Peter Newman | Farm Business Consultant | 0427 984 010
Ford beat Ferrari at Le Mans in 1966.
Can lupins beat canola for gross margin in 2023? Well no!
However, it comes pretty close in a couple of circumstances, so is there a case for some lupins instead of canola to take advantage of the lower cost and therefore lower risk of lupins?
This question was inspired by a client that I met with recently. They are low rainfall farmers and their lupin yield is slightly in front of their canola yield. We know that with the price of canola, the gross income of canola will always win, but canola is more costly to grow due to Nitrogen and seed costs (and in some cases fungicide cost), and most will agree that wheat following lupins is a superior crop at lower N cost. The winner, and I did the maths, based on a heap of assumptions (with the help of Agronomist Nick McKenna), and, the winner is…..
- In the low rainfall zone, where lupins slightly out yield canola, it’s pretty much a dead heat (just like the Ford GT40’s at LeMans in ’66). Lupins managed to argue that they started from further back on the grid and were awarded victory!
- In the low rainfall zone, if canola and lupins yield the same, canola wins by about $170/ha.
- In the medium and high rainfall zone, assuming that lupins slightly out yield canola, canola wins by $120 to $300/ha. A significant victory.
- In the very high rainfall zone, where canola yields are now outstanding thanks to some innovative growers and agronomists, and lupins yield relatively poorly, canola wins by the length of the A $740/ha shellacking! No wonder the canola : cereal rotation has become so popular.
This was all based on urea at $1000/t. I don’t know where the urea price is going to land this year, but I’m hearing rumours that the price is easing. We’ve already heard of small parcels of urea being offered for $815/T which is very encouraging. If I increase the price of urea to say, $1300/t, the results are much closer. Decreasing the urea price favours canola.
And if we increase the yield benefit of growing wheat after lupins, it gets closer again. For example, I have worked on a yield benefit of wheat on lupins in the medium rainfall zone of 0.4t/ha. However, a medium rainfall farmer in the Geraldton port zone this year grew a 5t/ ha crop of wheat on lupin stubble compared to a 3.5t/ha crop of wheat on canola stubble. In this case, lupins win.
Extra cost = extra risk
With the assumptions that I used, canola is anywhere from $125 to $390/ha more expensive to grow than lupins depending on rainfall zone. And if we add the cost of the extra nitrogen required to grow wheat after canola, this increases to about $160 to $480/ ha extra to grow canola over lupins. This risk is warranted with a decent season, but this extra cost will hurt in a poor season.
The bottom line
There is a case for lupins over canola if;
- Your lupin yield is greater than your canola yield, and/or
- The urea price stays very high (well above $1000/t), and/or
- You notice a big benefit (say 1t/ha) of growing wheat after lupins compared to wheat after
But, for the majority of growers, it seems that even with the very high input costs we are seeing, canola is still the most profitable break crop.
Table 1: Partial gross margin of lupin v canola for a range of rainfall zones in WA.
- Hybrid canola seed at $40 to $50/kg by 8kg/ha seed rate. More expensive seed in higher rainfall zones. Lupin seed rate 80kg/ha.
- Assumed similar chemical costs between lupins and canola, but in Medium and high rainfall zones, canola received one and two fungicides respectively. ($20/ha for fungicide and $10/ha for the plane).