Technical Abstract: As animal feeding operations increase in size, public and regulatory pressure is being exerted on the animal industry to develop and implement appropriate by-product utilization practices. One such practice is offsite application of litter and manure as fertilizer for cultivated crop production. However, this practice must be shown to be cost-effective to be widely accepted by local farmers and must be environmentally sound to be supported by regulators. In the present study, the on-farm economic impacts of the traditional commercial (inorganic) fertilizer practice were compared for several hybrid litter and commercial N fertilization alternatives. For six years (2002-2007), land management, crop yield, crop price, and fertilizer cost data were collected from six field sites in central Texas and utilized for economic analysis. Varying litter and inorganic fertilizer combinations resulted in minimal differences in corn and wheat yields; however, total fertilizer costs increased significantly as litter rate increased in spite of dramatic increases in commercial fertilizer cost. The highest average annual economic throughput values were determined for the 1 and 2 ton/ac litter treatments. At litter rates greater than 3 ton/ac, diminishing returns were observed as fertilizer costs increased with no compensating higher yields to provide offsetting revenues. This economically optimal litter range of 1-2 ton/ac is also environmentally optimal according to nutrient runoff and soil nutrient data collected onsite. It is hoped that this surprising coincidence will facilitate the increased use of litter as a cost-effective, environmentally friendly fertilizer alternative for cultivated crop production and thus benefit both the grain farmers and poultry producers in the region.