, just because not only do they have to take on much more financial exposure, but they’re doing it in the light of very bad subsoil moisture in most areas. So there’s still a drought risk if we don’t get sufficient rain in the spring and early summer, and the price volatility has been pretty wild. The prices today are not what people were expecting a year ago or even six months ago. It’s hard to say, given another eight months where prices are going to be, and most farmers won’t have everything priced out by next fall, even if they price some, which some farmers don’t even do that. But even those farmers who do price a fair bit of their crop, they’re still going to be a lot on on priced and unhedged. So, you know, there’s going to be a lot of money spent in. Putting in this crop and that money is going to be, you know, depending on what it what it nets. On the other side of harvest will depend a lot on on price and then of course, mostly on the what happens with this drought and whether we get what you would call a normal summer.

Robert Arnason: [00:09:18] Yeah, so so given those combination of risks, the risk that fertilizer prices could go up further in the next couple of months and the risk that, you know, we may not get spring rains. I guess there’s a lot of things going on inside farmers’ heads right now saying, hmm, I wonder if it’s actually a worthwhile growing canola because the input costs are high. Or maybe I should grow canola because it’s a familiar crop and I know how to grow it, and therefore that’s maybe a safer bet for me. So there’s a lot of things going on here in terms of like folks figuring out, Hmm, where should I be? How much risk am I willing to take on financially to grow certain crops, right?

Ed White: [00:10:02] Well, and here’s what’s interesting is crop we haven’t spoken of and I should have mentioned before, but soybeans, which have been sort of everybody’s darling in Manitoba until a couple of years ago, and then some poor results have spoiled what was a surging acreage base for soybeans and say, this year, you know, the production costs for soybeans are relatively very low compared to everything else, mostly because of the, you know, you don’t need as much fertilizer, and things like canola and corn have substantially higher costs of production. Yet the canola and corn look to be, you know, under most reasonable assumptions, getting you a lot more money per acre, whereas soybeans, because of the relatively low bushels per acre do not seem, you know, even with that low cost production, they seem, you know, one of the most unpromising crops out there with know barely any profitability over your total costs and over operating costs. They still don’t look great. So, you know, there you go. Do you go with a relatively low input crop or low investment crop like soybeans, but with a poor outlook? Or do you sort of roll the dice on spending the money on on those crops like canola or corn and hope you get a crop and hope hope you can price it at the right place?

Robert Arnason: [00:11:36] So given what we just talked about and these different factors in the marketplace, what’s your best guess as part of what’s your best guess as to which crops will see an acreage boom in western Canada this year? What are you? What’s your gut telling you?

Ed White: [00:11:54] Well, you know, Western Canada, I wouldn’t guess because this is just Manitoba numbers. But I mean, I don’t know when you’ve got questionable growing conditions because of the soil moisture, would you tend to stick with those mainstay crops that you grow? Well, they’re in your rotation, so you don’t have to change much from your rotation. I mean, when you’ve got corn and oats and, you know, even spring wheat all looking. Good, buy this. You know, why wouldn’t you stick with those? It’s, I guess, those ones like barley and soybeans, barley been a fading mainstay for lots of people, but it’s really faded a lot in recent years. You know, is there some play around that is there? You know, I mean, soybeans, I doubt many people will launch a whole bunch of extra new acres this year based on on the outlook. But, you know, things like canola, why would you why would you cut back on canola unless you simply can’t afford to grow it? You know, oats is doesn’t demand the same, you know, investment. That’s an easy one. If if you’re oats grower, you know why, why would you not just keep up with that do as much as you can within your rotation? Yeah, I just think it’s a disappointing, you know, outlook for things like soybeans about which there have been so much hope a few years ago and around things like peas as well. Don’t don’t look very good. And there’s so much talk around that in terms of just market priced peas. They also look quite poor. So will that affect the overall base? We’ve had some new plants come online for peas, but on the other hand, there’s probably enough out there to to meet their needs and they contract most of their production or much of their production anyway. But yeah, it’ll be an interesting one because you’ve got financial risk playing off against likely return.

Robert Arnason: [00:13:53] Ok, well, thanks for sharing your thoughts on this topic, Ed. I’ve been speaking with Ed White, a reporter with the Western Producer in Manitoba.

Robert Arnason: [00:14:02] Thanks, Ed.. 

Ed White : Thanks, Robert.

Robert Arnason: [00:14:18] Next up on the show, as of late December, organic wheat was selling for twenty four dollars per bushel and organic flax was at sixty five dollars per bushel in western Canada. So it should be a great time to be an organic farmer. But it’s possible that the Prairies could see a repeat of what happened around two thousand and ten when hundreds of farmers quit organic production. Here to talk about the state of organic farming in Saskatchewan and the broader issues in the organic sector is Marla Carlson, executive director of Sask. Organics, which represents organic producers across the province. I spoke with Marla just before Christmas. Let’s just go back in time to kind of that late 2000, early 2010, 2011 period. Commodity prices were high for canola and other crops, and I guess some organic farmers made the decision to go back to conventional. Do you remember that time and what was that period like for the organic sector?

Marla Carlson: [00:15:25] Yeah, yeah, no, for sure. I definitely remember that time and I think, you know, part of it was high prices, you know, in the conventional market. And then also we were, you know, coming off of the end of a, you know, a financial crisis, you know, global financial crisis. So I think those two things together, you know, made it harder for some farmers to stay in organic production, especially those who hadn’t been doing it for very long and may have, you know, come in to the market, you know, expecting, you know, the premiums to be, you know, as they were when they were transitioning. So, you know, I think that that that definitely, you know, there’s always, I think with organic production, the pull and and the push right or the push and the pull, depending on which side of the equation you know you’re looking at. So I always think it’s a multiple, you know, there’s multiple factors that help farmers or, you know, results in farmers making the decision to leave organic production. But there definitely was a decline in numbers in the province

Robert Arnason: [00:16:38] Right. So there’s no doubt then, that price and the price difference differential between organic crops and organic commodities and conventional is a factor in play when it comes to the number of producers that are entering or leaving organic. That’s definitely a factor.

Marla Carlson: [00:16:57] I would I would say, you know, it is, you know, it is a factor, some of some of that or a lot of that price premium is required, you know, for organic production because of, you know, the the lower yields. Although, you know, we’re getting a little bit of research now that showing that yield gap is is closing between organic and conventional for some for some crops. But there’s still definitely a yield gap. So you know you need to be paid, you know, more, you know, per per bushel, if you’re going to have fewer of them to make the farm profitable and resilient. So for sure.

Robert Arnason: [00:17:33] So right now on my laptop, I’m looking at the organic price quotes that are listed on organicbiz.ca. And I’m seeing that, for example, for hard spring rent pardon me, hard red spring wheat, the premium for organic is about two hundred percent. And then for something like oats milling oats, it’s about one hundred and fifty percent. So those premiums are smaller than they were a few years ago. Correct?

Marla Carlson: [00:18:06] Yes. Yeah, they they are. They are definitely smaller, you know, smaller than they have have been. I mean, I think price, obviously, you know, the differentiating differential is important, but I also think, you know, factoring in your cost of production, right? So what is actually your net profit on on the farm per acre? And I mean, I haven’t seen any any numbers recently. But you know what, I and I don’t follow the conventional market, obviously as closely as I do the organic market. But you know, there’s some some pretty also, you know, high input costs and see costs and uncertainty that I think are, you know, having some upward pressure on price, potentially for conventional acres or for conventional farmers. So, you know, it’s not it’s not the same in the organic sector. So, you know, I think that prices are one aspect of it and they’re an important part of it. But then also looking at like I was saying your your cost of production and what you’re ending up, you know, kind of in your pocket at the end of the year. Net profit, I like I said, I haven’t seen the numbers yet, but in the past that that number has been higher or higher per acre for organic production than than conventional.

Robert Arnason: [00:19:21] Ok, so what are you hearing from organic growers, organic farmers in Saskatchewan right now? Are they doing OK financially after the drought of twenty twenty one? Is there? Are there some people who are in difficult straits like what’s your sense of the situation across the board?

Marla Carlson: [00:19:42] Yeah, I mean, anecdotally, I mean, the drought has impacted, you know, organic farmers like it has conventional farmers. And then there’s those, you know, weird, you know, strips that seem to run through where folks to get the moisture when they needed it. So there’s definitely, you know, variability. But the drought has has impacted organic farmers, for sure. Just, you know, in terms of yield, for sure. And some folks didn’t didn’t get a crop this year. So that will, you know, obviously that isn’t good for for organic farmers. So it definitely has had an impact.

Robert Arnason: [00:20:15] Ok. And are you having any? Sense or feeling that we might see a repeat of what happened in that kind of late 2000s or early 2010 periods that there are some folks that might exit the business or what’s your sense of that?

Marla Carlson: [00:20:32] Yeah, I think I I you know again, you know, it’s just, you know, farming. Farming is in cycles, but I do think that we will see, you know. My hope is or, you know, I don’t see necessarily any indication that will have the as dramatic a drop as we did in that eight, nine, 10 period. But there will be, you know, anecdotally again, because I don’t have my data yet for this year, but the numbers and acres will will have dropped some, you know, some of that will be retirement, but some of you know, some of that will will also be, you know, continuing to farm, but not organically.

Robert Arnason: [00:21:12] So are you talking about Saskatchewan now where Prairie wide?

Marla Carlson: [00:21:18] I know Saskatchewan best. So yes, Saskatchewan for that’s what I’m referring to. Is Saskatchewan.

Robert Arnason: [00:21:25] Ok. So possibly, possibly a small drop in numbers, but maybe not significant or substantial.

Marla Carlson: [00:21:36] I would say not as. Yeah, definitely. Well, my hope is that it won’t be as significant as that eight, nine, 10 period where we had, you know, we’ve basically been building back since since that period in terms of numbers and acres in the province. So, you know, there’s a bit of, you know, we have a five year stretch where we were increasing in numbers and acres and then we plateaued a little bit. And, you know, actually last in our in our 2019 data, we we had a small decrease in in producers and acres. So. Ok. Yeah.

Robert Arnason: [00:22:12] Yeah. All right, so as you say, things always go in cycles. This could be when we don’t know what’s going to happen with commodity prices come next fall, we could be having a very different conversation. So it’s really hard to know where this is headed.

Marla Carlson: [00:22:30] I would, you know, I would agree with that. And you know, the weather this summer for all farmers is is going to really be, you know, significant because for some, this might be the first year that they’ve, you know, that they’ve been experiencing the low moisture. But you know, for some farmers and especially in the southern parts of the provinces, this is year three or four. So to, you know, to go with insufficient moisture for another season would definitely not be good for organic farmers, you know, as their conventional neighbors. So yeah, it is definitely a wait and wait and see and hope for some, some better weather conditions this summer.

Robert Arnason: [00:23:11] All right. Well, thanks, Marla. You’ve been listening to Marla Carlson, executive director of Sask. Organics. Well, that wraps up this week’s show. I’m Robert Arnason of the Western Producer. Thanks for listening.

Commerical: [00:23:49] I’ve been farming my whole life, and the one thing you can always count on is change. And now there’s a new generation of inoculates from Lallemand plant care. New engineered granules and Lal fixed spherical for pulses and soybeans that provide improved handling and accurate metering. New rhizobium and Lal fix pro yield that deliver improved nitrogen fixation and iron uptake in soybeans. I’ve seen a lot of change, but this Lallemand company? Well, this changes everything. Contact your Lallemand and sales representative today.

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