Published on Wednesday, January 30, 2019
Farming at a profit is more challenging when grain prices are low. Producers with owned ground and sound management can likely farm at a profit albeit at a narrower margin than previous years. Producers shelling out high cash rents will find it more difficult to operate at a profit even with sound management. Many paying high cash rent will operate at a loss. This is especially true if looking at profitability in a “site-specific” manner — considering profit/loss variability across a field or operation.
There are varied approaches in achieving these goals. Economic environment is a key factor to evaluate when selecting approaches on different farms. Two items to consider are grain prices and land tenure.
Grain Prices: Prices impact the return on investment of any input when put on a “per/bushel” basis. An agronomically accurate fertilizer recommendation under a specific recommendation strategy may not necessarily be a profitable one. Consider grain, fertilizer, and lime unit prices and probability of yield response to the fertilizer and lime application when developing a field’s recommendation.
Land Tenure: Do you “own” the farm? If so, a recommendation strategy that involves soil build and capital improvement is practical. If rented, is the rental relationship a long-term one with little worry of losing the ground? Or is the tenure on the field unknown and “year-to-year”? Land tenure drives a recommendation strategy across the spectrum from capital improvement to maintenance to sufficiency.
Variable rate fertilizer and lime recommendations based upon soil tests alone generally derive from a “buildup and maintenance” strategy. Their objective is to increase soil test phosphorus (P) and potassium (K) concentrations to critical values and raise soil pH to optimum levels. This is a great strategy on newly purchased and already owned ground where there is little to no risk in investing dollars into capital improvement of the land. In a low grain price environment, the buildup and maintenance strategies have a risk of losing money in the short term. Consider a large part of the money spent as capital improvement — much like installing tile drainage. Yield monitors give you data that you can use to apply variable rate fertilizer based on crop removal from last year’s yield. This is different from a variable rate recommendation based off a soil test. This is a sound strategy where soil test concentrations are already at levels with low probability of response to fertilizer application and the producer desires to “maintain” soil test concentrations. Perhaps it is in the rental agreement to maintain soil test levels. Perhaps on owned ground, there is not adequate cash flow to implement a capital improvement strategy at this time.
The three maps are images of the same field analyzed using the FARMserver® ROI tool. Areas in red are negative return on investment; black is positive. The ROI tool allows you to change input prices like rent, fertilizer price and seed cost then it combines those input costs with yield and a grain price that you choose. Use the FARMserver ROI tool to predict profitability based on this year’s planned inputs, grain prices, and historical yields. The three maps hold all costs constant and change only the rate of fertilizer applied, illustrating the impact that changing fertilizer recommendation strategy from full build (1) to more of a sufficiency approach (2) to no application (3) could have on annual field ROI. Reducing the fertilizer application rate increases farm profitability for the current crop, but will have long-term consequences for whole farm productivity and profitability. Visit farmserver.com to learn more about yield mapping, management zones and the FARMserver ROI tool.
Author: David Hughes
Categories: Agronomy Talk
Tags: soil tests, Profit, fertilizer, inputs, crop nutrition, variable rate, fertilizer applications
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