Economics of Nutrient Systems and Sources

B y H . F. R e e t z , J r . a n d G . D . S c h n i t k e y

he long-term economic viability of a low, because it will likely replace only N crop production system depends on that would normally be xed by nodulating sound management decisions such bacteria living on the soybean roots. as the selection of nutrient sources. Planning manure application to best match Commercial fertilizers are the most common, the crops need for N will help capture more but they can be supplemented, or sometimes of the value of the manure. If the N is lost or not needed by the growing replaced, by nutrients genEconomic comparisons of crop, that value is forfeited, erated by the crop rotation different cropping systems and the potential for ground[primarily nitrogen (N) from for central Illinois provide water pollution increases. legumes], livestock manure, examples of how crop rotaA comparison of several or other organic sources. tion inuences protability. cropping system scenarios Economic analysis of the Nutrient management is an will help illustrate an nutrient management plan important part of that analyapproach to evaluating the becomes more complex sis. Evaluation of various value of various nutrient when organic nutrient manure sources and storsources in different crop sources are used. age systems is included to management systems. The Nutrient use should be show the economic value of effect of crop residues and evaluated on the basis of all the nutrients supplied. nutrient removals from the crops in a rotation as well as crops in the rotation form the entire farm enterprise. When manure is used, it should be sold or the basis for agronomic and economic comcharged as an expense to the crop on which parison. Table 1 lists budgets giving annual it is applied and treated as an income for the farm livestock enterprise where it was pro- revenues and costs for corn and soybeans duced. If the farm has no livestock, there when the preceding crop is either corn or still may be opportunity to obtain manure soybeans. For example, the corn following from local concentrated livestock opera- soybeans column gives a budget for corn, tions. It is important to analyze the value of given that the previous years crop was soymanure compared to commercial fertilizer as beans. While multi-crop rotations are sometimes suggested as an alternative that could a nutrient source. provide organic nutrient sources, these budget comparisons help illustrate why Illinois Rotation Impacts on Fertilizer farmers have shifted toward the corn-soySources: Corn/Soybean Example Crop rotation is an important factor in bean system. Where there is a special mardecisions about nutrient sources. Nitrogen is ket or need for wheat or alfalfa, such a sysusually the nutrient of economic concern in tem still has its place among viable options. rotation systems. In a corn/soybean rotation, The budgets in Table 1 do not include govfor example, the value of the N in manure ernment payments. This is appropriate for applied for the soybean year is relatively looking at rotations because payments are
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TABLE 1. Crop budgets for central Illinois, 2001.

Corn Corn Soybeans Soybeans following following following following soybeans, corn, corn, soybeans, Wheat, bu Average yield per acre Price received, $/bu or $/ton Revenue, $/A Variable costs, $/A Fertilizer and lime Pesticides Seed Drying and storage Machinery repair, fuel, and hire Total variable costs, $/A Fixed costs, $/A Labor Building repair and depreciation Machinery depreciation Interest on investment Overhead Land (cash rent equivalent) Total xed costs, $/A Total costs, $/A Revenue less variable costs, $/A Revenue less total costs, $/A 158 2.00 316 58 32 33 17 34 174 25 8 19 23 15 145 235 409 142 -93 148 2.00 296 63 39 33 16 34 185 25 8 19 23 15 145 235 420 111 -124 49 5.45 267 20 33 19 6 28 106 20 8 17 23 15 145 228 334 161 -67 44 5.45 240 20 33 19 6 28 106 20 8 17 23 15 145 228 334 134 -94 75 2.30 173 42 0 15 8 19 84 20 8 15 16 15 145 219 303 89 -131 Alfalfa estab., 2.5 100 250 41 48 48 0 35 172 30 8 15 16 20 145 234 406 78 -156

Alfalfa, tons 4 100 400 46 32 0 0 42 120 30 8 15 15 15 145 228 348 280 52

Source: Based on calculations and other publications by authors.

not tied to production practices. Prices received reect the higher of market prices or loan rates. In the above comparison, corn following soybeans yielded 10 bu/A higher than corn following corn. Research shows that yields decline by up to 10 percent when a rotation is not used. Fertilizer and lime costs are higher for corn following corn because of higher amounts of N recommended than for corn following soybeans. Pesticide costs are also higher because of higher insecticide applications on corn following corn. As a result, the corn following soybeans rotation is more protable than the corn following corn. Phosphorus (P) and potassium (K) are applied at replacement levels. The budgets shown in Table 1 are used in Table 2 to evaluate rotations. These examples show the annual average expenses and revenues for each of the rotations,
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providing an average cash ow picture for comparison. Revenues and costs for a rotation represent a blend of revenue and costs for a blend of the crops in the rotation. For example, the corn/soybean rotation has a $39 fertilizer and lime cost. This equals half of the $58 fertilizer and lime cost from corn

Both economic and agronomic benets have been identied with crop rotation.

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TABLE 2. Returns and costs of alternative rotations in central Illinois, 2001.

Corn/ Corn/ ContiCorn/ soybeans/ soybeans/ nuous soybeans/ alfalfa alfalfa corn wheat (estab.) (4 yrs.) 296 63 39 33 16 34 185 25 8 19 23 15 145 235 420 111 -124 252 40 22 22 10 27 121 22 8 17 21 15 145 228 349 131 -97 278 40 38 33 8 32 151 25 8 17 21 17 145 233 384 127 -106 339 43 35 17 4 37 135 28 8 16 18 16 145 230 365 204 -26

Corn/ soybeans Revenue, $/A Variable costs, $/A Fertilizer and lime Pesticides Seed Drying and storage Machinery repair, fuel, and hire Total variable costs, $/A Fixed costs, $/A Labor Building repair and depreciation Machinery depreciation Interest on investment Overhead Land (cash rent equivalent) Total xed costs, $/A Total costs, $/A Revenue less variable costs, $/A Revenue less total costs, $/A 292 39 33 26 12 31 141 23 8 18 23 15 145 232 373 151 -81

Sources: Calculations based on costs from Table 1.

following soybeans and half of the $20 per acre costs from soybeans following corn. The most protable rotation is corn/soybeans/ alfalfa (4 years). Most farmers do not include alfalfa in their rotations because marketing alfalfa can be difcult, particularly if an outlet cannot be identied. Compared to corn and soybeans, alfalfa requires more intensive management and a completely different set of equipment. The second most protable rotation is corn/soybeans. The revenue less variable cost for corn/soybeans is $151. The revenue less total cost is -$81 per acre. A 50 percent corn and 50 percent soybeans rotation is the most popular rotation in central Illinois. Much of the reason for this is that it is the most protable grain crop combination. Moving to alfalfa or other higher end crops would add costs. Wheat in the rotation decreases protability. Similarly, adding alfalfa for only the establishment year to a corn/soybeans rotation decreases protability.
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Considering Livestock Manure as a Nutrient Resource Livestock manure is an important resource for some farms. Where it is available, it is a good nutrient source. However, there is not enough manure produced to meet a large percentage of the nutrient needs of intensive crop production. Perhaps even more important, the manure production tends to be in areas not geographically located near the cropland that can utilize it. Table 3 shows daily nutrient production from livestock. Nutrient production can vary tremendously depending on many factors, including the animals diet. Large operations can produce signicant amounts of manure. Even with a relatively low value per animal per day, the cumulative value of manure from a large livestock enterprise is a signicant economic value to the overall farm operation. However, livestock manure does have some limitations. One of the most serious is the variability in nutrient content
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TABLE 3. Daily nutrient production from different species of livestock.

Animal weight, lb Dairy Beef Veal Swine-nursery Swine-grower Gestating sow Poultry-layer Poultry-broiler 1,000 1,000 200 35 65 275 4 2 Manure produced 82.00 60.00 12.40 2.30 4.20 8.90 0.21 0.14 N lb/day 0.410 0.339 0.054 0.016 0.029 0.062 0.003 0.002 0.168 0.252 0.013 0.012 0.023 0.048 0.003 0.001 0.324 0.285 0.056 0.012 0.023 0.088 0.001 0.001 P2O5 K2O Value1, $/day 0.164 0.163 0.022 0.008 0.014 0.035 0.001 0.001

1Valued based on $0.22, $0.22, and $0.14 price per pound for N, P O , and K O, respectively. 2 5 2 Sources: Midwest Plan Service 18, 1991.

because of different feed rations. Storage system and duration, application method, and timing relative to crop growth will impact the amount of nutrient actually available for crop production. For example, N loss from denitrication during storage in a lagoon or volatilization during surface application will reduce the value associated with manure N. Testing the manure is an important, but mostly overlooked, part of the planning process. Transportation costs must be considered in determining manure value. The high volume, low nutrient analysis of
USDA photo by Ken Hammond.

manure makes transportation costly, so it rarely can be economically transported more than a short distance from the livestock operation. Manure is an important nutrient source if properly handled and if care is taken to balance nutrients in the manure with other fertilizer materials in a complete nutrient management plan. Economics of Organic Production Systems Crop production systems that use no commercial fertilizers, but depend entirely on manure and other organic sources, face certain limitations...including economic considerations. They tend to be centered around specic markets. Favorable economics depend, to a large extent on the availability of organic nutrient sources, the ability to produce protable yields, and the dependability of the markets. To use the USDA Organic label in marketing, restrictive practices are required. Organic production systems can be an economically sound alternative for those who are willing and able to participate in the limited opportunities to market products.
Dr. Reetz is PPI Midwest Director, located at Monticello, Illinois; e-mail hreetz@ppi-far.org. Dr. Schnitkey is with the Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign, Illinois; e-mail: schnitke@uiuc.edu.

Livestock manure can be an important nutrient source if managed properly.

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