Economics influence farming decisions

From an agronomic point of view, the response to an insect infestation in a field might seem straight-forward. But add an economic perspective to the situation, and the preferred course of action could change.

From an agronomic point of view, the response to an insect infestation in a field might seem straight-forward. But add an economic perspective to the situation, and the preferred course of action could change.

Nevin Rosaasen, an Edmonton-based research economist with Alberta Agriculture and Rural Development, described to a Red Deer audience on Wednesday why it’s important for farmers to apply an economic analysis when making decisions.

In the case of spraying insecticides, he said, they should calculate the cost of such action, assess the extent of the problem, consider if weather and other factors will increase or limit damage, figure out the likely impact on yields, and take into account the probably price of the harvested crop.

Only then, can a good decision be made, said Rosaasen.

“Determine your farm’s specific economic threshold using your own costs.”

Other factors might include the adverse impact of spraying on beneficial insects, which could hurt nearby fields or future crops.

The same diligence should be used when deciding if and when to spray weeds or use fungicides, said Rosaasen, or choosing a crop to seed or the mix and quantity of fertilizer to apply.

Higher yields may look good in the hopper, but if the cost of achieving those extra bushels exceeds the resulting revenue, the result is a bad one.

Rosaasen noted that many farmers are shortening their crop rotations so they can grow higher-priced canola, he said.

But studies have shown that longer rotations produce higher yields.

“There’s a yield loss of canola on canola — it’s consistent in all soil zones across Alberta — of a 15 to 20-per-cent yield decrease.

“And we also know that canola yields in a three-year-plus rotation is eight per cent higher than every second year.

“You need to look at the long run. Are you going to break disease cycles, decrease the chance of herbicide-resistant weeds?”

Even selecting a variety of seed should involve an economic exercise, said Rosaasen. If the highest-yielding variety is susceptible to a disease that’s prevalent, greater volumes at harvest could be offset by lower grades.

One way to manage fertilizer costs is to time purchases so that they correspond with price drops, said Rosaasen, citing a study that showed how fertilizer costs fluctuate during the year.

“Fertilizer prices tended to increase in the months of April, May and June, and were the lowest in October and November.”

But he savings associated with buying fertilizer in the late fall are only worth pursuing if they exceed the cost of storage, he pointed out.

The key to effective economic planning is good information, said Rosaasen.

And that requires detailed records.

“That’s the most important hat that you wear as a producer, or an agronomist. Unfortunately, it’s one of the areas where producers are the least responsible.”

Among the things farmers can do to maximize the profitability of their operations are to obtain seed tests and seed treatment, and conduct soil tests to determine what nutrients are needed, said Rosaasen.

“You can’t manage what you don’t measure.

“The importance of soil tests can’t be over-emphasized in this day and age.”

Rosaasen, was speaking at Agronomy Update 2014, which took place Tuesday and Wednesday in the city.

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