Planting decisions
“A decent amount of Canadian canola oil goes into the U.S. for biofuels, so this is the crop that could be impacted if there is a U.S. trade issue,” says Darren Bond, a crops farm management specialist for Manitoba Agriculture.
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Most producers’ acres are locked in due to rotation requirements and, depending on the producer, only 10 to 20 per cent of their land could be considered swing acres, he says.
More important than U.S. trade when switching acres between crops is high fertilizer costs, which were high even before the Middle East conflict, Bond adds.
Leigh Anderson, a senior economist at Farm Credit Canada (FCC), says that farmers are talking with their agronomists and crop input suppliers to plan these decisions.
“These plans could include changing what crops they plant, adjusting fertilizer use or revising yield targets that make economic sense in the current environment,” he says.
Fertilizer
Bond says how producers manage fertilizer this year will be key to their profitability. Effectively using the 4Rs (right source, right rate, right time, right place) will ensure getting the most out of fertilizer.
“There is a difference between being cost effective and cheap,” Bond says. “Cost effective is where every decision is analyzed and only outputs that provide an adequate return receive investment. Cheap is just cutting expenses because something seems too expensive.”
Taking steps to achieve maximum yields, while cutting expenses that provide little to no return, will be the keys to success in tight margin years, says Bond.
Expanding operations
Bond adds that whether producers pursue or hold off on expanding acreage will largely depend on their management and equipment capacity.
“If there is capacity that is currently not being used to its fullest potential, then expanding acres makes sense,” he says.
High costs and tighter margins tend to result in less land sold.
“Landowners may choose to rent out acres for a few years and wait until better margins return before putting land on the market,” Bond explains. “Producers may choose to rent land over purchasing it because the cash outlay is much smaller, and land rental contracts are for much shorter durations than a mortgage from a land purchase, leading to much less risk with land rental situations.”
Anderson adds that purchasing land in 2026 will come with careful consideration of price and timing.
“Some operations will prefer to wait and see where land values will settle while others may move more quickly should adjacent land become available, or simply because it fits their strategic business plans,” he says.
Producers should be aware of the external environments that can affect their businesses when it comes to deciding whether to buy or rent more land, but that shouldn’t be at the top of the list.
“Their focus should be on things they actually control, like marketing grain, managing equipment costs and understanding their costs of production,” Anderson says.
Livestock operations
External factors will affect livestock operations as well, but more so by weather than economic news, Anderson says.
“Cattle producers are awaiting spring weather to see pasture and hay conditions which will impact their ability to expand,” he says. “Meanwhile, the hog sector has faced a challenging winter for disease pressures, which has pressured supply.”
Anderson notes that Canada’s livestock herd expanded according to the January 1 inventory estimates released by Statistics Canada. StatsCan reported the Canadian cattle herd rose on January 1, 2026, in the first year-over-year increase since 2018. During the same period, StatsCan data shows that Canadian hog inventories fell due to higher international exports and slaughter in both Eastern and Western Canada.
Bond notes that beef margins are currently decent, but there remains a two-fold challenge when it comes to expansion, especially in the cow-calf industry.
“One is that it is very expensive to expand one’s cow herd, whether it be through retention (lost revenue) or purchase,” he says. “Secondly is that cow-calf production is very labour intensive, with many looking at the time and dedication that is required for an expansion, and simply deciding it’s not worth it.”
Equipment replacement
Producers will also take a hard and long look before purchasing equipment so that they don’t overextend themselves, according to Bond.
Used equipment might be more attractive in a year like this. It comes down to a cost-benefit analysis between the two situations, Bond says.
“Used equipment comes with a lower price tag, which is the biggest attraction,” he points out. “However, new equipment comes with warranty, a longer lifespan and dealer support.”
Weighing these options, while considering risk tolerance levels, will be the largest element in how farmers choose to equip themselves. Some will decide to hold on to their iron for an extended period.
“That fear of overextending oneself will keep iron on the farm longer until the margins improve,” Bond says.
Thanks to falling commodity prices, higher operating costs and lower profits, Anderson says that farmers are cautiously approaching their equipment replacement decisions, placing greater emphasis on their price per acre equipment costs.
“Farmers are looking for cost-saving measures, including delaying purchases and planning to further reduce equipment costs,” Anderson says, adding that FCC expects overall used equipment sales to outperform new ones.
Click here to read part one in this series.
