Farm cost increases doubled the general inflation rate over last five years: Manitoba Ag data

Manage weeds early in your canola cereals and pulses with Conqueror, Gold Wing, Thunderhawk and Blackhawk Evo powered by Duplessin technology, advancing the unstoppable superpower of pre seed burn down. From Nufarm for Real Agriculture, I'm Kelvin Heppner at St. Jean Farm Days in St. Jean, Manitoba and pleased to be joined now by Darren Bond, farm management specialist with Manitoba Agriculture. And Darren, inflation of course has been a huge storey over the last five, 10 years around the world. Here in Canada overall when we're looking at the economy, but when we look at the farm level cost of production increases that we've seen, you've actually put some numbers to it and it's quite the interesting storey there as well. Yeah, exactly. What we've seen from government sources like say the bank of Canada inflation or Stats Canada, the consumer price index is around 20% inflation over the last five years, going from 2020, 2025. However, speaking with producers, they feel that it's been a little bit more impactful than that. So we tried to put some numbers to things and we did put numbers to a number of different items. So like equipment for example, every two years our department comes out with a custom rental rate guide on equipment and we price it, come up with rental rates and over the last three guides, prices have gone up by about 40 to 50% over that time span. And when we look at a rental rate, which I would more equate to a producer's costs in running that piece of equipment, it's gone up that same amount around 50%. So that is, you know, obviously a lot more than what we've seen with the bank of Canada, 20% in that time span. But it's not limited to only equipment. We've seen that with parts. I use an example, just on our own farm, we replaced tracks on a track tractor. In fall of 2020, that price was $10,000 five track. In spring of 25 it was exactly double. That's 100% increase. It's pretty impactful. Maybe that one is maybe a bit of an extreme example, but I think it's, you know, there for everyone to see. We've also seen it on land. According to Farm Credit Canada's farmland value report, over the last five years in Manitoba, land has jumped or the appreciation has been about 50%. So looking at that, we compared Manitoba Agriculture's crop cost of production, which is an annual guide that we do every year. And our new 2026 guide is just out now. We look at that five year period depending on the commodity. Again, surprise or surprisingly or not surprisingly, it's about a 50% increase in that five year span for costing. So when we look at farm level inflation, the numbers are showing that it's quite a bit more than what the bank of Canada might be saying. And I think a lot of producers. Are starting to feel that basically double. Double what overall inflation has been. Exactly double, yeah. So when we look at the 2026 growing season you mentioned the new cost of production and profitability numbers are out that you guys work on every year. What are we seeing in terms of the profit picture? I know there's a lot of anecdotal discussion about how difficult things are and how there will likely be some more red on the balance sheet at the end of the year, both for 2025 and 2026. Where are we looking or how are things setting up here, at least for growers, grain farmers here in Manitoba, this. Part of North America, when we look at say the big three crops, we'll take hard red spring wheat, canola and soybeans by acre wise, those are the big three crops in Manitoba. Generally what we're seeing with wheat is wheat is a little less profitable compared to what we were looking at a year ago. Canola and soybeans a little bit more profitable. Canola, largely because the price prospects are just a little bit better. Again, it depends when you look at different pricing times. And then for soybeans, a little bit better, largely due to because it does doesn't use as much fertiliser as the other two crops. Fertiliser has taken a jump. Fertiliser has gone up by 15 to 20% depending on the crop that we're talking about from the previous year. So that has a big impact on that profitability. Fixed costs are a large component to that profitability. Our guides are showing minor losses in canola, a little bit greater losses in hardware at spring week, but a slight profit in soybeans. Of course, producers should do their own numbers for their own farm to see where they line up. But we also make sure we include fixed costs, which are equipment and land costs. Those are highly variable amongst farms. Every farm should do their own. But when we consider that in that's where we get to slight losses. Wheat is looking more and more like a rotation crop, like what we've seen in previous years. So knowing what one zone numbers are is very important and especially when we're looking at this cost price squeeze or type margins, something that is not unfamiliar to farmers. We've seen it we just maybe not have seen it over the last handful of years in the early 2000s. It's something that we need to be aware of so we can make those good decisions on our own farm soybeans. Though, we're at the kind of at the top of the list when it comes to profitability. Again, overall, using averages, yeah, yes, soybeans. Were a little bit better largely. Again, fertiliser costs aren't as impactful and the price prospects are decent. And then also in Manitoba, our soybean yield is slowly trending up over time. So we use an average yield of 42 bushels an acre, which is up 2 bushels an acre from our last guide. So that all helps. And a lot of producers will understand too that protecting that yield is going to be very important to attaining profitability in the upcoming year. And that's borne out in the evidence of those numbers. It feels like over maybe the last six months, Darren, we've seen a lot of. I've heard a lot more conversations about pencil sharpening for 2026 and where we can manage costs and where we can be more efficient in, in our production. Where do you recommend producers? Focus. You mentioned fertiliser. Is that the main starting point? Yes. And fertiliser is expensive. That's not going to be surprising to anyone. But I think it's. Maybe people don't appreciate how expensive is. We do some information or some data collection looking at the affordability of fertiliser. Essentially how many bushels of grain is required to purchase one tonne of urea, for example, or one tonne of phosphate. And it is getting more expensive by that standard. A lot of that is the price of fertiliser has gone up, but also the price of grain, especially we look at say wheat has gone down a little bit. So fertiliser is very expensive. How we manage our fertiliser, I think is the low hanging fruit to attain profitability in the upcoming year. When we look at the four Rs of fertiliser, a lot of times we look at it from an environmental lens, but I like to look at it from a profitability lens and how we can choose how and when we apply the fertiliser to then try to achieve profitability. Because I do believe that those who manage the fertiliser well, the savings that they can generate on their fertiliser without negatively impacting yield might be the difference between making money and not making money in a year like this. I guess that's where we weather dependent did maybe see a little bit more anhydrous NH3 go down this last fall for those reasons. Yeah. And we look at, we have a four hour fertiliser profitability calculator online. We can look at the losses between the different timings and placements because again, generally speaking, the closer you apply your fertiliser to when the crop needs it and if you band it in the ground, there's less environmental loss, all things being equal. So we can use the properties of fertiliser to help us rather than hurt us. And using those advantages, essentially arbitraging the fertiliser can help us gain those profits. And take example say nitrogen sourcing. You talk about anhydrous. Anhydrous is about 15% cheaper than urea on a cost per pound bushel. So producers that have the ability to move between sources, that's a competitive advantage for them because now they're not handcuffed to a certain source, they can look at the cheapest source on a price per pound, apply it, maybe save that 15% which goes into the profit and not negatively impact the yield, which is huge. And that might actually be your profit margin at the end of the day that 10 to 15% savings that you could find in fertiliser. Yes. And again, it's about competitiveness. We like to think that we're all colleagues when we farm and there's a camaraderie amongst it, and definitely there is. But when it comes to land and equipment, there is a competition factor to that. So if we can outperform our neighbours by being, say, smarter on fertiliser and we can generate that 15% return which is our profit, we have a little bit more that we can spend on land when it comes up available for us. And just having that extra profitability just makes the farm a little bit stronger from a balance sheet perspective and it just helps. And if we can find even just these little spots here and there and save a little bit here and there, that might be the difference between profitability and losing money on a year like this. Finally then, Darren, this isn't maybe something that you touched on in your presentation here in St. Jean, but when it comes to land costs as part of this inflation storey and cost of production storey, FCC's reports aren't really showing any slowdown. But do you see in the bigger picture pressure on, on this trend of higher land prices, land cost, whether we're talking rent or, or purchasing land. Well, land costs are a reflection of the profitability within farms. And it stands to reason that if we see a tightening in the profitability of farms, we'll start to see less appreciation in the land as well. There is a little bit of a delayed factor in that, but maybe one wild card is a few years ago we came off some pretty good times, and some of those producers that put money in the bank and built that balance sheet now can spend some money and that will support values too. But at the end of the day, I know there's been a lot of debate about land, and if it's land overvalued or undervalued, is it going to go up or is it going to go down? I think the key is to look at that farm profitability. Land values have a little bit of a delaying factor when it comes down to profitability in terms of that appreciation in land, and that will essentially steer that ship as to what we will see. Generally speaking, we would see a plateauing before we start to see any drastic moves, like a 1980s event type of thing. But I think right now that our management level of our farms in Manitoba, coupled with superior seed genetics, and again, we talked about fertiliser and superior fertiliser application and management will always keep a certain profitability on these farms. So these farms are just getting better managed, which will then result in a better balance sheet and that will always support land values as well. I think that's a good place to wrap it up because I think 2026 will be a year where there is a focus on that management and efficiency and figuring out how to run our operations more efficiently. And your presentation and discussion today, very relevant and timely. Thank you, Darren. Thanks. Anytime.