farm planning and budgeting

As farmers plan ahead for cropping in 2020, understanding the input costs and gross margins of the various crops is crucial for farm planning and budgeting.

When we look across our agronomy clients throughout the country and the amount spent on seed, sprays and fertilizer – or direct inputs / variable costs – we can pick out some important trends.

The great thing about the gross margin is that it only takes into account A) output (yield and price) and B) direct costs. This means that irrespective of the size of the farm, the efficiency of the enterprises can be easily understood and compared.

This comparison, referred to as ‘benchmarking’ is a valuable tool for comparing how effectively a farm is at buying inputs, using the right inputs, and getting them on at the correct timings.

Farm Budget Guide

There is an element of subjectivity, not all farms are the same and it is important to compare like-for-like situation. Not a farm in Molo with a farm in Mogotio for example, as their different yield potentials will be misleading.

It is also NOT a tool for making an absolute comparison and a judgement of whether something is right or wrong. What it is, is a tool for asking questions – why am I spending more on inputs than my neighbour – am I not bargaining hard enough with the agro-distributor?

As an example of how benchmarking can highlight issues, I sometimes get surprised looks when I tell people how much I spend on micronutrients – yet time and time again the importance of copper in particular in cereals, and boron in many crops is overlooked by growers who spend no money on them!

The same can be said of fungicide programs – on average our clients spent 16,000Ksh on wheat fungicides, but our trials repeatedly show that when growing Robin, Hawk, Wren and Korongo this is cost effective.

It may have been economic to spray one fungicide on these varieties 7 or 8 years ago, but they no longer have the resistance to disease.

Crop Gross Margins

  Wheat Barley Maize Canola Peas Sunflower Potatoes
Costs (Ksh)
 
Seed + treatment 4,350

 

4,050 5,300 9,000 21,950 210 110,000
 
Herbicides 3,600 3,600 8,200 6,300 11,600 10,800 10,400
Insecticides 2,400 2,400 10,600 3,050 2,100 2,100 12,000
Fungicides 16,600 11,300 4,000 6,700 18,100 2,000 45,000
 
Fertiliser 15,000 13,000 22,000 14,500 3,000 13,100 23,000
Micronutrients 1,800 1,800 1,800 1,100 1,100 1,100 3,500
 
Total Variable / Direct Costs 43,750 36,150 51,900 40,650 57,850 29,310 203,900
 
 
Price per kilo 34 37 25 40 60 30 18
Yield 4.5 t/ha

20 bag

4.5 t/ha

20 bags

8.0 t/ha

36 bags

2.5 t/ha

11 bags

2.2 t/ha

10 bags

2.0 t/ha

9 bags

18 t/ha

80 bags

Output 153,000 166,500 200,000 100,000 132,000 60,000 324,000
 
Gross Margin

(output minus variable costs)

109,250 130,350 148,100 59,350 74,150 30,690 120,100

Key trends over the past season are fertilizer prices rising slightly, fungicide costs going up with the addition of VAT, and lower insecticide costs in maize on most but not all farms, as Fall Armyworm pressure was less than budgeted for.

When we look at the difference in the final gross margin between farms, yield is always the driver of profitability. While cutting costs does help, the better farms make their spending count through greater timeliness, better planting and more accurate application.

What gross margins do not tell you however is the overall benefit of a crop to a rotation. On gross margin alone no one would ever chose to grow Sunflowers, yet we have seen a 1-2 t/ha yield response in cereals following a crop of Sunflowers – worth at least an extra 35,000 ksh per hectare – and a reduction in herbicide costs for several seasons.

On farms in Mt Kenya region last season for example, continuous wheat yielded around 40% less than first wheat (after peas or canola) across several farms where Brome was an issue.

 

Growers Stand To Benefit From Pulse Crops

We often think about pulse crops for the Nitrogen they fix and leave in the soil for the next crop, but what about other benefits?

Our most recent deep Nitrogen samples show a familiar trend with peas – even when inoculated, the soil nitrogen supply after the crop is similar to cereals and canola. So what else is going on?

crop input costs per acre

The picture above shows the roots of wheat plants from the same farm after various crops. Where the previous crop was wheat, nematodes, Rhizoctonia and Take-All have caused, brown, stubby and malformed roots that are unable to access moisture and nutrients.

After oats the roots are whiter (Oats do not host Take-all) and there is much less nematode damage (oats are resistant to some nematodes, but not others). You can also see there are far fewer seminal roots spreading down at depth. The roots however are much smaller than the wheat which followed Lupins on the right, which are far more extensive and stronger.

Lupins are very poor hosts of Root Lesion nematodes so they make a fantastic break crop on this particular farm, with its sandy textured soil in which nematodes thrive.

Whilst canola is excellent as a break crop for reducing Rhizoctonia, Take-All and sorting out grass weeds, it hosts many nematode species so legumes – including peas and faba beans – are an essential part of a diverse rotation.

farm budget guide 2019 2020

Late Foliar Nitrogen on Canola

We know that there is a very strong correlation between yield and the number of days between the end of flowering and senescence in Canola – the seed fill period. Anything we can do to improve this should be beneficial to yield.

There has been work on the effect of foliar Nitrogen applied at mid to late flowering in some countries; in the UK a benefit was seen but it tended to be where the main topdressing was either suboptimal or perhaps where significant leaching losses had occurred.

GRDC work in Australia in 2015 suggests that there is little or no yield penalty from late applied N, and the researchers suggest that in low rainfall areas, delaying nitrogen applications can be a good way of hedging your bets until you know the crop has enough moisture and is sufficiently advanced to make it to harvest.

French work in recent years has suggested that for high yielding Canola crops, peak demand for nitrogen around flowering can mean large crops can run short several weeks later in high rainfall situations if they were top dressed several weeks earlier.

Profitable Farming

2019 crop budgets

Getting soils tested is a crucial part of profitable farming. The earlier you can do it the better, to ensure liming and remedial work is implemented in good time ahead of next year’s crop. Get in touch with via this website contact form and we will put you in contact with your local adviser.

Till next time,

Happy farming,

David,

Center of Excellence for Crop Rotation Agventures

Farming for the future requires a change of approach. Monoculture, soil degradation and climate change and soil degradation are threats to the futureof how we feed the planet. Agventure Ltd set up the Center of Excellence for Crop Rotation to help farmers diversify cropping systems and introduce techniques which have a long-term outlook to improve soil health. The Center of Excellence for Crop Rotation works extensively with Crop Nutrition Laboratory Services Ltd (CropNuts).

About David

Barley farming in narok kikuyu laikipia eldoret

 

David Jones is the Broad Acre Specialist at Crop Nutrition Laboratory Services Ltd. (CROPNUTS). David has a keen interest in soils and no till farming systems where he has undertaken work looking into weed levels and changes in soil structure, and has extensive experience in field trials and in the development of precision farming techniques. In his spare time he enjoys playing rugby.