Shifting focus from crop yield to return on investment
by Sara Berges
Allamakee SWCD
Commodity prices are expected to remain fairly stable for the next few years. These lower prices are forcing farmers to focus more on input costs and return on investment (ROI) rather than just yields and revenue. The ROI shows a ratio of money gained or lost on an investment relative to the cost of the investment. Another way to look at it is how to get the biggest bang for the buck when looking at input costs (chemicals, seed, fertilizer, equipment, etc.) and expected yields and profits.
If we look at the production value (or yield) of each acre of crop ground, are there acres that consistently operate at a loss? Yield maps can help identify these areas. In this part of the state, there are many fields or parts of fields that have steep and shallow soils that literally do not pay to plant to corn or soybeans, fields with consistently low yields. The soil itself can be the limiting factor in the potential yield. Additional fertilizer or increased plant population will not be able to exceed the soil’s capacity for yield and will simply result in increased economic loss.
Soil tests are very important in helping producers determine where fertilizer is most needed and areas that have sufficient nutrient values. The agricultural data tool company, AgSolver, encourages farmers to look at the production efficiency, or the yield (bushels)/$1,000 spent as one way to compare the profitability of different areas on a farm. Now may be the time to consider alternative land uses for those “unprofitable” acres.
One obvious alternative land use is CRP. It likely would result in an economic benefit on those acres because there would be a known soil rental rate that would be consistent for the length of the contract. However, there are currently limited practices available for CRP and very limited acres nationwide, so you are not guaranteed to have a contract at this time.
The practices currently available under continuous CRP are grass waterways (CP8A), filter strips (CP21), habitat buffers for upland birds (CP33), pollinator (CP42-not suited for steep ground), windbreaks (CP5A), shelterbelts (CP16A), riparian buffers (CP22), and bottomland timber on wetlands (CP31). Many of these practices would work well on these unprofitable acres.
Another alternative land use would be planting a small grain crop on those acres, with most people considering rye (to harvest for cover crop seed) or oats (for feed or food). Small grains have much lower input costs than corn production and have many added benefits including reduced pest pressure, reduced weed pressure, and diversified farm income. By adding a red clover green manure with the small grain, a substantial amount of nitrogen can be provided for a subsequent corn crop and reduce input costs for the following year. Because small grains are generally harvested at the end of July or beginning of August, a cover crop could also be seeded early to generate enough growth to allow for fall grazing.
Another alternative could be converting part of the field (or all of it) to pasture. The federal EQIP program can help provide financial assistance to cover some of the costs. Keep in mind, however, that fencing and some other practices have a 20-year maintenance length. If you have interest in cropland conversion through EQIP, contact the NRCS/SWCD office to start the planning process. Funds would not be available until the 2018 crop year. Currently, most agricultural markets are not very profitable, but diversifying operations allows a producer to spread out risk and take advantage of different markets.
Stop by the NRCS/SWCD office if you would like to discuss any of these alternative land-use options.
