Agricultural Production Efficiency: The Vicious Cycle Continues

6125 Monitor 510
It has been a busy week otherwise with spring planting finally coming into my part of southwestern Ontario.  This past winter I probably did more planning than I’ve ever done on my farm.  Our greatest challenge as agricultural producers is to surf the efficiency curve to do more things in less time and at less cost.  Sometimes like in the last 5 years where agriculture has been very profitable it’s easy to forget that.  Call me old school.  When you’ve paid 23% interest rates in your early farming career, sometimes there’s always a cloud over your head.

This past winter, I acquired a bigger corn planter re-fabricated to exactly my specifications.  I plant into a stale seedbed, which works really well on my heavy clay soils.  It also reduces my labor requirements in the spring, which is always paramount to my farm management philosophy.  I also rebuilt my 20 foot no till drill and acquired a 90-foot field sprayer trying to make myself Superman.  Well, I’m a long ways away from being Superman, but this equipment in a very short planting window this spring has been amazing.  Production efficiency in Canadian agriculture is still the royal jelly holding the key to profitability.

Of course I don’t drive any of that equipment.  I plant using guidance systems, which place the seeds precisely where I want them.  This not only increases my production efficiency but also reduces my fatigue.  You might say it’s my grand plan to make farming so much easier as I grow older.

It has certainly been easier to make these investments over the last few years.  Profits have been a good thing.  The question is what is on the road ahead?   It is a bit of a mixed bag, in my opinion I think we can expect more of the same, but our cost equation might certainly change our farming environment.  I can certainly see that happening in southwestern Ontario.

Think of it this way.  I farm approximately 865 acres and I own all of it.  You know much about the equipment that I drive; it is a mixed bag of old and new.  So the investment to employ me is huge and in many ways doesn’t make any sense from a nonfarm perspective.  Of course, you may have been able to make that same argument throughout the years.  Needless to say, with our high fixed cost for land in Southwest Ontario, it is changing the farming structure in this region.  Smaller farms are becoming more institutionalized, as expansion is extremely limited because of the high cost of land.  That is not quite the case in other farming areas around the world.

It is true that investments in agriculture are rising on a per acre basis, both variable and fixed.  However, it is the fixed cost of farming that I think is increasingly changing the game.  In areas of Canada where land is cheaper, expansion is more possible.  This is also true for other areas in the world such as South America and Africa.  There are also areas in the United States and Mexico where opportunity knocks.  There is a much lower fixed cost for land.   There are problems for sure, but efficiency waits for nobody.  Somebody will see an opportunity and seize on it despite the challenges.

Meanwhile in Ontario the 50-acre field, a benchmark in our history is now becoming a hindrance.  Back in the day when I started spraying crops as a teenager I filled up an old sprayer that sprayed 7 acres at a time.   My new sprayer when filled up can cover 100 acres.   So think about the field efficiency in that.   I actually have to change fields to empty the tank, ditto with most of our new farming equipment, which is so big.  You talk about surfing the production efficiency curve. The question is what is next?

A large part of that will surely be determined by the health of the farming economy.  Over the last few weeks we have seen grain markets decline as demand enthusiasm has waned amid great planting weather in the United States.  That should serve as a reminder that what goes around comes around in our agricultural economic world.  2014 is so different than even 10 years ago.   The efficiency paradigm continues to surge.  Our challenge is to make our farms even more efficient.  The vicious cycle continues.