Francis Epplin, Elisha Henderson, Roger Sahs, and Thomas Peeper
Departments of Agricultural Economics and Plant and Soil Sciences, Oklahoma State University

Paper prepared for the Oklahoma-Kansas Winter Canola Conference, Enid, Oklahoma, July 22, 2005. The authors wish to thank the Oklahoma Wheat Commission and a number of private companies and producers who have provided information regarding production practices and production costs. This is an informal report of the Oklahoma Agricultural Experiment Station and the Oklahoma Cooperative Extension Service, project H-2403.
Products mentioned are for informational purposes only. No endorsement is implied or intended.

Introduction

The majority of Oklahoma cropland is seeded to hard red winter wheat and most is in continuous wheat production. When annual crops are grown in monocultures, weed species that can thrive in the environment may become established and become expensive to control. Similarly, when the same crop is grown year after year, diseases that infect the crop may become established in the field and become a persistent problem. If crop residue is retained on the soil surface the disease organism may bridge from old crop residue to the new crop.

It has been hypothesized, and demonstrated in some locations, that diversity provided by crop rotations may help manage nutrient cycling and reduce weed, insect, pathogen, and nematode problems. Throughout the world, crop rotations are used to manage weed and disease problems. For example, in the United States Corn Belt corn-soybean rotations are common. Crop rotations enable producers to break weed and disease cycles associated with monocultures. When these cycles are broken, yields may increase and producers may be able to deliver a higher quality crop with less dockage. Long-term studies have found that when corn is grown in a two-year rotation with soybeans, weed control options are increased, and average corn yield per harvested acre of corn increases relative to monoculture corn.

Winter canola has been proposed as a crop to fit in a rotation with hard red winter wheat in Oklahoma. A limited number of winter canola varieties have been developed and are available for planting. However, the economics of winter canola have not been determined. The purpose of this paper is to present preliminary results of a study to determine the economics of winter canola relative to winter wheat.

 

Methods

Ideally a comprehensive whole field or whole farm analysis would be conducted to enable a comparison of continuous monoculture wheat with several alternatives. Potential alternatives include, continuous canola, a wheat-canola rotation, and a wheat-wheat-canola rotation. However, data from crop rotations that include wheat and canola are not available and yield data from winter

canola trials in Oklahoma are extremely limited. Therefore, for this preliminary economic analysis, given basic assumptions about input requirements and prices, yields necessary for canola to break even with wheat are computed.

A set of production practices are defined and budgeted for wheat, conventional canola, and Roundup Ready® canola. Forage production is not considered for any of the three alternatives. Dual-purpose (fall-winter forage plus grain) wheat is not considered. Wheat for grain-only and canola for grain-only are compared.

Table 1 includes a list of the field operations budgeted for the wheat, conventional canola, and Roundup Ready® canola production systems. Conventional tillage, custom direct cut harvest, and custom application of herbicide, insecticide, and fertilizer is assumed for all systems. The wheat intended for grain-only is assumed to be seeded in October. For the conventional canola system, two pints per acre of Treflan® (trifluralin) herbicide is budgeted to be applied and incorporated with tillage prior to planting five pounds per acre of conventional canola seed in September. A second herbicide application (eight ounces per acre Assure II® (quizalofop-p-ethyl)) is budgeted for November. For the Roundup Ready® canola budget, five pounds per acre of Roundup Ready® seed is planted in September. Two eleven ounce per acre applications of Roundup UltraMAX® (glyphosate) are budgeted, one for November and one for March.

 

Table 1. Field Operations for Wheat, Conventional Canola, and Roundup Ready® Canola Production Systems
Field Operations	Month	Wheat	Canola (Conventional)	Canola (Roundup Ready®)
Moldboard Plow (Used on 20% of Acres)	June
Chisel (Used on 80% of Acres)	June
Secondary Tillage	August
Broadcast Fertilizer (46-0-0)	August
Broadcast Fertilizer (21-0-024S)	August
Secondary Tillage	September
Apply Herbicide (e.g. Treflan® )	September
Secondary Tillage	September
Seedbed Preparation Tillage	September
Apply Fertilizer (18-46-0)	September
Plant Canola	September
Apply Herbicide	October
Tertiary Tillage	October
Apply Fertilizer (18-46-0)	October
Plant Wheat	October
Apply Herbicide (e.g. Assure II®)	November
Apply Herbicide (e.g. Roundup UltraMAX®)	November
Broadcast Fertilizer (46-0-0)	February
Apply Herbicide (e.g. Roundup UltraMAX®)	March
Apply Pesticide (e.g. Dimethoate)	April
Apply Pesticide (e.g. Warrior®)	April
Harvest Canola	June
Harvest Wheat	June

 

Table 2 includes prices used in the budgets. Prices differ across regions, months, and dealers. In some cases differences in prices reflect differences in services, quality, and timeliness. Most prices are negotiable and many producers negotiate with a good understanding of expected differences in services, quality and timeliness that are not readily apparent in posted prices.

 

Table 2. Prices Used for Budgeting
Item	Units	Price/Unit
Canola Seed	lb	$1
Canola Seed (Roundup Ready®) + Tech Fee	lb	$4.60
Wheat Seed	bu	$9
Urea (46-0-0)	ton	$320
Ammonium Sulfate (21-0-0-24S	ton	$240
Diammonium Phosphate (18-46-0)	ton	$280
Treflan® (trifluralin)	pint	$2.75
Assure II® (quizalofop-p-ethyl)	pint	$18.00
Roundup UltraMAX® (glyphosate)	gallon	$35.00
Dimethoate	pint	$4.00
Warrior® (lambda-cyhalothrin	oz	$2.07
Herbicide Application	acre	$3.50
Fertilizer Application	acre	$3.25
Aerial Insecticide Application	acre	$4.00

 

Table 3 includes base enterprise budgets for each of the three systems. Both wheat and canola are commodities eligible for the loan rate provisions of the Farm Bill. The 2005 national loan rates are set at $2.75 per bushel of wheat and $0.093 per pound of canola. County rates are adjusted to reflect differences in transportation costs, markets, and other factors. Oklahoma county loan rates range from $2.71 to $2.84 per bushel for wheat and from $0.0734 to $0.0794 per pound for canola. To take full advantage of the loan program producers must place the crop in storage and maintain beneficial interest. For the base budgets, prices of $3 per bushel for wheat and $0.08 per pound for canola were used.

 

Table 3. Wheat, Conventianl Canola, and Roundup Ready® Canola per acre Production Returns and Cost Estimates for 45 bu/a Wheat Yield and 2,000 lb/a Canola Yield.

			Wheat (grain-only)		Canola (conventional)		Canola (Roundup Ready®)
Item	Units	Price per unit	Quantity	Value	Quantity	Value	Quantity	Value
Production
Wheat	bu	$3.00	45	135.00
Canola	lbs	$0.08			2000	160.00	2000	160.00
Gross Returns				135.00		160.00		160.00
"Cash" Costs
Wheat Seed	bu	$9.00	1	9.00
Canola Seed (conventional)	lbs	$1.00			5	5.00
Canola Seed (Roundup Ready®) + Technology Fee	lbs	$4.60					5	23.00
Urea (46-0-0)	lbs	$0.16	143	22.96	165	26.43	165	26.43
Diammonium Phosphate (18-46-0)	lbs	$0.14	50	7.00	50	7.00	50	7.00
Ammonium Sulfate (21-0-0-24S)	lbs	$0.12			21	2.52	21	2.52
Fertilizer Application	acre	$3.25	1	3.25	2.5	8.13	2.5	8.13
Herbicide	acre	$5.00	1	5.00
Herbicide (e.g. Treflan® (trifluralin))	pint	$2.75			2	5.50
Herbicide (e.g. Assure II ® (quizalofop-p-ethyl))	oz	$1.13			8	9.04
Herbicide (e.g. Roundup UltraMAX® (glyphosate))	oz	$0.27					22	5.94
Herbicide Application	acre	$3.50	1	3.50	2	7.00	2	7.00
Insecticide (e.g. dimethoate)	pint	$4.00	0.75	3.00
Insecticide (e.g. Warrior® (lambda-cyhalothrin))	oz	$2.07			3	6.21	3	6.21
Aerial Pesticide Application	acre	$4.00	1	4.00	1	4.00	1	4.00
Fuel Lube and Repair	acre			10.00		12.00		10.00
Annual Operating Capital	$	$0.07	34	2.37	46	3.25	50	3.51
Wheat Custom Harvest & Haul
Base Charge	acre	$15.00	1	15.00
Excess for > 20 bu/a	bu	$0.15	25	3.75
Hauling	bu	$0.15	45	6.75
Canola Custom Harvest & Haul
Base Charge	acre	$16.00			1	16.00	1	16.00
Excess for > 12.5 cwt/a	cwt	$0.32			7.5	2.40	7.5	2.40
Hauling	cwt	$0.32			20	6.40	20	6.40
Total "Cash" Costs	$/acre			$96		$121		$129
Return to Machinery and Equipment
Fixed Cost, and Labor, Land, Management, and Overhead	$/acre			$39		$39		$31

 

Data are not available to determine relative yields for wheat and canola across Oklahoma regions and soil types. The base budgets include yields of 45 bushels per acre for wheat and 2,000 pounds per acre for canola. Since, data are not available to compare actual yields, breakeven canola yields for wheat yields ranging from 30 to 60 bushels per acre are computed and reported in Table 4. The wheat price is set at $3 per bushel. Breakeven canola yields are reported for canola prices of $0.08 and $0.10 per pound.

Nitrogen, harvest costs, and hauling costs are adjusted with yield. Costs for other inputs are held constant. The expected nitrogen requirement for wheat is computed by multiplying the expected yield (bu/a) by 2 (lb N/b) and subtracting the assumed level of soil nitrogen of 15 (lb/a) (carryover). For 45 bushels per acre expected yield the required level of nitrogen, in addition to the expected carryover and that applied in the diammonium phosphate (18-46-0), is estimated to be 66 pounds per acre [(45 bu/a × 2 lb/bu) – (50 lb/a × 0.18) – (15 lb/a carryover)]. This requirement can be met with 143 pounds per acre of urea (46-0-0). Similarly, for an expected yield of 2,000 pounds per acre of canola and an expected requirement of 0.05 pounds of nitrogen per pound of canola, 50 pounds per acre of 18-46-0 and 15 pounds per acre carryover, 165 pounds of urea would be required per acre. For winter canola, it is recommended that only a third of the nitrogen be applied preplant with the remaining two thirds applied as a topdress in February.
For the budgets reported in Table 3, machinery fixed costs, and costs for labor, land, management, overhead, and risk are not included. It is assumed that these excluded costs would be very similar for wheat and canola grown to produce only grain. An individual producer, to more nearly represent a specific situation, may adjust the input and production quantities and prices as reported in Table 3.

Breakeven Canola Yields

Table 4 includes a set of estimated canola breakeven yields for wheat yields of 30, 45, and 60 bushels per acre for two sets of wheat and canola prices and for both conventional and Roundup Ready® canola. For a wheat price of $3 per bushel and a canola price of $0.08 per pound, conventional canola yields of 1,471, 2,005, and 2,540 pounds per acre would be required to breakeven with wheat yields of 30, 45, and 60 bushels per acre, respectively. Corresponding breakeven yields for Roundup Ready® canola are 1,609, 2,143, and 2,677 pounds per acre. By this measure, 2,005 pounds per acre of conventional canola and 2,143 pounds per acre of Roundup Ready® canola would be required to breakeven with 45 bushels per acre of wheat.
Figure 1 includes a chart of the breakeven wheat and conventional canola yields for canola prices of $0.08 and $0.10 per pound and a wheat price of $3 per bushel. Figure 2 includes a chart of similar breakeven yields for Roundup Ready® canola and wheat. The breakeven charts may be used to determine the expected breakeven canola yields for a given expected wheat yield. The estimated breakeven yields for conventional and Roundup Ready® canola are very similar. With minor adjustments to a few input quantities and prices, they could be nearly identical.
Given the information currently available, an individual producer may use the breakeven charts to determine the canola yield necessary to breakeven with a specific wheat yield. If based upon 2005 results in Oklahoma, it is estimated that the breakeven canola yield can be exceeded on
the field in question then canola may be a good option. Decisions are field specific. Canola may not be an option on a specific field depending upon prior herbicide applications to the field. However, if a grower has decided to seed a particular field to canola, the next step is to identify the field’s historical weed problems. If either herbicide system will control the targeted weeds then select the best variety from among all potential varieties. If glyphosate is required to control the targeted weeds then the next step is to identify the best Roundup Ready® canola variety for the farm from among all available Roundup Ready® varieties.

This economic analysis is based upon information that is currently available. As more field research is conducted, and more actual data become available from trials in which wheat, canola, and rotations that include both crops, are compared, more precise economic analysis can be conducted. The consequences of crop rotation in terms of yield, yield variability, grain quality, and herbicide, insecticide, tillage, and fertilizer requirements, can be incorporated into the economic analysis.

OSU enterprise budget software is available to develop budgets customized for a specific field or farm. Farmers may contact their local county extension office, or the website at www.agecon.okstate.edu/budgets, or call 405-744-9836 for more information. Oklahoma farmers who are interested in more comprehensive economic analysis for their specific farm are encouraged to take advantage of the Intensive Financial Management and Planning Support (IFMAPS) program available through the Oklahoma Cooperative Extension Service. Farmers may contact their local county extension office or call 800-522-3755 for more information.

Table 4. Breakeven Conventional and Roundup Ready® Canola Yields

Wheat Yield (bu/a)	Breakeven Canola Yield (lb/a )
	Conventional	Roundup Ready®
	Wheat Price $3/bu, Canola Price $0.08/lb
30	1,471	1,609
45	2,005	2,143
60	2,540	2,677
	Wheat Price $3/bu, Canola Price $0.10/lb
30	1,082	1,183
45	1,475	1,576
60	1,868	1,969

 

Figure 1. Breakeven Conventional Canola and Wheat Yields with a Wheat Price of $3 per bushel and Canola Prices of $0.08 and $0.10 per pound.

 

Figure 2. Breakeven Roundup Ready® Canola and Wheat Yields with a Wheat Price of $3 per bushel and Canola Prices of $0.08 and $0.10 per pound.