Red Deer County News

Posted on: April 17, 2017

Does ALUS Pencil Out For Annual Croplands?

ALUS - Payments.jpg

by Ken Lewis, Conservation Coordinator

Since Red Deer County started the ALUS program, we’ve said that “ALUS sends a different market signal to farmers, about their acres that are marginal for annual crops”.

But - can we crunch the numbers, to demonstrate this? This article tries to do just that by looking at the differences between an ideal field, a real field and an ALUS established field.

For any field, we can determine our net profit off that field, by knowing our cost of production. For our ideal field, we are looking at 160 acres of annual crop. Based on that assumption, the table to the left demonstrates the profit generated by the field.

However, we all know that there is no such thing as an ideal field. In order to look at the economics of a “real” field, we are basing our calculations on the following:
• 140 acres of annual crop
• 10 acres of permanent wetland
• 10 acres of marginal cropland around the wetland

So, here’s an example of a “real field”. We’ll put a permanent wetland in it, and surround it with some acres of marginal cropland, and map it out with our high tech GPS and GIS gear. Then, we’ll consider each different type of acres (high yield, low yield or marginal, and wetland) as unique “profit centres”.

Let’s have a look at the economics table. You’ll notice a few things here, like changes to the costs of production and to the yields, based on the good acres versus the marginal acres. The bottom line, is that both the marginal crop acres and the wetland acres are losing us money.

What if we enroll in ALUS? ALUS pays farmers for their management that produces an increase in ecosystem services for society.

In our example with ALUS, instead of planting canola in the marginal area, we seed the marginal acres to native perennial forages. Our plan is to leave these plants for the wildlife. With the ALUS Program, 75% of the costs of seeding the native forage, can be covered by ALUS. So, the $150 here is what’s left, the (estimated) cost to the farmer. We are now being paid $5 to $40 per acre per year by ALUS for the acres producing increased ecosystem services.

With ALUS, we can enroll our acres for up to 10 years, and hopefully, more. To get the complete picture, we’d have to run this analysis for each year, incorporating rotations, etc. For example, let’s look at our field 4 years into ALUS, when we’ve planted canola again.

Highlights:
• Overall, this quarter is now making us similar money to what we would have made this particular year, had we planted canola in the marginal acres instead.
• ALUS revenue ($40 per acre per year) is guaranteed. It is not weather dependent. Can we say the same on marginal acres otherwise?
• If you had similar profit on the ALUS acres for the 9 remaining in the ALUS Contract, you’d net a profit of $2,700…which more than offsets the losses in the first establishment year. This, compared to a net loss over 10 years of cropping those marginal acres, of maybe $5,000?

Keep in mind, you’ll want to plug in your own numbers, to see how ALUS might pencil out for your farm. We can help you come up with an idea of how ALUS might work for your operation. If this example is even remotely accurate, things look fairly promising.

So, this spring, when you’re looking at those marginal acres around your potholes, sloughs and creeks…please think once or twice about ALUS and better yet, give us a call at 403.342.8653. Let’s see what we can do.

TABLE ONE - IDEAL FIELD
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TABLE TWO - REAL FIELD
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TABLE THREE - ALUS YEAR 1
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TABLE FOUR - ALUS YEAR 4

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