Darren Bond, a farm management specialist at Manitoba Agriculture, outlined the 2024 outlook for farmers at the St. Jean Farm Days in early January.
Bond, known for his insightful analysis, dove into the challenges awaiting farmers in the coming year.
Bond painted a challenging year ahead, with profit margins anticipated to tighten, possibly reverting to historical grain and oilseed production levels. His message was clear – the upcoming year, 2024, might usher in a return to a more demanding economic landscape for farmers.
While production costs may dip slightly from the previous year, they remain stubbornly high.
The agricultural specialist drew attention to the prevailing softness in commodity prices, identifying it as a formidable hurdle to profitability in the forthcoming year. He underscored the need for farmers to sharpen their focus on producing top-quality crops and implementing stringent cost-management measures.
Bond urged farmers to exercise caution in their financial decisions, emphasizing the imperative of adjusting spending habits to align with the anticipated tighter profit margins. The proactive stance he advocated was not just a recommendation but a necessity for those looking to weather the challenges of 2024 successfully.
Bond described what he meant by farmers being more cautious going into 2024.
For the last few years, because of reasonably decent profit margins on the farm, there was more room for mistakes and being more aggressive in spending on things like land and equipment.
“For example, in 2024, because those profit margins appear to be shrinking, the ability to rebound from overspending on something is a lot more difficult just because the profit margins don’t support that,” Bond said.
Now, producers know this situation and that profit margins will be harder to grind out because they’ve done their own cost to production. The people at Manitoba Agriculture always encourage producers to do their production costs. Hence, they understand where those profit margins lie.
“The good thing is if you’ve done that and have a firm handle on your costs, that goes a long way to being cautious.”
The challenge for those who have yet to do that and need to realize how tight the margins might be is that they go along spending in 2024 like it’s 2022 or 2023 when the profit may not be there.
Details unfolded as Bond provided tangible examples of average crop input costs in Manitoba. Fertilizer costs, a critical component of the agricultural equation, have dropped a little. However, Bond pointed out that the fall in commodity prices had far outstripped any savings in production costs. As he vividly described, the financial knife had cut deeper than many might have initially anticipated in commodity prices of $150 to $200 a tonne.
Bond outlined the operating costs, including seed, fertilizer, chemicals and fuel. HRS wheat costs are about $388 per acre plus almost $200 for fixed costs, including land, labour and equipment.
He said canola’s operating costs sit around $456 an acre. Corn requires more inputs, including more fertilizer and some extra drying costs, and has operating costs at $622 an acre.
Including the operating and fixed costs, HRS wheat comes in at about $606 per acre. Canola comes in at about $674 per acre, soybeans at $523 and corn at about $860 per acre. Compared to last year, costs are $25 to $50 an acre lower depending on the crop, but revenue is also lower.
“It depends on the situation for the individual farmer, but again, $150, $200, even more for corn per acre based on lower crop prices and the lower revenue. So that’s the real stinger for 2024,” said Bond.
His insight into the variability in grain prices among different companies added a layer of complexity to the farmer’s decision-making process.
“There seems to be a lot of variability for grain prices amongst different companies in different locations on any given day,” Bond said.
Companies are looking to fill trains and ships run price specials, so they’ll adjust the basis accordingly.
“So finding profit in 2024, I think, is going to require producers to broaden their horizon on who they market to and maybe cast their net a little bit wider, if you will, to be able to identify those opportunities,” he said.
Between locations, depending on who wants the grain or who doesn’t want the grain with the basis. With canola or soybeans, there is a $1.50 a bushel difference in prices because certain companies need the grain at a particular time.
“It will require a lot more energy, attention to detail, and contact with the grain buyers.”
With his wealth of knowledge, Bond offered a blueprint for success – a blend of meticulous crop production, shrewd cost management, and an astute marketing approach. •
— By Harry Siemens