Beyond Agronomy News: November 11th, 2008

Agronomy

Innovative land rental agreements

More often than not, I have a hard time fishing rental agreements out of producers because it's in their best interest to hold their cards close and be prudent with the details. Lately however, I heard of an interesting proposal for land rent that made me think twice about its potential. The producer offered his neighbour 10 years of cash rent up front to farm the land during that time. Even with interest costs, which are tax deductible, he figured the principle and interest was worth it.

In this example, we'll look at offering a 5-year lump sum of rent on 1,000 acres at $50.00 an acre and 5.25% interest.

$50.00 acre × 1,000 acres = $50,000 annual rent
$50,000 × 5 years = $250,000 5-year payment
$250,000 × 5.25% over 5 years = $290,716.65 5-year payment or $58,143.33 annually
$58,143.33 ÷ 1,000 acres = $58.14 acre

In this example offering a lump sum to cover five years of rent would cost $58.14 an acre after interest and increase the land rental cost by 16%. This strategy does tie up capital for five years but I suspect the banks would prefer to see a highly leveraged client with 5-year rental agreements rather than 1 or 3-year agreements. I'd be interested to hear your thoughts on this strategy.

Another land rental agreement is one that links rental payments to grain prices, thereby allowing the land owner to share in the risks and returns. In this case, the November Pool Return Outlook on wheat from the Canadian Wheat Board is being used, but you could use the price of canola or another crop at a specific time. In this lease, there's a base amount per acre paid to the landlord. If wheat is $7.25 a bushel or better net to farmers at the end of November, the cash rent goes up by $5 an acre. If wheat is above $8.25, the cash rent goes up $10 an acre. If the wheat PRO is above $9.25 a bushel, the rent increase is $15 an acre above the base. However, if the tenant collects crop insurance for the crops on the leased land, there are no rental increases no matter what grain prices do. I read this in one of Kevin Hursh's daily commentaries. Interesting! SL

Low draft gumbo openers prevent plugging & improve seed placement

I had a chance to see the GEN manufacturing prototype low draft gumbo openers in the field last year and again in 2008. I must say, they're a very impressive opener for those who struggle with plugging and seeding depth control in heavy clay soils ("heavy clay" being a relative term, as some readers will attest!). These gumbo style low draft openers have closed bottoms and strategically placed beads of weld above the tips that prevent the orange peel plugging that is synonymous with gumbo soils. I did have a chance to see demos of the openers in 2007 and full-scale use across 5,000 acres in 2008. I was very impressed with the reduced plugging and excellent paired row seed placement.

We run GEN 300 4-inch low draft openers and they work really well in our heavy soil at Morrin, shown in the photo above. They do, however, plug a little more often than we'd like, especially after the wet springs we've had, so the low draft gumbo style tips would be a great fit. A low draft opener that has excellent seed and fertilizer placement along with reduced plugging is a winner in my books. SL

Fuel efficiency of 4WDs is now part of the puchasing equation

It wasn't that long ago when fuel prices didn't even hit the radar screen, and look how it concerns us today. This fall, it was hard not to have a conversation that didn't involve fuel prices or availability. Many producers were telling me their fuel bills were running between $3,000 and $5,000 per day to keep the trucks, grain cart and combines running. Unbelievable!

Below you'll find a list of today's common 400+ HP 4WD's to see how they compare with respect to fuel economy. I went to the Nebraska Tractor Test Laboratory website to see what the true in-field test results were. The following fuel economy ratings are based on maximum power at the drawbar. I wanted to simulate the speed we would travel at seeding so I decided to compare each 4WD at maximum power travelling around 5 mph. The caveat in this example is that we don't typically run at maximum power but I feel it's the closest comparative rating we'll get.

Challenger MT 875B
423 hp at 4.97 mph, 2099 rpm
14.99 hp-hr/gal

John Deere 9530T
367 hp at 4.8 mph, 2096 rpm
15.57 hp-hr/gal

JD 9620
397 hp at 4.68 mph, 2100 rpm
16.62 hp-hr/gal

NH TJ 450
411 hp at 5.02 mph, 1701 rpm
18.14 hp-hr/gal

STX 530 Quadtrac
455 hp at 5.06 mph, 1806 rpm
15.62 hp-hr/gal

STX 440
411 hp at 5.02 mph, 1701 rpm
18.26 hp-hr/gal

The fuel consumption measurement, horsepower-hours per gallon (hp-hr./gal.), has become the standard used for comparing the efficiency of all agricultural tractor models. The measurement of hp-hr/gal means that burning one gallon of fuel in the tractor at full load and at rated engine speed produces a certain amount of horsepower for an hour. The higher the number, the greater the fuel efficiency; that is, more work is being done with a given amount of fuel.

In this scenario, the most fuel efficient 4WD is the STX 440 at an impressive 18.26 hp-hr/gal. The lowest fuel performance comes from the Challenger MT 865 at 14.99 hp-hr/gal. The difference between the lowest and highest fuel economy among these 4WD'S is 3.15 hp-hr/gal or 21%. Just some food for thought when you're out shopping for horsepower this fall. SL

Article & photo source

Readers Comment

In response to last week's fall banding article:

"I think you need to add in the cost of openers as these are a direct wear item as well as a per hour cost for putting more hours on your tractor. I think these two items would add between $1.25 - $2.00/ac depending on your situation. We've also been told to take 85% of the acre/hr number to allow for inefficiencies such as headlands, gas wells or irregular fields. This would bring the banding operation down to 35 ac/hr from 42 ac/hr. Again, just some rough calculations." Sterling Hilton, Strathmore, AB

Good point, Sterling. Including your suggestions, the total cost of fall banding including hourly tractor rate, fuel, labour and openers would now be approximately $4.00 an acre. With urea at $750 a tonne or $0.74 lb/N and an application rate of 80 lbs/N per acre, the price of urea would have to increase by $50.63 a tonne to offset the cost of fall banding. This still makes a good case for fall banding this year. SL

Market News

International Crop Weather News

• United States: On the Plains, precipitation is spreading across central and southern portions of the region, boosting soil moisture reserves for winter wheat but slowing cotton and sorghum harvesting. On the central High Plains, some of the precipitation is falling as wet snow. In the Corn Belt, snow showers are confined to areas downwind of the Great Lakes. Elsewhere in the Midwest, cold, dry weather favors fieldwork, including corn and final soybean harvesting. In the South, cool, dry weather is promoting fieldwork activities, such as winter wheat planting and soybean harvesting.
• Europe: Widespread rain across most of Europe maintains abundant moisture supplies for winter wheat and rapeseed establishment but hampers summer crop harvesting. Dry weather in the Balkans maintains a rapid pace of fieldwork.
• Former Soviet Union: Dry weather continues in Ukraine and southern Russia, helping the corn, sunflower, and sugar beet harvests advance toward completion. Unusually mild weather promotes additional growth of winter grains in Russia, Ukraine, and Belarus. Cool, showery weather in Uzbekistan hampers final cotton harvest efforts.
• East Asia: Dry weather aids winter wheat planting on the North China Plain. Showers slow winter rapeseed planting but provide beneficial moisture for emergence.
• South Asia: Lingering showers in Bangladesh and northeastern India slow rice maturation and harvesting, while dry weather elsewhere favors summer crop maturation and winter wheat planting.
• Middle East: Rain in northern Iraq and western Iran provides topsoil moisture for winter wheat and barley.
• Northwest Africa: Heavy rain maintains favorable moisture for winter grain planting but causes flooding in Morocco.
• Australia: Soaking rains in Western Australia provide nearly ideal conditions for filling winter grains. In southeastern Australia, hot, dry weather further reduces yield prospects for immature winter grains. In eastern Australia, mostly dry weather aids summer crop planting and winter wheat harvesting.
• South America: Hot, dry weather reduces moisture for soybean establishment in sections of central Brazil. In contrast, unfavorable wetness persists in Brazil's southern wheat belt. In central Argentina, scattered showers benefit immature winter grains and emerging summer crops, although pockets of dryness linger in Cordoba.
• South Africa: Rain continues in northern and eastern sections of the Corn Belt, although warmer weather increases evaporative losses.
• Mexico: Rain continues in and around Veracruz, further improving irrigation levels for winter-grown agriculture. Elsewhere, seasonably drier conditions favor maturation of corn and other rain-fed summer crops.