ONTARIO GRAIN FARMER AGRONOMY 15 Agriculture is an industry of familiar refrains: producing more with less, navigating more volatile markets, and farming in a less-forgiving environment. Clichés aside, those phrases reflect a real shift. Advisors, economists, and extension personnel are increasingly pointing to cost-of-production (CoP) calculations as a critical tool for understanding risk, returns, and long-term decision-making. Tracking CoP factors is challenging enough, with seed, fertilizer, and fuel costs, weather-related decisions on planting, and weed, disease, and pest management concerns. And those are the common on-farm factors. Add the effects beyond growers’ control, such as tariffs, conflicts in Ukraine and Iran, and the uncertainties of global trade, and the need for a better understanding of the aspects that can be controlled increases. It’s not that CoP hasn’t always been important; it’s that the variables in the equation, and the value each grower assigns to them, have grown in number and complexity. It can also be hindered by good years, when complacency can seep into decision-making, countered by the optimism of farmers hoping they can grow themselves out of tough times. For Dr. Al Mussell, the “less-forgiving environment” picture is a reflection of Canadian agriculture’s rise in economic value. The industry recently surpassed $100 billion in farm cash receipts and $1 trillion in farm assets. “Producers have much more in terms of dollars at risk and assets in play that affect risk,” says Mussell, research lead with Agri-Food Economic Systems. “Some farmers are fairly leveraged relative to those dollars at risk, and we have new sources of risk — geopolitics affecting agricultural input and output markets, embargoes, and market disintegration.” Mussell likens the current volatility to the early 1970s, with an OPEC-driven energy crisis, a food crisis caused by the “Russian Grain Robbery,” the U.S. moving off the gold standard, and the Arab oil embargo against the U.S. It took nearly a decade to recover from those influences, slowed and punctuated by interest rate hikes that are unthinkable now. That’s actually a benefit within today’s agricultural climate: lower interest rates have made money easier to borrow, but such a trend is unlikely to continue, and Mussell is concerned about how that could affect some growers. Fixed and variable costs become harder to manage, especially when corn can cost up to $1,000 an acre for planting alone. MIXED SIGNALS Another change Mussell cites is how markets tend to default to blaming “the funds” for unknown effects on stocks and pricing. Mid-summer weather in the U.S. Great Plains and Europe should have driven corn and wheat prices higher, yet many in the market were saying, “stocks are too high.” Speaking with colleagues in the U.S., Mussell learned that perceptions about stocks have less of an impact compared with years past. “The old benchmark has changed; you have to look at it in terms of stocks-to-use,” says Mussell, suggesting some in the trade are over-reliant on information that’s close at hand, including “very high” stocks. “Every time we can’t explain what’s going on with the markets, it’s ‘the funds’.” WHERE TO CUT, WHERE TO INVEST The immediacy of a growing season takes priority, and how the markets develop and react falls behind decisions on seeding and fertility rates, at least in the spring. Colin Elgie has been getting more questions about fertilizer applications, especially with the same rates as previous years running 30 to 50 per cent higher in cost in 2026. The question becomes: where can I cut back? “There’s a risk to under-applying, but there’s also a risk to over-applying,” says Elgie, field crop soil fertility specialist with the Ontario Ministry of Agriculture, Food and Agribusiness (OMAFA). “With the price of fertilizers, over-application is a riskier thing now than it was two or three years ago. At best, it is simply building up those levels.” - Colin Elgie Field Crop Soil Fertility Specialist, OMAFA continued on page 16
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