Smith: Economic Profitability and Sustainability of Canola Production Systems in Western Canada
Date: April 2013
Term: 3 years
Status: Completed
Researcher(s): Elwin Smith, R. Blackshaw, Agriculture and Agri-Food Canada (AAFC), Lethbridge, AB, N. Harker, J. O'Donovan, AAFC Lacombe AB, S. Brandt, E. Johnson, AAFC Scott, SK
SaskCanola Investment: n/a
Total Project Cost: n/a
Funding Partners: n/a
Project Summary
Researchers conducted a three-year project to study the economics of canola production systems including an input study and a rotation study. The results from the input study of a barley-canola rotation indicated the primary input that influences yield was weed control. Without weed control the addition of fertilizer or other inputs had no benefit. In-crop weed pressure and the timing of weed control impacted canola yield. The rotation study results showed that the net return from continuous canola rotations was lower than from the standard four-year rotation. High canola price benefited shorter canola rotations more than the four-year rotation. With very high canola prices and blackleg resistant hybrid canola, the short C-W rotation was the most profitable rotation and continuous canola was as profitable as 4-year rotations.
Farm cash receipts in Canada from canola were $4.9 billion in 2008, representing about 21% of total farm cash receipts in Canada. This is only slightly lower than the 25% for all wheat. Canola production has expanded in the past decade due to improved agronomics and higher relative profitability than some other cereals and oilseeds. To maintain or expand the current level of output it is essential to identify, delineate, and where possible, quantify, the physical factors and economic circumstances that motivate producers to grow canola rather than some other crop.
Researchers with Agriculture and Agri-Food Canada (AAFC) in collaboration with the University of Lethbridge conducted a three-year project from 2010 to 2013 to study the economics of canola production systems. The specific objectives of the study were to evaluate input use rates and evaluate the duration between canola in a rotation.
This study was a two-part economic analysis of data from recently completed field studies, the Canola Grower Survey (See 3.7.9), and secondary sources for prices, input costs and other financial data. The project included an input study and a rotation study, which were undertaken by graduate students, under the supervision of University professors and AAFC researchers. This project did not have any field experiments.
Input Study
The input study evaluated different rates of input use, such as seed type, seeding rate, fertilizer and herbicides used in canola production. Differing rates for inputs were examined in isolation (i.e., changes in single inputs) as well as in combination (i.e., examining multiple inputs simultaneously). The objective of this study was to identify potential opportunities to reduce some production inputs without sacrificing yield and profits, as well as to examine whether some inputs have more impact on profitability than others.
The results from the study of a barley-canola rotation indicated the primary input that influences yield was weed control (Figure 1). The inputs had more impact on the net return of canola than of barley. Without weed control the addition of fertilizer or other higher quality inputs had no benefit. The practices of increasing seeding rate of canola, higher fertilizer rates, or using better genetics to compete with weeds when there was no weed control were not profitable practices (data not shown).
Figure 1: Net returns for canola and barley starting from the highest input level and subtracting inputs
(HLI=highest level of inputs, G=reduced genetics (conventional non-hybrid cultivar for canola), 50S=reduced seeding rate by 50%, F=nitrogen fertilizer reduced by 50% and 100% from recommended rate, and H=herbicide reduced by 50% and 100% from recommended rate.
The most expensive input to eliminate was herbicides, but in this study using a 50% herbicide rate had similar net return to using the full rate of herbicides. Reducing herbicide rates did reduce cost, but the value of the yield declined by a similar amount negating the potential savings. Nitrogen fertilizer increased net return in a weed-free environment, but a very high rate of nitrogen was not necessarily profitable. A higher than recommended seeding rate to increase plant density reduced net return due to higher seed costs. Finally, higher quality genetics (hybrid for canola and a newer variety for barley) increased net return.
The importance of weed control in canola production was also evident in a survey of canola growers. The pressure of in-crop weeds impacted canola yield and value of canola production (Table 1). In many cases, fields with severe weed infestations were also sprayed two or three times, increasing production costs and lowering the net return even more than is reported in Table 1.
Table 1: Impact of severity of weeds on canola yield and returns
*Canola price was $10/bu (cash)
Source: Danny Le Roy and Ryan Friesen, University of Lethbridge and Elwin Smith, AAFC. 2013.
The timing of in-crop weed control along with weed pressure had a definite impact on canola yield. For the survey of canola growers, timing included: Very early = pre-emergence and cotyledon, Early = 1-2 leaf, Recommended = 3-4 leaf. The results showed that proportionately more ‘very early’ control was associated with severe weed pressure – an indication that producers acted on the weed situation, but despite their early action there was still a yield penalty. (Table 2)
Table 2: Canola yield as impacted by timing of in-crop weed control and severity of weeds.
Source: Danny Le Roy and Ryan Friesen, University of Lethbridge and Elwin Smith, AAFC. 2013.
If a producer knows they have or will have high weed pressure they need to time weed control applications earlier than the recommended timing for weed control. The yield penalty for waiting to the recommended control time is double that of early control of weeds. (Table 3)
Table 3: The reduction in yield and returns from severe weed levels, by timing of weed control.
Source: Danny Le Roy and Ryan Friesen, University of Lethbridge and Elwin Smith, AAFC. 2013.
There was also a yield impact from the previous crop in the rotation, with a proportionately more yield impact with severe weed pressure after canola and pulse crops. There was less of an impact for other crops such as beans, mustard, potato, forages and fallow. (Table 4).
Table 4: Impact of previous crop on canola yield, by weed severity and the difference between mild and severe weed pressure.
Source: Danny Le Roy and Ryan Friesen, University of Lethbridge and Elwin Smith, AAFC. 2013.
Rotation Study
In the rotation study the economic costs and benefits of shortening the interval between canola in crop rotations was examined. This was only relevant for areas free of clubroot. The rotation intervals for canola, with field pea, spring wheat and flax, varied from continuous canola, to canola once every second, third or fourth year. Additional factors in the study included canola genotype (blackleg resistant and blackleg susceptible) and fungicide for disease control.
The results from the study showed that the net return from continuous canola rotations was lower than from the standard four-year rotation (Figure 2). Continuous canola had the lowest return of the five rotations, and the open pollinated cultivar without blackleg resistance had lower return than the hybrid with blackleg resistance. With very high canola prices and blackleg resistant hybrid canola, the short C-W rotation was the most profitable rotation and continuous canola was as profitable as 4-year rotations. There was an economic incentive when growing hybrid canola with blackleg resistance to shorten the rotation and include field pea in a three-year rotation of pea-canola-wheat.
Melfort
Scott
Fig. 2. Contribution margin for five hybrid canola rotations without fungicide control, and for four ratios of canola to wheat prices (C:W) at Scott and Melfort, Saskatchewan, Canada. Letters above the bars indicate significant differences among the five crop rotations by each of the four wheat:canola price ratios.
Source: Smith, E. G., Kutcher, H. R., Brandt, S. A., Ulrich, D., Malhi, S. S. and Johnston, A. M. 2013. The profitability of short-duration canola and pea rotations in western Canada. Can. J. Plant Sci. 93: 933940.
For a limited number of years when canola prices are attractive, producers may be able to shorten their rotation. The rotation can be lengthened out when other crops (wheat, barley) are more or as profitable to grow as canola. However, there are concerns with disease pressure, even with the blackleg resistance hybrids, when shortened canola rotations are used for many years, so there is a need to have flexible rotations and have some periods when canola is not planted too frequently.
Scientific Publications
Smith, E.G., Brandt, S.A., Kutcher, H.R., and Malhi, S.S. (2013). "Economic evaluation of canola and pea interval in rotations.", Canadian Journal of Plant Science, 93(5), pp. 933-940.
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