Financial

Selling Prices

Winter canola profitability greatly depends on selling prices. Winter canola is typically priced on a hundredweight (cwt.) or per pound (lb.) basis. In 2013, the average U.S. canola price was $19.30 per cwt. Prices have increased during the past few years, but they recently declined in 2013.

Historical Canola Prices

Markets for winter canola are well-established in the Great Plains states, and prices can be followed in USDA reports such as the Canola Daily Report, Kansas Canola Market Report or the Oklahoma Grain Elevator Cash Bids Report. Canola pricing is based on winter canola futures prices traded on the IntercontinentalExchange (ICE). Please note that ICE pricing is in terms of Canadian dollars per metric ton.

Missouri producers are encouraged to discuss pricing, contracts and other terms with potential buyers well in advance of production.

Cost of Production

It is important to understand and evaluate the cost of production when looking at a new crop. Winter canola production costs are fairly similar to wheat production costs. Significant costs include seed, fertilizer and machinery operations. A cost-return budget tool for winter canola has been developed to provide a customized analysis for your farm.

Winter Canola Cost-Return Budget (Missouri)

Crop Insurance

Crop insurance policy for winter canola is not currently established in Missouri. However, producers can request coverage for winter canola through their crop insurance agents, and the USDA – Risk Management Agency will review on a case-by-case basis. Requests must be submitted prior to Aug. 31. Actual winter canola production history from your farm will be used to create a written agreement. If there is not history, a similar crop such as wheat can be used to establish a baseline for production history.

Requesting Insurance Not Available in Your County (USDA-RMA)

Canola Crop Policy (USDA-RMA)

Farm Financial Assessment

Farm financial performance and records are important to consider when evaluating a new alternative crop. Past financial performance, current financial condition and the capacity to take on risk influence alternative crop adoption viability. If you need external financing to kick start your entry into alternative crop production, then your lender will likely want to see a good business plan and, if available, financial and production histories.

Financial recordkeeping systems are important for tracking financial performance and making decisions. You can keep records manually through a written system or electronically through a computerized system such as Quicken or Quickbooks. For you to make sound decisions, financial records need to be kept current and accurate.

Information from financial statements and income tax records can measure a farm’s financial position and performance. The balance sheet, statement of cash flows and income statement are three important financial statements. Balance sheets communicate the financial condition of a farming business on a specific day, such as the beginning or end of the year. They share detailed information about a farm’s assets, liabilities and equity. The statement of cash flows (cash in, cash out) shows cash receipts and cash expenditures during a certain time period. The income statement reports the revenue, expenses and profit during a given time period. Historical balance sheets, statements of cash flows and income statements demonstrate how the business has performed. Additionally, these statements can be used to project the business’ future performance. IRS Schedule F and 4797 tax forms are important to existing producers for accurately conducting accrual-adjusted financial analysis.

Key financial measures also help to evaluate a farm’s financial condition. Numerous financial measures can help with evaluating a farm. Usually, these measures tend to look at the profitability, financial efficiency, liquidity and solvency of the business. Examples include return on assets, the operating expense ratio and the debt-to-asset ratio. Lenders typically use a set of key measures when they evaluate loan applicants. Key financial measures can also help with benchmarking your farm relative to other operations. Benchmarking data can be obtained through developing good relationships with other local farmers who are willing to share some of their key financial measures. Alternatively, you may try contacting state recordkeeping business associations, universities or extension services.

Many tools and spreadsheets available online may assist producers in developing financial statements, keeping records and conducting financial analysis. Additionally, accountants, bankers and other business specialists are good resources who may assist with assessing farm financial performance.

For More Information

Measuring and Analyzing Farm Financial Performance (Purdue)

Worksheets for Measuring and Analyzing Farm Financial Performance (Purdue)

Farm Finance Scorecard (Minnesota)

Establishing and Using a Farm Financial Record-Keeping System (eXtension)

Farm Analysis Solutions Tools (FAST) (Illinois)