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Economic Comparison of
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Kent D. Olson
Department of Applied Economics University of Minnesota |
Norman B. Senjem
Minnesota River Basin Coordinator |
Copyright © 2002 Regents of the University of Minnesota. All rights reserved.
Crop residue management through reduced tillage is a cost-effective, best management practice for reducing sediment losses into the Minnesota River. The Minnesota River Assessment Project recommended widespread adoption of conservation tillage, meaning systems that leave at least 30 percent of the surface covered with crop residue after planting, to help achieve the basinwide goal of a 40 percent reduction in sedimentation. It is believed that farmers can reduce tillage to this degree without endangering crop yields or profitability if they choose appropriate tillage systems for their crop rotations, climate, and soils, and adopt necessary changes in crop management. Tillage guidelines for specific rotations and regions within the Minnesota River basin, developed by the University of Minnesota, are described in other documents.
In this paper, an economic comparison is made between several tillage systems in distinct regions of the basin. We limit our evaluation to incremental changes that have no expected yield penalties, based on University of Minnesota reduced tillage guidelines. We explicitly avoid discussion of extreme solutions, where predicted yield penalties need to be compensated for by savings in operating costs through superior crop management, such as low-cost weed control. We intentionally focus on changes which offer the potential for reduced costs and increased net profits. At a time when market prices for farm commodities have stabilized at a relatively low level, and when conservative political forces threaten to reduce federal price supports on farm commodities, we feel that this focus is of particular significance.
The Minnesota River basin can be divided into four regions based on soil parent materials and rainfall for purposes of tillage system evaluation. The two soil parent materials are glacial till and lacustrine. Lacustrine soils, which are heavy and poorly drained, are found south of Mankato and to the northwest of New Ulm in Renville, Chippewa, northern Lac Qui Parle counties, and isolated pockets elsewhere. Most of the rest of the soils in the basin are classified as glacial till, which tend to be better drained and not as level. The division between high- and low-rainfall areas of the basin is formed by the 28-inch annual precipitation line, which runs roughly north to south between highways 15 and 71.
In this paper we compare the same tillage systems in both the high- and low-rainfall regions. On lacustrine soils, we compare the switch from using a moldboard plow to using a chisel plow. On glacial till soils, we compare both the switch from using a chisel plow to a one-pass-and-plant system and the switch from using a chisel plow to a ridge-till system. All of the changes are designed to result in a rotation average of 30 percent surface crop residue, the definition of conservation tillage. This will be achieved through straight points on chisel plows and avoiding secondary tillage beyond operations listed.
To compare these systems, we are basing our estimates on an example farm which has 800 crop acres evenly divided between corn and soybeans with a 400-acre corn base. The current, on-farm equipment line includes a moldboard plow, 8-row planter, chisel plow, field cultivator, tandem disk, row cultivator, and three tractors (75 hp, 120 hp and 160 hp) as well as other equipment not pertinent to this analysis. The planter is assumed to be new enough and rugged enough to be readily adapted to high-residue use with row attachments.
We use this example farm knowing that every farmer will see something that is different from his or her own farm. However, this does not mean our analysis is not applicable to other farms. Each farmer can use this example as a starting point to study the switch to a different tillage system on their own farm. We have laid out our process and numbers in a straightforward manner so they can be adjusted to fit individual conditions.
In the next section, we present the changes in machinery and the associated up-front investment costs that would be needed to switch from one tillage system to another system. Then we estimate the costs of growing corn and soybean using the various tillage systems. In the last section of this paper, we compare the up-front investment costs of switching machinery to the changes in annual operating costs.
The up-front costs of adapting (or switching) the equipment line to higher residue use are obtained from current market information.
Moldboard to Chisel. To switch from a moldboard to a chisel plow is expected to have a minimal cost since most farms already have both kinds of plows. To increase residue and thus reduce erosion, the chisel needs straight shovels. To replace the twisted shovels with 2-inch straight shovels is estimated to cost $250; the straight shovels are cheaper than the twisted shovels.
Chisel to One-Pass-and-Plant. To switch from a chisel plow to a one-pass-and-plant system involves the use of two tillage methods. The first method is for corn following soybeans and would not require purchasing any new equipment; the current field cultivator could be used for the required tillage following soybeans. The second method, which is appropriate for soybeans following corn, would require, in our example, the purchase of a new tillage implement which combines two or three light tillage operations in the spring. One such implement (which combines the functions of a disk, field cultivator, and a drag) is available for $10,500 in a 15' width. (An alternative to purchasing the new implement for soybeans is one or two passes with the tandem disk.)
Chisel to Ridge-till. To switch from a chisel plow to a ridge-till system, would require the conversion of a modern planter and the purchase of a heavy-duty cultivator. The cost of the planter conversion is estimated to be $7,000 for an 8-row, 30" planter. The price of a new heavy-duty, 8-row, 30" cultivator is estimated to be $11,500. The cost of converting a combine's wheels to run between the rows is not included in this analysis but would need to be included if it was required in a specific situation.
In this section, we estimate and compare the operating costs for a corn-soybean rotation. Since the yields are equal in the comparisons, any difference in net returns is caused by the differences in the costs. To facilitate comparisons between systems, standard tillage, herbicides, fertilization, and other operations were defined for each basic tillage system following University recommendations ( Table 1 ). The costs of operating under the different systems are estimated using SCS (NRCS) CARE program (Cost and Return Estimator). All machinery is assumed to be owned; no custom work is hired. Prices of products and inputs (except herbicides) are taken from current market information. Herbicide costs are from "Cultural and Chemical Weed Control in Field Crops, 1995" (BU-3157-S, Minnesota Extension Service, University of Minnesota).
Moldboard to Chisel. In both the eastern and western parts of the basin, the average annual return from the corn-soybean rotation is estimated to be $10 per acre higher for the chisel system compared to the moldboard system ( Table 2 and Table 3 ). Lower machinery operating costs and lower labor costs are the major reasons for the chisel system's lower operating costs. Operating costs per acre are estimated to be $7 lower for corn and $5 per acre for soybeans in both parts of the basin.
Chisel to One-Pass-and-Plant. In the eastern part of the basin, the average annual return from the corn-soybean rotation is estimated to be $10 per acre higher for the one-pass-and-plant system compared to the chisel system ( Table 4 ). In the western part of the basin, the average return is estimated to be $9 per acre higher for the one-pass-and-plant system ( Table 5 ). Most of the lower cost for the one-pass system is due to lower herbicide costs for soybeans. Machinery operating costs, diesel fuel use, and labor use are also lower for the one-pass system. Operating costs per acre are estimated to be $4 lower for corn and $11 per acre for soybeans in the eastern part of the basin. In the western part of the basin, they are $3 lower for corn and $11 lower for soybeans.
Chisel to Ridge-till. In both the eastern and western parts of the basin, the ridge-till system's average annual return from the corn-soybean rotation is estimated to be $10 per acre higher than the chisel system ( Table 6 and Table 7 ). Lower herbicide costs due to banding with ridge-till is the main reason for the decrease. The ridge-till system requires less machinery use and diesel fuel; but since the ridge-till equipment is more expensive to purchase and, thus, operate, the machinery operating costs do not decrease as much as may be expected. Operating costs per acre are estimated to be $15 lower for corn in the eastern part of the basin and $14 lower in the western part of the basin. Operating costs are $7 lower for soybeans in both parts of the basin.
If the post-emergence herbicides were banded with the chisel system, the herbicide costs decrease by $5 for corn and $9 for soybean. Thus, the cost relationships change. The operating costs for corn are then $10 lower in the eastern part and $9 lower in the western part. For soybeans, the chisel system would have lower operating costs in both regions; lower by $2 per acre.
In this section we compare the required machinery investment cost to switch tillage systems to the estimated annual cost savings. For this example, the farm has 800 acres: 400 planted to soybeans and, with 7.5 percent set aside, 370 acres actually planted to corn. We also assume that the estimated cost savings will continue at the same level into the future.
Moldboard to Chisel. In both parts of the basin, operating costs are estimated to decrease by $7 per acre for corn and $5 per acre for soybeans. Thus, total savings for the farm is estimated to be $4,590. Since we expect this example farm already to have a chisel plow, there is no investment expense to be paid in order to make the switch from moldboard to chisel plow. The $250 cost of switching to straight shovels to leave more residue on top of the soil and reduce erosion would be paid for easily. If a chisel plow had to be purchased, these savings in operating costs indicate that its purchase price would be paid back in fewer than two years.
Chisel to One-Pass-and-Plant. In the eastern part of the basin, operating costs per acre are estimated to be $4 lower for corn and $11 lower for soybeans. In the western part of the basin, operating costs are estimated to be $3 lower for corn and $11 lower for soybeans. As mentioned earlier, a farmer could switch to one-pass-and-plant without making any additional equipment investment. However, the farmer in this example may want to use a combination tillage rig instead of two disk passes before planting soybeans. Since the new combination implement would be used only following corn, total savings for the farm on the soybeans is estimated to be $4,400 in both parts of the basin. Compared to the $10,500 purchase cost of the disk-cultivator-drag implement, these savings would give the farm a payback period of fewer than three years (not counting interest expenses).
Chisel to Ridge-till. Operating costs per acre are estimated to be $15 lower for corn in the eastern part of the basin and $14 lower in the western part. Operating costs are $7 lower for soybeans in both areas. Total savings for the example farm is estimated to be $8,350 in the eastern part of the basin and $7,980 in the western part. Compared to the $7,000 to convert the planter and the $11,500 purchase cost of the new, heavy-duty cultivator, these savings would give the farm a payback period of fewer than three years (not counting interest expenses). If combine conversion is required, the payback period would be lengthened.
If banding is done with the chisel system, the cost relationships change and, thus, the profitability of changing to ridge-till system also changes. Compared to the chisel system, operating costs for corn in the ridge-till system are estimated to be $10 lower in the eastern part of the basin and $9 lower in the western part. But the operating costs for soybeans under the chisel system is estimated to be $2 lower in both areas. Thus, by switching to ridge-till, the example farmer would expect to lower corn costs by $3,700 in the eastern part of the basin and $3,330 in the western part. This cost savings on corn would be partially offset by soybean costs increasing by $800. This lower savings would extend the payback period for the ridge-till equipment to over six years in the eastern part and over seven years in the western part--without counting for any interest costs. Since interest can become significant over this many years, the decision to switch to ridge-till from a chisel system that bands the post-emerge requires more analysis and is questionable. If combine conversion is required, these costs would extend the payback period and make the switch to ridge-till from chisel even more questionable.
These cost estimates show that there are potential savings to be made by switching from tillage systems which leave less crop residue on the soil surface, potentially contributing to erosion, to systems that leave more surface residues and minimize erosion. These savings we have estimated are private benefits in the sense that they will be seen by the individual farmer; they do not count society's benefit of a cleaner river.
In this paper, we have used an example farm that we think is similar to many farms in the Minnesota River basin. We know it is not the same as every farm in the Minnesota River basin. Any example farm we had chosen would have that same problem. However, this example farm shows that a farmer could likely benefit by a switch in tillage system. Therefore, we encourage individual farmers to take our example calculations, modify those items which are different, and make a more exact comparison for their own farms.
To order other publications in this series, contact your Minnesota County Extension Office, or outside of Minnesota, contact the Extension Store at (612) 625-8173. Titles in this series include:
This set of publications was the result of a joint effort between Minnesota Extension Service, Minnesota Agricultural Experiment Station, and Minnesota Pollution Control Agency. This information was first presented February of 1995 at the Sediment Control Solutions Conferences in Mankato and Montevideo, Minnesota.
Produced by Communication and Educational Technology Services, University of Minnesota Extension.
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