Regional Strategic, LTD.
[email protected] • Phone: 515.802.0938 • P.O. Box 36534 • Des Moines, Iowa 50320
Regional Strategic, LTD.
[email protected] • Phone: 515.802.0938 • P.O. Box 36534 • Des Moines, Iowa 50320
EstimationofFinancialImplicationsResultingfromtheImplementationofFarmConservationPractices
PreparedfortheIowaSoybeanAssociation
By
MarkImerman,SeniorConsultantEricImerman,SeniorConsultant
RegionalStrategic,Ltd.DesMoines,Iowa
October4,2019
ForwardThisinvestigationwasdevelopedtogenerateinterview-basedestimatesofenterprise-levelfinancialimplicationsresultingfromtheimplementationoffarmconservationpracticesinIowa.TheimpetusforthisanalysisisaninterestindevelopingrobustinformationfromIowafarmenterprisestoprovideamorefocusedandlocalizedrepresentationofthefarmcasestudiesincludedin2018’s“FarmFinanceandConservation”publicationpresentedbytheEnvironmentalDefenseFundandK-COEISOM.Thegoalistobetterunderstandwhatinfluencesfarmers’participationintheimplementationandmaintenanceofconservationpractices.Attheoutset,itwashopedthatinformationgeneratedherewouldshowthattherearefarmfinanceandprofitincentivesforengaginginconservationpractices.TheworkhasbeenundertakenbyRegionalStrategic,LtdwithfundingfromtheIowaSoybeanAssociationandtheWaltonFamilyFoundation.
KEYFINDINGSPrimaryproducersonparticipantoperationstendtobeolderthanIowaprimaryproducersoverallasreportedbythe2017U.S.CensusofAgriculture.ParticipantfarmsaregenerallylargerthanIowafarmsreportedinthe2017CensusofAgriculture.Onlyoneparticipantoperation,at294acres,wassmallerthantheIowaaveragefarmsizeof355acres.Thelargeststudyoperationwas5,200acres.Two,at2,000acreseach,wereofminimumsizetogetintothelargestsizecategory.Thefinallarge-categoryfarmwas2,200acres.Totalacreage(row-cropandotherwise)inthestudygroupwas29,056.Thisislessthanone-tenthofonepercentofIowafarmland.Amongthetwentyparticipants:
Eighteenproduced6,889acresofsoybeansaftercornwithcovercropFourteenproduced6,002acresofsoybeansaftercornwithoutcovercropFourteenproduced6,222acresofcornaftersoybeanswithcovercropFifteenproduced5,420acresofcornaftersoybeanswithoutcovercropThreeproduced1,447acresofcornaftercornwithcovercropSixproduced1,225acresofcornaftercornwithoutcovercrop
Covercropacreageandnon-coveredacreagewerecomparedinthreeways
1. Averagesacrossallparticipants(seventeen)thatsuppliedsufficientinformationforcomparison2. Averagesforparticipantsthatproducedbothcoveredandnon-coveredacreagewithinaparticular
rotationandcoulddistinguishyields3. Averagesforparticipantsthateithercoveredallacreagewithinarotationorcoverednoacreage
withinarotationAcrossthreerotations
A. SoybeansfollowingcornB. CornfollowingsoybeansC. Cornfollowingcorn
Covercropproductionwasdisadvantageousforallthreecomparisonsinthecornfollowingcornrotationduetoyieldshortfallsrelativetoacreagewherenocovercropwasproduced.Soybeanyieldsaftercovercropproductionweresuperiortoyieldswherenocovercropwasproducedinallthreecomparisons,butincomparison1theyieldpremiumwasinsufficienttooffsethighercostsofcovercropproduction.Incomparisons2and3soybeansfollowingcornandacovercropshowedadvantagesoversoybeansonacreagewherenocovercrophadbeengrown.Cornfollowingsoybeanandacovercropoutperformedacreagewherenocovercropwasproducedincomparisons1and3.
ForrotationsAandB,cropsfollowingcoversshowedadvantageouslyintwooutofthreecomparisonsforeachrotation.Totalpesticideexpenditures(herbicide,insecticide,andfungicide)wereconsistentlylowerforacreagefollowingacovercroprelativetoacreagewherenocovercrophadbeengrown.Thisrelationshipdidnottransferconsistentlytopesticideapplication(sprayer)costs.Innearlyallcomparisonswherecovercropacreagewasadvantageousrelativetoacreagewherenocoverhadbeengrown,totalfertilizerexpenditureswereloweronthecoveredacreage.Themajorityofotherwiseeligibleparticipantsforcomparison2couldnotbeutilizedbecausetheydidnotprovidedifferentiableyieldsforcoveredandnon-coveredacreage.Fiveparticipantsharvestedcovercropsfrom560acresin2018.Theseharvestsgeneratedanetrevenueof$78,160afterharvestcostswerepaid.Asixthparticipantownsacovercropseedsalesandservicebusinessthatcontractsfor1700acresofryeandoatseedsfromcovercrops.Nearlyalloftheseparticipantsindicatedaninterestinexpandingtheircovercropharvestoperations.Participantsdisplayedawiderangeofrecordkeepingsystems.Theserangedfromnearlyone-thirddemonstratingnovisibledocumentationtoone-thirdutilizingcomputer-basedaccountingandagronomicinformation.Theremainderwerescatteredbetween.Betterrecordsappeartobecorrelatedwithmoreintenseparticipationinconservationpractices,butgoodrecordsdonotappeartobeafunctionofoperationscale.Participantsindicatethatmovingtono-tillandstrip-tillgeneratedsavingsof$10-88peracrerelativetoconventionaltillage.Theseestimatestendtobehigherforparticipantsthatarebetterabletoaccountforthemthroughqualityrecordkeepingsystems.Estimatedpotentialfuelandequipmentsavingsrangeupto$265millionannuallyonastatewidebasisforIowa.Participantaveragenitrogenapplicationsaresignificantlyhigherthanthemaximumreturntonitrogen(MRTN)ratespromotedbytheIowanutrientreductionstrategy.Onaverage,reducingparticipantapplicationratestoMRTNwouldresultinincreasedreturnsofapproximately$6peracreaccordingtotheonlineMRTNcalculatoratIowaStateUniversity.Fiveparticipantsareregularlyapplyingnitrogentoacreagegoingintobeans.Nearlyhalfofmanureusersindicatetheyaregiftedmanure,barterformanure,orreceivemanureasaby-productfromleasinglivestockproductionfacilities.Severalothersnotethatthepricetheypayformanureissubstantiallylessthanwhattheywouldpayforitspotassiumandphosphoruscontent.Itappearsthatalotofmanureisbeingpurchasedandappliedasfreenitrogen.Whileparticipantsstrivetotreatrentedlandasownedlandfromaconservationperspective,theyacknowledgethatthereisareducedwillingnesstoinvestonthepartoflandlords.Additionally,astenantshowtheymanagelanddependsuponhowmuchispaidinrent.
Whileitisdifficulttonaildownthemechanism,itisclearthatstrongfarmtransitionplansareconducivetomaintainingconservationpracticesasafarmoperationchangeshands.
TableofContentsINTRODUCTION 1PARTICIPANTSUMMARY 3THREECOMPILATONSOFAVERAGECROPROTATIONYIELDSANDCOSTS 7AveragesAcrossAllParticipants 8SelectiveCropRotationComparisonsOTHERISSUES 10ConcludingThoughtsonThreeComparisons 16HARVESTINGCOVERCROPS 17OTHERISSUES 18CoverCropIssuesandRecordKeeping 18ReducedTillage 19Diversification 20CombiningandStackingConservationPractices 21SUMMARY 22CASESTUDY1–RECORDMANAGEMENT 24CASESTUDY2–RISKMANAGEMENT 31CASESTUDY3–COVERCROPSANDMONETIZATION 37CASESTUDY4–REDUCEDTILLAGE 43CASESTUDY5–NITROGENMANAGEMENT 47CASESTUDY6–OWNERSHIPIMPACTS 51CASESTUDY7–FARMTRANSITIONS 53CASESTUDY8–WAYNEFREDERICKS 56
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IntroductionFarmconservationisimportanttothelong-termeconomicviabilityofallfarmoperatorsandfarmlandowners,allconsumersoffoodandfarmproducts,andalldownstreamconsumersofwaterresources.Theimplicationsoffarmconservationpracticesonproduction,soilhealth,foodsupply,andwaterqualityreceivesubstantialattention.Thefield-levelcostsofimprovingconservationpracticesatthefarmlevelarealsowellsubstantiated.Theenterprise-levelandstatewidesavingsthatcanresultfromsignificantimplementationofconservationpracticesacrossanoperationreceivelessattention.ThisreportistheresultofaninvestigationintothelevelsandsignificanceofsuchsavingsthroughdirectinterviewsanddatacollectionwithselectIowaconservationadopters.ThefoundationofthisinvestigationisaseriesofinterviewswithtwentyIowafarmoperatorsknowntohaveadoptedconservationpractices.Thepopulationofparticipantswasidentified–andtheirparticipationwasarrangedby–theIowaSoybeanAssociation’sEnvironmentalProgramsandServicesteam.InitialinterviewswereconductedfromlateFebruarythroughearlyAprilof2019.Eachparticipantreceivedaninterviewquestionnaireandcropbudgetworksheetspriortocommittingtotheprocess.Eachparticipantwhocommittedtothestudyagreedtoandscheduledaninitialinterviewcovering
• Generalfarminformation• Specificcroppingandconservationpractices,costs,andoutputsforthemostrecentavailableyear
orrotation• Farmlifecycleandsuccessioninformation
Interviewsandcropbudgetsfocusedonthe2018croppingyeardefinedastheperiodfollowing2017cropharvestthrough2018cropharvest.Wherecovercropswereplanted,thecoverwasplantedinfall2017andterminatedin2018beforeorshortlyafterthe2018(budgeted)cropwasplanted.Thegoalwastoprovideasnapshotofcropcostsandoutcomesforcornandsoybeansfollowingcovercropsrelativetocropcostsandoutcomesforcornandsoybeansnotfollowingcovercrops.Thesecondyearsofsixtwo-yearcroprotationswereconsidered:
SoybeansaftercornwithcovercropSoybeansaftercornwithoutcovercropCornaftersoybeanswithcovercropCornaftersoybeanswithoutcovercropCornaftercornwithcovercropCornaftercornwithoutcovercrop
Followingsummarizationandreviewofinitialresults,stafffromtheIowaSoybeanAssociationandRegionalStrategic,Ltd.selectednineparticipantsforfollow-upinterviews.Eightoftheseparticipants
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scheduledfollow-upinterviews.Theseadditionalinterviewssupportaseriesofeightcasestudiesincludedinthisreport.Thisreportprovidessummariesofparticipantcharacteristicsandfindingsfromtheinitialinterviews.Additionally,seventopicalcasestudiesaddressthefollowingtopics:
1. Recordsmanagementandinformationsystems2. Riskmanagement3. Covercropvaluationandmonetization4. Reducedtillage5. Nutrientmanagement6. Ownershipimpacts7. Transitions
AneighthcasestudyfocusesonWayneFredericks’farmoperation,recordmanagement,andconservationprofile.
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ParticipantSummaryInFebruaryandMarchof2019,theIowaSoybeanAssociationselectedtwentyfarmoperatorstobeinterviewedforthisinvestigation.Selectionwasnotrandom.Operatorsselectedrepresentasubsetofthefarmoperatorpopulationthatmaintainshighvisibilityinconservationdiscussions,events,andorganizationsrelatedtoIowaagriculture.Figure1showsthedistributionofparticipantsbycountyinIowa(removedtoensureparticipantanonymity).Table1andFigure2showtheagedistributionoftheprincipalproducers1involvedinparticipant’soperationscomparedwithadistributionofprincipalproducersfromthe2017CensusofAgricultureforIowa.Studyparticipants’principalproducersaregenerallyolderthanIowafarmers.2Fiveprincipalproducers(all65yearsormoreinage)reportedjointdecision-making.Twoofthesereportedapartnerofthesamegeneration(awifeandabrother).Onereportedawifeandchildren.One,sonsofthenextgeneration(45-54)andayoungernephew(25).Onereportedason(35).Inthe3caseswherechildrenwerenoted,itwasasonoftheprincipalproducerwhoparticipatedintheinterview.TABLE1:AgeofPrincipalProducers
Age of Principal Producer
2017 Census of Agriculture
Study Participants
Number Percent Number Percent
Under 25 years 859 0.74 0 0.00 25-34 years 8,093 7.00 0 0.00 35-44 years 12,708 10.99 2 10.00 45-54 years 19,040 16.47 4 20.00 55-64 years 34,387 29.74 3 15.00 65-74 years 25,433 22.00 10 50.00 75 years and over 15,110 13.07 1 5.00
1“Principalproducer”referstotheactiveoperatorcontrollingthelargestshareofland,equipment,andproductionontheparticipantfarmoperation.2Thistablecomparesprincipalproducersinparticipantoperationsinordertogetadirectcomparisonto2017CensusofAgriculturedata.Atleastoneparticipantinterviewwaswithanoperatorunder35,buthewasinpartnershipwithhisfather.
4
0
10
20
30
40
50
60
Under25 25-34 35-44 45-54 55-64 65-74 75&over
Figure2:PrecentofPrincipalProducersbyAgeforParticipantsandIowa2017CensusofAg
2017Census Participant
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Giventheagedistributionofparticipants’principalproducers,itisnotsurprisingthatfarmoperationtransitionisaconcernforseveralstudyparticipants:
• Sevenreportnotransitionplan(37%ofparticipantacreage)• Threereportthatthecurrenttransitionistothecurrentprincipalproducer–meaningthefarmis
transitioningfromnon-operatingowners(retiredoperatorsand/orestates)tothecurrentprincipalproducer(7.9%ofparticipantacreage)
• Ninereportaplantomovefromthecurrentprincipalproducertomembersofayoungergeneration(48.5%ofparticipantacreage)
• Onereportsthefarmisacorporationownedbythefamily(6.6%ofparticipantacreage)TABLE2:StudyParticipantFarmSize
Farms by Size (acres)
2017 Census of Agriculture
Study Participants
Number Percent Number Percent
1-9 acres 9,120 10.59 0 0.00 10-49 acres 18,183 21.12 0 0.00 50-179 acres 20,831 24.19 0 0.00 180-499 acres 19,172 22.27 1 5.00 500-999 acres 10,381 12.06 9 45.00 1,000-1,999 acres 6,525 7.58 6 30.00 2,000 acres or more 1,892 2.20 4 20.00 Table2showsthedistributionofstudyparticipantsbyfarmsizeinacrescomparedtoallfarmsinthe2017CensusofAgricultureforIowa.Likethedistributionofprincipalproducerage,studyoperationsizedistributionisskewedtowardslargerfarmsrelativetoIowaallfarms.Figure3providesavisualinterpretationofthisdistribution.Onlyoneparticipant,at294acres,wassmallerthantheIowaaveragefarmsizeof355acres.Thelargeststudyoperationwas5,200acres.Two,at2,000acreseach,wereofminimumsizetogetintothelargestsizecategory.Thefinallarge-categoryfarmwas2,200acres.Totalacreageinthestudygroupwas29,056.Thisislessthanone-tenthofonepercentofIowafarmland.
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05101520253035404550
1-910-49
50-179
180-499
500-999
1,000-1,999
2,000ormore
Figure3:PercentofFarmsbyNumberofAcresforParticipantsandIowa2017CensusofAg
2017AgCensus Participants
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ThreeCompilationsofAverageCropRotationYieldsandCostsTables3,6,and7presentthreecompilationsofproductioncostandyieldinformationacrosstheparticipantpopulation.Thethreetableswereallconstructedbycalculatingaverageyieldsandproductioncostsperacreacrossthreesubsetsofthetwentystudyparticipants.
• Table3providesaveragesacrossseventeeninterviewparticipantswhoprovidedbothproductionpracticeactivitiesandout-of-pocketinputexpenditureinformation
• Table6providesaveragesonlyforparticipantswhoplantedintobothcoveredgroundandnon-coveredgroundforanygivenrotation
• Table7providesaveragesforparticipantswhoeithercoveredalltheirrow-cropacreageorcoverednoneoftheiracreageinanygivenrotation
Eachofthetableswasproducedbyaveragingparticipantreportedcostsoverreportedacres.Participantswereaskedtoprovideadescriptivenarrativeoftheiroperationsandtoprovidecroppingbudgetsbycrop,rotation,andthecultivationofacovercrop.Wherevernecessary,gapsinoperatorknowledgeaboutspecificfield-levelcostswereaugmentedwithbenchmarkdatafromIowaStateUniversity’s2018IowaFarmCustomRateSurvey.3EveryparticipantreliedatleastpartiallyonIowaStateUniversitysurveyestimatesforpracticecosts.Amongthetwentyparticipants:
Eighteenproduced6,889acresofsoybeansaftercornwithcovercropFourteenproduced6,002acresofsoybeansaftercornwithoutcovercropFourteenproduced6,222acresofcornaftersoybeanswithcovercropFifteenproduced5,420acresofcornaftersoybeanswithoutcovercropThreeproduced1,447acresofcornaftercornwithcovercropSixproduced1,225acresofcornaftercornwithoutcovercrop
Forthepurposesofthisinvestigation,themostimportantdataprovidedwaspre-harvestpractices4(howmanyactivitieshappenedinthefield)andcovercropestablishmentandharvestyieldinformation.Pre-harvestcostsincludethecostsofestablishingandterminatingcovercrops,savingsfromreducedtillage,savingsonfertilizer,herbicides,andpesticidesthatcanbeattributabletocroppingpractices,andincreasesordecreasesinyield(revenue)thatmaybeattributabletocroppingpractices.
3Availableathttps://www.extension.iastate.edu/hancock/sites/www.extension.iastate.edu/files/hancock/2018_CustomRateSurvey.pdf4The2018cropyearwasdefinedastheperiodfrom2017harvestthrough2018harvest.Falltillage,fertilization,andotheractivitiesthatoccurredfollowing2017harvestareconsideredpre-harvestpracticesforthe2018cropyear.Falltillage,fertilization,andotherpracticesthatoccurredfollowingthe2018harvestareconsideredaspre-harvestactivitiesforthe2019cropyear.
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Otherthanminimalcostdifferentialsduetoyield,primary-cropharvestcostdatadoesnotdirectlyreflectthecostsorsavingsfromconservationpractices.Salescostinformationreflectsmarketingchoicesratherthanproductionpractices.Interestandinsurancereflectfinancechoicesandriskallocation.Thesedifferencesaremuchlesslikelytobeattributabletocroppingpractices.AveragesAcrossAllParticipantsTable3showsrotationaveragesforpre-harvestoperatingandcovercropproductioncostsacrosstheacreageofallparticipantsthatprovidedbothoperationalpracticeandout-of-pocketexpenseinformation.Thetableprovidesinformationonaper-acrebasis.Inmostcases,itisassumedthataparticularapplicationortreatmentwascarriedoutinasinglepassacrossthefield.Inthecasesofspraying(bothgroundandaerial),thenumberofpasses(sprayevents)wasincludedasaseparatelineinadditiontoaverageoverallpracticecostperacre.Thisreflectstherealitythatsprayingregularlyhappensmultipletimesperseason.Italsoreflectsaninterestinwhethercovercroppracticesconsistentlyaffectsprayingactivity.ItisimportanttonotethatthedatainTable3cannotbeinterpretedashead-to-headcomparisons.Therearedifferentpracticesandmanagementinformationsystemsacrosstheseventeenparticipantsinthecomparison.Itispossiblethatparticipantsgrowingcovercropsarebettermanagersthanthosethatdonotorviceversa.Thereisnowaywithinthedatatodeterminetheallocationofhigh-qualitylandtoonepracticerelativetoanother.DifferencesinTable3maybeduetogeneralparticipantpracticesorlandselectionratherthantheimplementationofacovercrop.Thereare,however,someinterestingobservationstobemadewithrespecttoTable3.Yieldsandyieldexpectations(lines2and3)weresimilarforcoverandnon-covercropsinbeansfollowingcornandcornfollowingbeans.Averageyieldsinbothsituationsfavoredcropsfollowingcovercrops(0.5bushelperacrepremiumonbeansfollowingcornandacoverand2.2bushelsperacrepremiumoncornfollowingbeansandacover).Theyieldpremiumonsoybeansfollowingacovercropwouldnotbesufficienttooffsethighercostsevenaftertakingreportedcovercropsubsidiesintoaccount(line26).The2.2-bushelyieldpremiumoncornfollowingbeanswithacovercropwouldbesufficienttooffsetincreasedcostsatcornmarketpricesof$3.37perbushelwithaveragereportedcovercropsubsidiesof$7.85peracre(line26).Forcornfollowingcorn,however,averageparticipants’yieldgoalwas6.7bushelperacrelowerwhenacovercropwasplanted.Actualreportedyieldsshowedanaverage44.9bushelperacreshortfallwhereacovercropwasestablishedbetweencorn-on-corncropsrelativetotheuncoveredrotation.Whilethecoveredrotationshoweda$36.56input-costadvantageafteraccountingfortheaveragecovercropsubsidyof$15.81,thiswouldnotoffsettheyieldshortfallatanysustainablemarketprice.Thesefindingsareforasinglecropyearandaselectgroupofparticipants.Theydonotcarrytheweightthatresultsofmultiple-yearrandomizedstriptrialsoveralargerpopulationwouldcarry.Nevertheless,
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theyareimportantbecauseriskstoregularsummercropsareasignificantfactorindecisionstoestablishacovercrop.Table3:Productionpracticeandcostforallparticipantsprovidingbudgetinformation
BeansAfterCorn CornafterBeans CornafterCorn
Row and
CoverandNoCover
andCover
andNoCover
andCover
andNoCover
1 Acres 5638.6 5577.0 5642.2 4370.0 1222.0 525.02 Yieldgoal(bu./acre) 61.0 62.5 212.6 211.8 200.3 207.03 Actualyield(bu./acre) 59.1 58.6 209.0 206.8 166.9 211.84 Actualyieldaspercentofgoal 96.9 93.7 98.3 97.6 83.3 102.3
5 Chiselplowpasscost($/acre) 0.00 0.32 0.00 0.00 0.00 13.006 Fieldcultivatepasscost($/acre) 0.00 0.26 1.57 0.50 0.00 6.867 NH3applicationcost($/acre) 0.00 0.00 1.04 0.89 0.00 1.058 Strip-tillpasscost($/acre) 0.67 0.00 6.21 5.10 12.28 1.479 Sidedresspasscost($/acre) 0.00 0.00 5.26 4.01 1.91 3.8910 FertilizerpassCost($/acre) 0.00 0.18 1.00 1.41 0.00 4.0611 Othertillagepasscost($/acre) 0.93 0.62 0.00 0.75 0.00 9.1912 Plantcost($/acre) 18.64 18.14 19.16 18.56 13.24 19.2613 Numberofgroundspraypasses 2.50 2.49 1.77 1.62 2.95 2.0014 Groundspraycosts($/acre) 15.65 16.07 10.55 10.02 14.53 13.7515 Numberofaerialspraypasses 0.25 0.10 0.31 0.35 0.00 0.2516 Aerialspraycosts($/acre) 2.86 1.08 3.00 3.70 0.00 3.2417 Seed($/acre) 62.86 61.38 96.95 98.91 111.16 114.6618 Fertilizer:All($/acre) 40.16 36.13 103.79 109.20 90.34 92.18
19Herbicide,insecticide&fungicide:All($/acre) 41.76 44.85 40.33 45.39 42.18 49.79
20 Reportedcostspriortocovercosts($/acre) 186.28 181.61 290.92 300.42 288.59 334.65
21 CoverCrop:Seed($/acre) 11.19 0.00 11.76 0.00 14.52 0.0022 CoverCrop:Plant($/acre) 10.85 0.00 10.83 0.00 7.93 0.0023 CoverCrop:Termination($/acre) 1.36 0.00 2.15 0.00 2.86 0.00
24 Reportedcostswithcovercosts($/acre) 209.68 181.61 315.67 300.42 313.90 334.6525 Reportedcoversubsidies($/acre) 10.19 7.85 15.81 26 Netreportedcosts($/acre) 198.96 181.61 307.82 300.42 298.09 334.65
Itisalsonotablethataveragereportedproductioncostspriortocovercropestablishmentcostsforbothcornrotationswerenotablyloweroncoveredground(line20).Thebulkofthesesavingswereinaveragecostsforseed,fertilizer,andherbicide,insecticide,andfungicide(lines17-19).Averagepesticide(totalherbicide,insecticide,andfungicide)expenditureswerelowerforcovercropacreagethanforuncoveredacreageinallrotationsinTable3.CostsanddifferencesareshowninTable4.
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Althoughaveragepesticidematerialcostswereloweroncoveredacreageforallrotationswhenaveragingallparticipants,thisrelationshipisnotconsistentlyseenwhenaveragingsubsetsofparticipantsinTables6and7below.Table4:Totalreportedherbicide,insecticide,andfungicidematerialcost($/acre)comparisonforacreagewithandwithoutcovercrops
Cover Nocover Coversavings
Soybeanfollowingcorn 41.76 44.85 3.09Cornfollowingsoybean 40.33 45.39 5.06Cornfollowingcorn 42.18 49.79 7.60Consistentlylowerpesticidecostswerenotreflectedinapplication(sprayer)costs.Sprayercostswerehigherforcoveredlandinthesoybeansfollowingcornrotationbutlowerforbothcornfollowingsoybeansandcornfollowingcorn.Table5showscombinedpesticidematerialandsprayercostsbyrotationandadvantagesforacreagewithacovercrop.Table5:Totalreportedherbicide,insecticide,andfungicidematerialandsprayercost($/acre)comparisonforacreagewithandwithoutcovercrops
Cover Nocover Coversavings
Soybeanfollowingcorn 60.27 62.00 1.73Cornfollowingsoybean 53.88 59.12 5.23Cornfollowingcorn 56.72 66.78 10.06Covercropsubsidies(row25)weresubstantiallylessthanthecostofproducingcovercrops(rows21-23)onaverage.Participantsinthiscomparisonreportedcovercropsubsidiesrangingfrom$0to$25.38peracre.Threeparticipantsdidnotengageincovercroppingforthe2018cropyear.Tenreportedaveragecovercropsubsidiesoflessthan$10peracre,andthreeofthesereportednosubsidiesatall.
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SelectiveCropRotationComparisonsAsnotedabove,thecomparisonofoverallparticipantaveragesdoesnotaccountfordifferencesthatmayexistinoperationmanagement,landallocation,orotherfactors.Covercropproducersself-select.Individualsthatfeelcomfortablewiththerisksandreturnsavailableinthepresenceofcovercropswillchosetoproducethem.Individualsthatareuncomfortablewithrespecttotheassociatedrisksandreturnswillchosenotto.Individualcomfortlevelsandselectiondecisionsmayreflectpastsuccess,managementexpertiseand/orconfidence,qualityoflandavailable,etc.Allthesefactorsaffectthechoicetoproducecovers,andthoseselectivechoicesalmostcertainlyaffecttheaverageyieldandproductioncostinformationpresentedinTable3.Toexpandonoverallaverages,twoadditionalcomparisonsareprovidedhere.Attemptingtogetbeyondoperatorqualifications,Table6providesacomparisonbetweencoveredandnon-coveredrotationsamongparticipantsthathadbothcoveredandnon-coveredcropswithinanyspecificrotation.Table7comparescoveredandnon-coveredrotationsbetweenparticipantsthateithercoveredalltheirrow-cropacreageorcoverednoneoftheirrow-cropacreagewithinaparticularcroprotationTheseventeenparticipantswhoseaveragesarecomparedinTable3included:
• Threeparticipantsplantingcovercropsonalltheirrow-cropacreage• Threeparticipantsnotplantingcovercropsatall• Tenparticipantswithsoybeansfollowingcornbothwithandwithoutcovercrops• Eightparticipantswithcornfollowingsoybeansbothwithandwithoutcovercrops• Oneparticipantwithcornfollowingcornbothwithandwithoutcovercrops
Atotalofelevenparticipantsprovidesituationswherewecandirectlycompareagivencropinagivenrotationbothfollowingandnotfollowingacovercrop.Ofthese,onlyfourparticipantswithsixrotationshadrecordsthatallowedparticipantstodistinguishyieldsbetweentheircovercroplandandtheirnon-covercropland:
• Twoparticipantswithbeansfollowingcorn• Threeparticipantswithcornfollowingbeans• Oneparticipantwithcornfollowingcorn
Table6replicatesTable3withdatafromonlythesefourparticipants.Table6eliminatessomeoftheself-selectioneffectsthatundoubtedlyaffecttheaveragesinTable3.EachparticipantintheaveragespresentedinTable6producebothcoveredandnon-coveredcropsforeachrotationinwhichtheyareincluded.Thisshouldsubstantiallyreducetheeffectsofmanagementabilitybetweenaveragesforcropsthatfollowacovercropandcropsthatdonot.
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Table6:Productionpracticeandcostforparticipantsraisingbothcoveredandnon-coveredcropsinanygivenrotation BeansAfterCorn CornafterBeans CornafterCorn
Row and
CoverandNoCover
andCover
andNoCover
andCover
andNoCover
1 Acres 694.0 364.0 1174.0 351.0 40.0 245.02 Yieldgoal(bu./acre) 60.0 60.0 197.5 205.8 210.0 210.03 Actualyield(bu./acre) 55.8 54.7 167.3 179.5 225.0 233.04 Actualyieldaspercentofgoal 93.0 91.2 84.7 87.2 107.1 111.0
5 Chiselplowpasscost($/acre) 0.00 4.84 0.00 0.00 0.00 20.106 Fieldcultivatepasscost($/acre) 0.00 4.04 0.00 6.28 0.00 14.707 NH3applicationcost($/acre) 0.00 0.00 2.95 5.38 0.00 0.008 Strip-tillpasscost($/acre) 0.00 0.00 13.45 5.69 0.00 0.009 Sidedresspasscost($/acre) 0.00 0.00 7.35 3.39 0.00 0.0010 FertilizerpassCost($/acre) 0.00 0.00 0.00 0.00 0.00 5.4511 Othertillagepasscost($/acre) 0.00 0.00 0.00 0.00 0.00 0.0012 Plantcost($/acre) 12.20 9.61 13.97 13.49 21.65 19.1513 Numberofgroundspraypasses 3.21 3.45 2.83 2.38 2.00 2.0014 Groundspraycosts($/acre) 14.89 15.23 14.15 11.50 13.20 13.2015 Numberofaerialspraypasses 0.00 0.00 0.00 0.00 0.00 0.0016 Aerialspraycosts($/acre) 0.00 0.00 0.00 0.00 0.00 0.0017 Seed($/acre) 71.64 67.48 90.06 87.56 111.75 111.7518 Fertilizer:All($/acre) 30.79 36.99 95.57 107.56 64.84 64.84
19Herbicide,insecticide&fungicide:All($/acre) 44.36 61.87 34.84 31.15 33.91 33.91
20 Reportedcostspriortocovercosts($/acre) 177.09 203.51 275.17 274.39 247.35 285.10
21 CoverCrop:Seed($/acre) 12.99 0.00 14.57 0.00 44.00 0.0022 CoverCrop:Plant($/acre) 8.17 0.00 9.85 0.00 19.50 0.0023 CoverCrop:Termination($/acre) 7.51 0.00 4.91 0.00 0.00 0.00
24 Reportedcostswithcovercosts($/acre) 205.76 203.51 304.49 274.39 310.85 285.1025 Reportedcoversubsidies($/acre) 15.09 19.27 0.00 26 Netreportedcosts($/acre) 190.66 203.51 285.22 274.39 310.85 285.10
CovercropsubsidiesinTable6(row25)aresubstantiallyhigherforsoybeansfollowingcornandforcornfollowingsoybeansthantheyareinTable3.OneofthefourparticipantsinTable6reportedreceivinganaverageof$25/acrecovercropsubsidyonbothhisbeans-on-cornrotationandhiscorn-on-beansrotation.Oneparticipantincludedinthecorn-on-beanrotationreportedanaverageof$25.38/acreincovercropsubsidies.Thatleftoneparticipantineachcategorythatwasnotreceivingcovercropsubsidies.
13
Inthebeansfollowingcornrotations,thetwoparticipantsaveragedinTable6showthatoncovercropacreagethey:
• Benefitedfromanextrayieldof1.1bushelsofsoybeansperacre(row3)• Spent$26.42peracrelessinproductioncostspriortocovercropcosts(row20)• Spent$2.25peracremoreonproductioncostsincludingcovercropcosts(row24)• Receivedanaverageof$15.09percovercropacreincovercropsubsidies(row25)
TheoverallresultisthatsoybeansfollowingcornandacovercropforTable6participantswithbothcoveredandnon-coveredacreagenetted$12.85incovercropsubsidiesovercosts(row26)and1.1bushelperacreinincreaseyield(row3)oversoybeansfollowingcornwherenocovercropwasplanted.Atmarketpricesover$2.05perbushel,theyieldpremiumwouldbesufficienttopaycovercropestablishmentcostsandreportedsubsidieswouldbefreecashflow.Costsavingsforsoybeansafteracovercropinthisrotationmanifestedthemselvesprimarilyinreducedexpensesfor
• Tillage(rows5-11)• Totalfertilizer(row18)• Totalherbicide,insecticide,andfungicide(row19)
Itispossiblethatsavingsfromreducedtillage(whichreduceserosionandphosphorusloss)isanimportantcomponentinoffsettingcostsforcovercropestablishment(whichfurtherreduceserosionandsequestersnitrogen).Insomecombination,thetwopracticesareassociatedherewithreducedfertilizerandchemicalpestcontrol(herbicide,insecticide,andfungicide)useinthebeanfollowingcornrotation.ReducedfertilizerutilizationisalsoseenoncoveredacreageforcornfollowingcorninTable6.Thisinvestigationdoesnothaveenoughinformationtomakeclaimsofcausation,butmoredetailedmulti-yearfield-levelpracticestudiesmightbeofinterestinthisregard.The4participantsengagedincorn-following-beansandcorn-following-cornrotationsinTable6hadadifferentaverageexperience.Bothrotationsshowedanaverageyieldshortfalloncoveredground(row3).Averagereportedcostspriortocovercropcostswerehigherforcropsfollowingcoversforcornfollowingbeansbutlowerforcornfollowingcorn(row20).Addingacovercropresultedincostsforcornaftercoverbeinghigherbothafterbeansandaftercorn.Averagecovercropsubsidieswereinsufficienttooffsetthoseincreasedcosts.Yieldshortfallsinbothcasesrelativetoyieldsintheno-coveredcornrotationsmeanthathigherproductioncostscouldnotbemadeupforthisgroupofparticipantsin2018.ThecomparisonsinTable6providecover-to-no-covercomparisonsforfarmparticipantsengagedinbothpractices.Thisoptionfordirectcomparisonsatleastpartiallyaccountsfordifferencesinoperatorefficiencyandmanagementability,aseachoperatorineachrotationwasengagedinbothcoveredandnon-coveredrowcrops.Thereisthepossibility,however,thatsomepracticesarecommontobothcoveroptionsonanyoftheseoperationssimplybecauseitiseasiermanageriallyoroperationallyratherthanoptimalfortheexistenceofacovercrop.Thiswouldmuteanydistinctionsthatcanbedrawn.
14
Onewaytogetaroundthisistocompareoperationsthatcoverallacreageinagivenrotationwithoperationsthatdonotcoveranyacreageinagivenrotation.Ineachofthesecases,onewouldexpecttheparticipanttoengageinonlypracticesthatareoptimalforeitheroptionratherthanblendingpracticestosimplifyoperationsormanagement.Ourparticipantsincludedtwelveoperatorswhometoneofthesecriteriaforatleastonerotation.Table7providesacomparisonofaveragecostsandyieldsforparticipantsthatcoverallrow-cropacreagewithinagivenrotationorcoverednoneoftheirrow-cropacreagewithinagivenrotation.Table7:Productionpracticeandcostforparticipantsraisingonlycoveredornon-coveredcropsinanygivenrotation BeansAfterCorn CornafterBeans CornafterCorn
Row and
CoverandNoCover
andCover
andNoCover
andCover
andNoCover
1 Acres 1591.6 1489.0 1901.2 2181.0 1182.0 280.02 Yieldgoal(bu./acre) 60.0 60.0 210.3 212.2 200.0 204.33 Actualyield(bu./acre) 65.4 58.4 209.6 204.5 164.9 193.24 Actualyieldaspercentofgoal 109.1 97.3 99.7 96.4 82.5 94.6
5 Chiselplowpasscost($/acre) 0.00 0.00 0.00 0.00 0.00 6.806 Fieldcultivatepasscost($/acre) 0.00 0.00 4.66 0.00 0.00 0.007 NH3applicationcost($/acre) 0.00 0.00 0.84 0.20 0.00 1.968 Strip-tillpasscost($/acre) 2.39 0.00 4.86 4.94 12.70 2.759 Sidedresspasscost($/acre) 0.00 0.00 2.37 3.69 1.97 7.3010 FertilizerpassCost($/acre) 0.00 0.66 0.00 1.69 0.00 2.8411 Othertillagepasscost($/acre) 0.00 2.32 0.00 1.50 0.00 17.2412 Plantcost($/acre) 21.21 20.00 19.91 17.92 12.96 19.3513 Numberofgroundspraypasses 2.00 2.00 2.00 2.21 2.98 2.0014 Groundspraycosts($/acre) 12.50 13.50 12.61 13.96 14.58 14.2415 Numberofaerialspraypasses 0.71 0.00 0.41 0.56 0.00 0.4616 Aerialspraycosts($/acre) 7.82 0.00 4.44 6.25 0.00 6.0717 Seed($/acre) 62.68 62.48 104.53 101.93 111.14 117.2118 Fertilizer:All($/acre) 55.11 53.85 85.12 98.29 91.20 116.10
19Herbicide,insecticide&fungicide:All($/acre) 40.47 49.08 49.49 55.02 42.46 63.68
20 Reportedcostspriortocovercosts($/acre) 204.89 203.88 291.23 308.16 289.99 378.01
21 CoverCrop:Seed($/acre) 9.26 0.00 12.19 0.00 13.52 0.0022 CoverCrop:Plant($/acre) 5.58 0.00 7.14 0.00 7.54 0.0023 CoverCrop:Termination($/acre) 0.00 0.00 0.00 0.00 2.95 0.00
24 Reportedcostswithcovercosts($/acre) 219.73 203.88 310.56 308.16 314.01 378.0125 Reportedcoversubsidies($/acre) 6.57 6.38 16.34 26 Netreportedcosts($/acre) 213.15 203.88 304.18 308.16 297.66 378.01
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ThecomparisoninTable7showsthatcostsbeforecovercropexpendituresforcoveredacreswerelowerforbothcornrotations,andnearlyequalforthebeanrotationrelativetouncoveredacreage.Fertilizerexpensewaslowerforthecoveredportionofbothcornrotations.Herbicide,insecticide,andfungicideexpensewaslowerforthecoveredportionsofallthreerotations.ThisechoesresultsseeninTable6,and,again,mightwarrantmoredetailedmulti-yearfield-levelpracticeanalysis.Table7showsthatthecoveredportionofacreagegenerateda
• 7.0bushelperacreyieldpremiumoveruncoveredacreageforsoybeansfollowingcorn• 5.1bushelperacreyieldpremiumoveruncoveredacreageforcornfollowingsoybeans• 28.3bushelperacreyieldshortfallrelativetouncoveredcornaftercornacreage
Forthesoybeanfollowingcornrotation,participantsthatcoverarebetteroffthantheirnon-coveringcounterparts(afterreportedcovercropsubsidies)atsoybeanpricesabove$1.33perbushel.Atpricesover$2.27participantsproducingacovercropwouldbebetteroffevenwithoutcovercropsubsidies.Table7showsasimilarstoryforthecornfollowingsoybeanrotation.Afteraveragereportedcovercropsubsidiesof$6.38peracre,productioncostsforcoveredacreageare$3.98lowerthancostsfornon-coveredacreage.Evenintheabsenceofanycovercropsubsidies,atanycornmarketpriceabove$0.48perbushel,covercropproducerswouldbebetteroffthannon-coveredproducersinthecornaftersoybeanrotation.ThesituationforcornfollowingcornparticipantsproducingacovercropintheTable7comparisonisnotsoadvantageous.Coveredacreageexperiencedayieldshortfallof28.3bushelsperacrerelativetoacreagewhereacovercropwasnotproduced.Whilecostsafteraccountingforcovercropsubsidieswere$80.35peracrelowerforcoveredacres,participantsproducingcornaftercornwithoutacovercropwouldbebetteroffthancovercropproducersatanymarketpriceabove$2.84perbushelofcorn.However,inremovingparticipantsthatmightblendpracticestosimplifyoperationsandmanagement(Table6)wehavepotentiallyreintroducedmanagementbiasintoTable7.Participantsthatcompletelycoveragivenrotationarelikelytoberelativelyconfidentcovercroppers.Thisconfidencemaycomefromahistoryofmoreintensemanagement.Participantsthatleaveentirerotationsuncoveredmayfallontheothersideofthescale.InremovingthepotentialforpracticeblendingfromTable6toTable7wereintroducedtheparticipantbiasthatwespecificallytriedtoremovewithTable6.ConcludingThoughtsonThreeComparisonsThethreecomparisonswerepresentedinordertoseeifdifferentbiasesamongtheparticipantsofeachgroupmightleadtosignificantlydifferentconclusiveresults.Therewerenohard-and-fastconclusionstobedrawnacrosscomparisons,butsomegeneralobservationscanbemade.
16
Toacertainextent,comparisonsinTable7echoresultsinTables3and4.
• Innocasedocovercropproducersout-performnon-covercropproducersincornaftercornrotations
• CovercropproducersshowanadvantageincornfollowingbeanrotationsinTable3andTable7• CovercropproducersshowanadvantageinbeanfollowingcornrotationsinTable6andTable7
Innearlyeverycasewherecovercropshavetherotationaladvantage,thatadvantageisaccompaniedbylowerfertilizerandlowertotalherbicide,insecticide,andfungicidecosts(thesingleexceptionisfertilizerappliedtobeansfollowingcorninTable7).Insomecases,lowertillagecostsarealsoafactor.Tillagecostsmightbemoreofafactorifparticipantswerenotsoheavilyengagedinreducedtillagealready.Whilethisinvestigationisnotabletospeculateonthedirectionofcausationorthemechanismoftherelationships,itdoesappearthatthereisarelationshipbetweentillage,fertilizeruse,pesticideuse,andcovercropadvantagesinthesoybeanfollowingcornandthecornfollowingsoybeanrotationalcomparisonsineachofthethreecomparisonsconstructed.Theseresultsappeartoindicatethatmuchmightbelearnedfromamoreintensivestudy.WhilethereismeritinlookingatsmallerandmoreselectiveparticipantgroupsinTables4and5,itishardtoconsistentlyrecognizeageneralpatternofoutcomesacrosstheseandtheaveragesofallparticipants(Table3)giventhesmallsamplegroupandvariationsinrespondentdetail.Developingastudywithalargerrandomizedcontrolpopulationandoneormorespecificallydefinedproductionandmanagementpracticescouldprovidemorerobustinsightsintocostandyielddifferentialsassociatedwithcovercropping.
17
HarvestingCoverCropsFiveparticipantsgeneratesubstantialreturnsongrazing,harvesting,andmarketingtheircovercropsinthesoybeanfollowingcornrotation.Alltold,about560participantacresweremonetizedinthisway.Table8showsaverageharvestrevenueperacreandharvestcostperacreforharvestedcovercropacreage.Table8doesnotincludeestablishmentcostsforthecovercropontheseacres,asitisassumedthecovercropisproducedforconservationpurposesandexistsregardlessofwhetheritisharvested.
Table8:HarvestedCoverCropAcresandRevenue Participantharvestedcovercropacres 560Harvestrevenue($/acre) 165Harvestcost($/acre) 25Netrevenueperharvestedacre($/acre) 140
Totalnetrevenuefor560harvestedacres($) 78,160Onaverage,participantsrealizedapproximately$165peracreinmarketrevenueandaccruedapproximately$25peracreinharvestcosts.Giventheexistenceofacovercropasaconservationpractice,participantswereabletonetanaverageofapproximately$140peracrebyharvestingthatcovercropratherthanterminatingitinthefield.Thisnetreturnisrelativelyhighcomparedtoparticipants’expectationsregardingtheirregularsummercrops,butestablishmentcosts,landcosts,andsomepercentageofpestcontrolcostsarealreadyallocatedtotheproductionofsummercrops.Thesecostswouldbeincurredinanyevent.Subtractingharvestcosts,whichwouldnototherwisebeincurred,yieldsanaveragenetrevenueperharvestedcovercropacreofapproximately$140.Inaddition,oneparticipanthasdevelopedacovercropseedingandconsultingbusiness.Thisbusinesscontractswithotherfarmoperatorstoharvest,clean,andselltheircovercropproductionasseedforotherfarmoperators.Italsoprovidescustomplantingservices.
18
OtherIssuesThesectionsabovefocusedonyieldandreportedproductioncostdifferencesforparticipantscroppinglandthathadeitherbeencoveredorleftbarefollowingthepreviouscrop.Intheprocessofgatheringandanalyzingthisinformationseveralotherissuespresentedthemselvesthatmaybeoffurtherinterestorsubjecttofutureinquiry.Seventopicswereselectedforfollow-upinterviewsandcasestudiesthatwillbepresentedseparately:
1. Recordmanagementandinformationsystems2. Riskmanagement3. Covercropvaluationandmonetization4. Tillagereduction5. Nitrogenmanagement6. Landownershipimpacts7. Farmtransitions
Aneighthcasestudyfocusesonanindividualparticipant.Inaddition,therearesomeissuesthatwerenotfolloweduponforcasestudiesthatwarrantsomediscussion.Thefollowingsectionsprovidesomeinsightontheseandgeneralnotesoncasestudytopicswherewarranted.CoverCropIssuesandRecordKeepingEvaluatingtheeconomicvalueofproducingcovercropsishobbledbyrecordkeeping.LookingatTable3,acomparisonacrossallparticipantsthatprovidedcostinformation,threeparticipantshadtobeomittedforlackofout-of-pocketcosts.Thesethreeparticipantsrepresentednearly17%ofallparticipantrow-cropland.Twoofthemcoveralltheirrow-cropacreage.Onerepresentsthesecondlargestoperationamongparticipants.ThesethreewereomittedfromallthreecomparisonsrepresentedinTables3,6,and7becausetheiroperatingpracticescouldnotbematchedtoinputcosts.LookingtoTable6,twoparticipantswereincludedinthecomparisonofcoveredacreagetonon-coveredacreageinthesoybeanfollowingcornrotation.Eightotherparticipantscouldnotbeusedforthecomparisonbecausetheydidnotdifferentiateyieldsbetweencoveredandbareacreage.Theseeightrepresentedover85%oftheacreageinthisrotationthatcouldhavebeendirectlycompared.Addingoneotherwiseeligibleparticipantthatdidnotprovideinputcostdatapushestheomissionratepast90%.Theinabilitytodifferentiateyieldsbetweencoveredandbaregroundisnottrivial.Itisimportantbecauseoneoftheregularlystatedbenefitsofcovercropproductionisincreasedyieldsthroughmoistureretentionandsoilquality.Theinabilitytodifferentiateyieldsmeansthatthisbenefitcannotbeevaluatedintheinvestigationoronindividualparticipant’sfarmoperations.
19
Similarly,forthecornfollowingsoybeanrotationinTable6,threeparticipantswereavailable.Fiveadditionalparticipantswereomittedbecausetheydidnotdistinguishyieldsbetweencoveredandbareacreage.Thesefiverepresented75%oftheacreageinthecornaftersoybeanrotationthatcouldhavebeendirectlycompared.AnotherimplicationthishasforTable6isthereisanenhancedpossibilitytheinsightsdrawnfromthetablearedrivenbyoutliers.TheissuecascadesbackintoinsightsdrawnfromTable3,asdifferencesinactualyieldswithrespecttocoverstatusareminimized,limitingthereliabilityofanycalculationofpriceswherecovercropproducersarebetterofforworseoff.TheomissionofthreeparticipantswhodidnotprovideinputcostinformationalsoaffectedthepopulationavailableforTable7,astwoofthoseparticipantscoverallrow-cropacreageandtheremainingomissionplantsnocoversinrotationsgoingtocorn.Beyondtheinabilitytodistinguishyieldswithregardtocovercropproduction,ineverycasewherecovercropshadanadvantagewithinagivenrotation,thisadvantagewasaccompaniedbereducedfertilizercostsandreducedtotalherbicide,insecticide,andfungicidecosts.Reducedtillagewasalsoafactorinsomecases(althoughreducedtillageisnearlythenorminallrotationoptionswiththeparticipantpopulation).Veryfewbudgets,however,distinguishedfertilizerandpesticideapplicationpasseswithrespecttocovercropproduction.Applicationcostssavingsmightreasonablybeexpectedtomagnifysavingsinfertilizerandpesticidematerial.Thesesavingsdidnotshowupintheproductionbudgets.TheinsightsavailablefromTables3-5suggestthatadvantagesaccruingtocovercropproductionareunderstatedinthecropproductionbudgetsprovidedforthisinvestigation.Thiswouldhaveimportantimplicationsforcontinuedcovercropadoption.Moreimportant,however,isthepossibilitythattheuncertaintyinthebudgetcompilationsmaskstheoppositeresult.Accurateoperatingrecordsthatdistinguishcovercropproductionwithinrotationsisnecessarytoquantifycovercropadvantages.Itisalsonecessarytoassurethatthoseadvantagesexist.Thelackofrecordssufficientlydetailedtodrawoutthesedistinctionsalmostcertainlyincreasestherisksfacedbyindividualparticipants.
ReducedTillageParticipantsalmostuniformlystatedmovingfromconventionaltillagetostrip-tillandno-tillpracticessavesthemequipment,fuel,andtimewhileimprovingtheirsoilqualityandreducingsoilloss.Oneparticipantdocumentedequipmentcostssavingsof$44peracreandlaborcostsavingsof$27peracre.Anotherindicatedthemovecuttractorhoursbytwo-thirdsandfueluseby80%.Participantsalsodocumentedincreasedsoilorganicmatter,whichleadstoincreasedretentionofnutrientsandwater.Noneofourparticipantsweremovingawayfromthesepractices,andallofthosethathadopportunitiestodeepentheirexposurewereintheprocessofdoingso.
20
Inspiteofallthis,itisdifficulttodirectlycompareconventionalandreducedtillagepracticesinthisinvestigationbecausenearlyallparticipantsaresoheavilycommittedtoreducedtillage.MuchoftheconventionaltillageidentifiedwaspracticedbyaparticipantwhodidnotgivesufficientinformationtobeincludedinthecomparisonsinTables3,6,and7.Tillagemightbeanothervaluabletopicforanin-depthstudywithalargerpopulation.DiversificationOneoftheissuespresentedforthisstudythatwasnotpursuedwastheimpactofconservationonfarmdiversificationandviceversa.Thereareatleasttwodimensionstothis:
1. Diversificationoffarmoperationsandincome2. Diversificationoffarmoperatorincomewithoff-farmincome
Bothareofinterestbutbeyondthescopeofwhatcouldbehandledunderthisproject.Oneoftheimportantissuesinvolvedisthedirectionofcausation.Doestheadoptionofconservationpracticesleadtomorediverseenterprises,oraremorediverseenterprisesmorelikelytoengageinconservationpractices?Whilereducedtillagepracticesdonotappeardependentuponfarmdiversification,itdoesappearthatcovercropmonetizationispartiallydependentuponthepresenceofunconfinedlivestock.Muchofthecovercroputilizationidentifiedinthisinvestigationtooktheformofgrazingorbalinghayorstraw.Expandingtheseusesislimitedbythelocallivestockindustryinanygivenarea.Theotherprimarycovercropmarketiscovercropseed.Thismarketisconstrainedbytherateofgrowthincovercropacreage.Thisrateofgrowthmaybeacceleratedbythedevelopmentofnichemarketsforcovercropproducts,butthatisadevelopmentthatremainstobeseen.Off-farmincomechangestheriskprofileofthefarmoperatorandshouldprovidefreedomtoexperiment.Therewasnodirectinquiryinthefirstroundofinterviewsonoff-farmincome,butsomeparticipantshadregularoff-farmwork.Ininquiriesregardingfarmtransitionsduringfollow-upinterviewsparticipantswereexplicitlyaskedhowtheywouldcoverhouseholdexpensesduringthefarmtransitionperiod.Everyrespondentdiscussedoff-farmincome.Mosthadsufficientoff-farmincomethattheycouldleavefarmearningsentirelytofinancetransitiondebtandexpenditures.Untetheringfarmoperationsearningsfromfamilyincomerequirementsshouldhavesubstantialimplicationsforfarmmanagement.Whiletherelationshipbetweendiversificationandconservationpracticesisanimportanttopic,itisbeyondthescopeoftheinvestigationandinterviewshere.Itdoes,however,provideaninterestingtopicforfuturestudy.
21
CombiningorStackingConservationPracticesToacertainextent,ourparticipantsarecombiningorstackingconservationpractices.Muchofthecovercroppedacreageinthecomparisonsaboveisalsoeitherno-tilledorstrip-tilled.Thisaccountsforaportionofthecostdifferentialsbetweencoveredandnon-coveredlandwherecoveredlandshowsanadvantage.Participantswhoaresuccessfulcovercropproducersareearningthatsuccessatleastpartiallyonreducedtillage.Savingsfromapracticethatprimarilycontrolserosionandphosphoruslossarebeingutilizedtofundapracticethatfurtherreduceserosionandsequestersnitrogen.Betterrecordswouldprovideabetterpictureofhowthisworks.Anothercharacteristicofcomparisonsfavoringcovercropproductionisreducedexpendituresforfertilizerandpesticides.Thesereductionsareadirectconservationpracticethatiseitherpartiallyfundingorismadepossiblebysuccessfulcovercropproduction.Therearealmostcertainlysomestackingbenefitsfromthesepracticesintermsofcostreduction,soilhealth,andenvironmentalsustainability.Theinterviewsinthisstudy,however,arenotsufficientlydetailedanddonothaveadeepenoughofahistoricalseriestoteaseouthowthepracticesaugmentoraredetrimentaltooneanother.Thecoexistenceofthesepracticeshassubstantialrisk-managementandsustainabilityimplicationsthatwouldalsobenefitfromenhancedrecordkeeping.Itwouldbeusefultohavefield-levelpractice,crop,yield,andsoilqualityinformationoveralongertimeseries.Thiswouldallowforstatisticalanalysisintohowrotations,tillage,nutrients,andcoverstatusinteractovertime.Suchatimeserieswillhavetobeaprojectgoingintothefuture,asmostfarmoperatorswillnotbeabletoregenerateaccuratefield-levelpracticesandcostsfromthepast.Manyofthisinvestigation’sparticipantshavethetechnologicalabilitytodevelopandmaintainfieldleveldataseries(utilizingtractorandimplementmounteddatacollectionsystems)andintegratingitwithcomputer-basedaccountingsystems.Developingthiscapacitywouldbeacriticalnextstepinunderstandingthevalueofstackingconservationpracticesaswellasinmonetizingsoilquality.Variableproductioncostsarelargelydrivenbyfield-levelpractices.Returnsonthosecostsaredrivenbyfield-levelresults.Fixedproductioncostsarelargelyafunctionoffield-levelpracticesandproductionscale.Generatingrobustestimatesofcostsavingsand/oryieldpremiumsthataccruetoindividualconservationpracticesorconservationpracticesthatarestackedrequiresrobustfield-leveldata.
22
SummaryThisreportisbaseduponinterviewswithtwentyIowafarmoperatorswhowerechosenbytheIowaSoybeanAssociationonthebasisoftheirperceivedfocusonconservationandlandstewardship.ParticipantfarmsarelargerthanIowafarmsingeneralasreportedbythe2017CensusofAgriculture.PrimaryproducersamongparticipantoperationsaresomewhatolderthanprimaryproducersforIowa,butthisismitigatedbythenumberofparticipantprimaryproducerswhoareactivelyinvolvedintransitioningoperationstoyoungerpartners.Participant-suppliedproductioncostandyieldinformationwasutilizedtogeneratethreecomparisonsofaveragecostsandyieldsforcropsfollowingacovercropandcropsnotfollowingacovercropforthreecroprotations.Thecomparisonsaveragedinformationfrom:
1. Seventeenparticipantswhoprovidedbothproductionpracticebudgetsandout-of-pocketinputexpenses
2. Participantswhoproducedcropsonbothcoveredacreageandnon-coveredacreageinanyrotationandcoulddistinguishyieldsbetweencoveredandnon-coveredproduction
3. Participantswhoeithercoveredallacreageinagivenrotationorcoverednoneoftheirrow-cropacreageinagivenrotation
Conclusionsonthefinancialviabilityofcovercropestablishmentwerenotcompletelyconsistentamongcomparisons,butsometrendswereidentifiable
• Incomparison3(Table7)yieldpremiumsandcovercropsubsidiesoncropsfollowingacovercropweresufficienttomorethanoffsetcovercropestablishmentcostsforsoybeansfollowingcornandforcornfollowingsoybeans
• Thiswasalsotrueforsoybeansfollowingcornincomparison2(Table6)• Bothsoybeansfollowingcornandcornfollowingsoybeansincomparison1(Table3)generated
yieldpremiumsoncropsfollowingacover.Forsoybeansfollowingcorn,however,thispremiumisnotsufficienttocoverthecostofestablishingthecovercrop–evenafterreportedcovercropsubsidiesaretakenintoaccount.Forcornfollowingsoybeans,theyieldpremiumoncropsfollowingacovercropwouldpayestablishmentcostsatcornpricesof$3.37perbushelormore
• Acreageincornfollowingcornandacovercropunderperformeditsuncoveredcounterpartsinallthreecomparisons
• Coveredsoybeanfollowingcornacreageandcoveredcornfollowingsoybeanacreagehadadvantagesoveruncoveredacreageintwooutofthreecomparisonsforeachrotation
• Innearlyallcaseswherecoveredacreageshowedarotationaladvantage,itwasaccompaniedbylowertotalfertilizerandtotalpesticide(herbicide,insecticide,andfungicide)expenditures
23
Byrotation:
• Forsoybeansfollowingcorn,allthreecomparisonsgeneratedanaverageyieldpremiumforcoveredacresrelativetouncoveredacres
o Incomparison1(Table3)thisyieldpremiumwasinsufficienttopaycovercropestablishmentcosts–evenafterreportedcovercropsubsidiesareaccountedfor
o Incomparisons2and3(Tables6and7)thisyieldpremiumissufficienttopayforcovercropestablishmentcostsafteraccountingforreportedcovercropsubsidies.
• Forcornfollowingsoybeans,comparisons1and3(Tables3and7)generatedyieldpremiumsfor
cropsfollowingcovercrops,andthispremiumplusreportedcovercropsubsidieswassufficienttooffsetcovercropestablishmentcosts
• Cornfollowingcornandacovercropgeneratedloweryieldsthancornfollowingcornwithouta
covercropinallcomparisonsItappearsthattheabilityofyieldpremiumsandreportedcovercropsubsidiestooffsetexpensesisatleastpartiallydependentupontheimplementationofotherconservationpractices.Innearlyallcaseswherecovercropproductionwasassociatedwitharotationaladvantage,covercropproductionwasassociatedwithloweraveragetotalcostsforfertilizersandpesticides.Often,covercropadvantageswerealsoassociatedwithreducedtillageexpenses.Fiveparticipantsaregrazingorharvesting560acresofcovercrop.Thisactivityistakingplaceoncoversfollowingcorninacorn-soybeanrotation.Harvestingintothesoybeanplantallowsalittleextratimebeforeplantingthesummercrop.Averagecovercroprevenueforthese560acresis$165peracre.Averagecovercropharvestcostsare$25peracre,givinganetrevenueoverharvestcostsof$140peracre.Grazingandharvestinghayorstrawissomewhatdependentuponlocalpopulationsofunconfinedlivestock.Ontheflipside,covercropproductionmightencouragetheexpansionofdiversificationintolivestock.Theothermajorharvestmarketiscovercropseed.Thismarketisdependentupontherateofgrowthincovercropacreage.Wewerenotabletodoin-depthevaluationsofno-tillandstrip-tillrelativetointensivetillagebecauseparticipantswerealmostentirelyengagedinreducedtillagepractices.Itisclear,however,thatourparticipantsuniversallyseesignificantsavings.Somecanaccessspecificrecordstodocumentthosesavingsandallwhostillhavetillagereductionstomakeareheadingthatdirection.Also,wheretherearecostadvantagesinourcomparisonsofcroprotationswithandwithoutcovercrops,thosecostadvantagesareoftenpartiallytiedtotillagecosts.Soybeansfollowingacovercrop,inparticular,arecloselytiedtono-tillpractices.Finally,wehavebeenheartenedtoconnectwithanumberofyoungfarmerswhoareontheballwithrespecttorecords,transitionmanagement,andconservation.Similarly,wevisitedwithseveralestablishedfarmerswhoareobjectivelymanagingtheiroperationswiththehelpofdetailedrecords,randomizedproductiontrials,andawealthofexperience.
