Profitability of Variable Rate Phosphorus in a Two Crop Rotation

22 Pages·2000·0.09 MB·English

noitat opRo ro C wnasTiurohpso hePt aeRlbair a fVyotilibatiforP
By:
Jennie Popp
Department of Agricultural Economics and Agribusiness
University of Arkansas
Fayetteville, Arkansas
and
Terry Griffin
Farm Business Management and Marketing Extension Educator
University of Illinois Extension
Macomb Extension Center
sion i,lblmIocaM
Paper presented at the
2000 American Agricultural Economics Association Annual Meeting
Tampa, Florida
July 30 - August 2, 2000
Copyright © 2000 by the authors. All rights reserved. Readers may make verbatim copies of
this document for non-commercial purposes only, by any means, provided that this copyright
notice appears on all such copies.
tcartsbA
The purpose of this study is to examine the profitability of variable rate phosphorus
applicati on on rice and soybean production on fields comprised of up to four clay and silt loam
soil s in Arkansas County, Arkansas. The four chosen soils and Arkansas county represent
traditional becausceh:osen was (PP)h osphsotrautse . the in arperaosd uction soybean and rice
1)soybeansas well as rice ona pplications P of benefit the of advised been recently have farmers
2) riceacross and soils loam silt and clay between greatly vary rateasp plication P recommended
and soybeans and 3)the residual effects of P applications in a crop rotation affect the
appropriateness of VRT.
A three phase simulation, regression and mathematical optimization analysis was
conducted to determine, within a ten year planning horizon: 1) the conditions under which the
profitability of variable rate P applications exceeded the profitability of uniform rate technology
)TRU( and 2) whether VRT profits over and above URT provided sufficient incentive for a
producer to change from URT to VRT halfway through the ten year planning horizon.
While general,In here. discussed is one only results,i nteresting many produced study the
results sho wtehdta phtre o fitabiliVotwRfyhaT is g hsleyn sittphiee tvr oec entacoglfewa iyt hin
a fsUiwReliTlfotdracssomhpi,m irl notgf o ibnte a blteo f ounwda s VRTw heeOnvf etne n, field.
to VRT during a given 10 year planning horizon, was unadvisable as increased revenue from
yields did not cover the costs of VRT hire.
noitcudortnI
Arkansas is home to a diverse set of crops including rice, cotton, and soybean which
rank soybeanand Rice 1999). NASS, (USDA, production U.S. in respectivelnyi nth, and fifth, first,
are often grown in rotation. Today, some producers are attempting to manage nutrient
requirements (VRT).technology rate variable with field a in variations across and time across both
One such nutrient is phosphorus. In the past, phosphorus (P) applications were not generally
recommended (BeyroutyP soil of levels initial adequate and conditions flooded of because rice for
et rotattihoen .opfso orytbieotanhn e taop pliebde taos sumweads sufPAf liscoi,e nt 1991a)l.. ,
However, productiroince aidnv antageobues can P applied thdaett erminehda s researrcehc ent
on alkaline silt loam soils (Wilson et al., 1999). Added P is still not recommended for clay soils.
Adequate levels of P, based on recommended rates, can improve the chances of attaining
optimal rice yields. Conversely, excess P in the soil may not directly affect production, but may
indirectly decrease yields by causing micro nutrient imbalances. While there is evidence to
sugges t there is agronomic value to variable rate application of some nutrients, little or no
information riceon managenmuetnrti ent VRT opfr ofitabilitthye regardifnagr mers to available is
or on crops grown in rotation together with rice.
The purpose of this study is to provide Arkansas agricultural producers with information
regarding usedcommonly fields clay and loam silt on application P rate variable of profitability the
whatunder determine to cinonducted was research this put, Simply production. soybean and rice
conditions variable rate P is economically viable for rice and soybean production in Arkansas.
Background
A review of the literature revde mtatacohiVtotlosesRe hemt T, adm t o,en xlaym ionfed
all pr ecisioang riculturtee chnologicVeaRsb dnT.ee fineavdsa ryintgha ep plicatiorna toaefn
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Profitability of Variable Rate Phosphorus....AAEA 2000
input ratesingle a applit(eeUscR hTn)o rlaotgueyn iform contrast, In needed. as field a across
of1999;1998, al, et English 1998; Pautsch, and (Babcocskt udies Many field. a across product a
Lowenberg-DeBoer, 1998; Mahajanashetti et al., 1999; Prato and Kang, 1998; Roberts et al.,
1998; Watkins et al., 1998) have examined the economic aspects of VRT. Several of the afore
mentioned fielda diiwfnifhteehrrieennn ctte os linked is VRT of value the tshuagatgu etshtoerds
(i.e., textural and fertility variability and differences in water holding capacity). If the benefits of
VRT However,valuable. is technology the then VRT, with associated costs the all than greater are
VRT has been found to be profitable only when certain conditions exist. These conditions
usually require a certain limited range of input cost to crop price ratios, a certain amount of
variability within the quality of the soil in a field, or both.
tsoM VsRtTu difeosc umsooennd o cultucrreosc puaoscst h t(aS oYnenudg arr1a9,9 9)
and corn (English et al., 1999, Lowenberg-DeBoer, 1998, Roberts et al., 1998). Many studies
examined VRT nitrogen (English et al., 1 998,1 999;M ahajanashettie ta l.,1 999;R obertse ta l.,
1998 typicallystudies these of focus The management. P at looked (1999) Segarra and Yu while )
was etxoa mitncheoe n ditiownhsi rcehn dvearr eida brlaent uet rieanptp licatimoonpr reo fitable
than uniform rate application. However, some studies also focused on the importance of
environmental concerns (English et al., 1999; Prato and Kang, 1998).
snoitpmuss Adn asevitcejb O,weivrev OydutS
This Low(e1an9lb9.e8(r)1g,9-9D9e)B,o ere t English of research the upon built has study
Roberts et al. (1998), and Yu and Segarra (1999). Like Yu and Segarra (1999), this study
focuses on the use of VRT in P application. H owever,w hileY ua ndS egarrae xaminedV RTo n
monoculture c ottonp roduction,t hiss tudye xaminedt her oleo fV RTo na t wo-cropr otation.A s
with English et al.(1999), Mahajanashetti et al.(1999), and Prato and Kang (1998), this study
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Profitability of Variable Rate Phosphorus....AAEA 2000
relies usedhorizopnl anning year 10 A analysis. the for modbeilo physical a by simulated data on
andby(1998), Mahajanashetti (1999), al. et. English to Similar applied. is (1999) Segarra and Yu
Roberts et. al (1999), this study used hypothetical field combinations of multiple soil series for
analysis. Finally, like English et. al. (1999), Lowenberg-DeBoer (1999), Roberts et. al (1999),
and Yu and Segarra (1999), prices of inputs and crops are varied to examine price effects on
optimal P application rates and the profitability of VRT.
The objectives of this study are to:
• determine the relationship between yield and P on four soils commonly used to
grow rice and soybeans in Arkansas
• evaluate the profitability of VRT of P on a rice and soybean rotation
• assess what conditions need to be present before VRT is profitable
Five price be to assumed arper oduFcierrsst s,t udy. the direct to made aasrseu mptions
takers canVRT only that such arec ombinationsso il Second, market. output and input the both in
address soil differences at the field level. In sorm eewa olr flide ldvsa,r iabilicttbayren e atbeyd
subdividing Arkansas,Eastern in However, 1. Figure in as units, managements maller into fields
it may be more likely that soils are not separable in the fields (USDA, SCS, 1972). Instead the
soils may be mixed as presented in Figure 2. Third, the producer applies constant rates of
nitrogen on all soils. On a real farm, nitrogen rates may be adjusted for individual field and soil
conditions. However, because P is the focus of this study, it is assumed that nitrogen use is
fixed. ArkaCnosuAanrstk.ya,n sas icnop nodtiertneitfoilnaeslc t to made sairmeuF loautritohn,s
This theof one is it and county that in found are soislesl ectefdo ur the becaucsheo sen was area
leading Fssittuntaefahtctflaeshhiltis.unecpyso co ir, yhleo ib oandneagntu aryd crne ti aicsoe n
VRT applications are made accurately in a field.
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Profitability of Variable Rate Phosphorus....AAEA 2000
Study Area
Based on ten year average production numbers, Arkansas County is one of the leading
ecir soybeanand rice in found commonly soils Four state. the in counties producing soybean and
fields in Arkansas County were chosen for this analysis: Calloway, Calhoun, Crowley, and
Sharkey. claya is Sharkey while soils loam silt as classified are Crowley and CalhouCna,l loway,
soil. Agronomically, the three silt loam soils are considered similar in natural fertility and yield
potential. andfertilizers to well responding while fertility natural and matter organic in low are They
.emil It was expected that these three soils would have similar rice and soybean yields. The
Sharkey clay soil is medium nsUaifntnmeduiiirertnlthorar aiir lo mrlgg aga ihaneitt ndnntyi e.cr
management, Sharkey clay soils are expected to have lower rice yields than the silt loam soils.
Sharkey is also expected to require less P culsroariratseletmtPh ctnhsheo ta,e mln my e nded
application to clay soils in Arkansas is zero. Applied P and yield are expected to be positively
correlated on silt loam soils and negatively correlated on clay soils.
noitcud olfreoP dloaMciter otf enoaheTmpole veD
Crop production is a function of many factors including weather, soil moisture, tillage,
variety, simplmi ofdieelda s ttuHphpdoeirywssia et qtncvioui stecfa moiari liicn,dinled etg s ,y . ,
of simpltihfiise dIn P. rvaatrepi raobflioetf ta hbei lity on focus to order in chosepnrw oadsu ctio n
model, soiTlotal avwaatitoletarab.ll a en d Pa,p pliePd, soil foufn ctioan is crogpi ven a of yield
P available at the beginning of any period is a function of soil P, applied P, P runoff, and P
uptake functiona is periodg iven any in rPuhnoosfpfh orus perpiroedv.i oust he in all crop, the by
of soil P, applied P, total available water, and crop uptake of P, all in the current period. These
generalized equations, which are assumed to include the same variables for both the rice and
soybean equations, can be written as follows:
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Profitability of Variable Rate Phosphorus....AAEA 2000
dlY ’ f ( PS , PA , W ) )1(
t t t t
PS ’ g ( PS , PA , Runoff , PU ) )2(
t t&1 t&1 t&1 t&1
Runoff ’ h ( PS , PA , W , PU ) )3(
t t t t t
where: Yld yield, is SP phsoosiplih so rus , AP is applied phosphorus, W si twoattaelr , Runoff si
runoff, UP phaonsdphoroufs , uptakec rop is t wielqluatiTohness e period.t ime tdhees ignates
beconditionswhat under assess to and soils individual on applications P optimal estimate to used
VRT is economically superior to uniform rate application.
noitalupina Mdn anoitalumi SataD
The evaluatetdoe velopweads modelE PIC, orIC EnlntivemiPgarortolaenit,mce eydn tal
crop production, soil erosion, water quality aspects, environmental concerns, ramifications of
management andRice 1995). al., et (Mitchelclh anges other to responses and changesp,r actice
soybean production practices in the model (such as tillage, planting, spraying, irrigating, and
harvesting) rice-1:1 A 1999b). and 1999a (Windhapmr,a ctices field actual reflect to chosen were
soybean rotation which is representative of Arkansas County (Norman, 1999) was followed.
Applications aiolnflp u tesx,cw ePehp,rect elo dn stasaolinnlmt u latSiiomn usl.a tirouwnne sr e
generated tozero fromv ariedw erPelh eovseplhso rus freartteisl.i z1e3r unders oils four the on
96 impacttchaep turteao t tempatn in used wasr angwei deT his crope.a ch on acre pepro unds
of rates P the varying 1)f ollowewsmdeta:rrn eaag tgeeengmeierenaTstlh ree yields.c rop on P
over onplaced were rates 2)Pr epceoprmrimooeddnusdc,et di corno p soybean and rice the both
soybean variedrates but rice on placed were rates P recommended 3) and rice on varied rates but
on soybean. A total trea t3m7oe wfnre ters pe l icasatoceirdfptlo orhssuoe,srd uct1io4nt8ga l
treatments. 2,220period,3 0-year the over recorded weorbes ervatainonnusa l 4,440 result, a As
annual observations each for rice and soybean.
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Profitability of Variable Rate Phosphorus....AAEA 2000
EPIC simulated yields were compared to actual farm yields reported in Arkansas
County, thoseto similar were acre per bushels 46 to 18 of ranges yield soybean EPIC Arkansas.
reported for irrigated soybean (AASS, 1999). On the other hand, simulated rice yields of 85 to
125 19(9A9ACA)roS.kuSan,nt syia ns tyfpoiutcnhadal slnllo yiw gewhret rleya cre pbeurs hels
tI is likely that the range in the nutrient application rates (which included too little and too much
nutrients) could have affected the observed yields and made these suboptimal.
Econometric Estimation of a Theoretical Model of Production
CIPE generated panel data for over 200 variables, each for 30 years. A fixed effects
model wereequations All equations. these within relationships desired the estimate to chosen was
tested yieldtheoretical The (Hsaio,1999) data panel with associated failures any for corrected and
equations were estimated using the variables listed in equation 1. In equations 2 and 3, yield
served uEpvqtauarPakiE te4aP i tbIptohlClhnete aas h.nun e tp b tya Pbk eepft rotoraex ry as
through 6 show the final functional form of the estimated model:
dlY ’ f ( C , PS , PA , W , PS 2 , PA 2 , W 2 ) )4(
t t t t t t t
adj R 2 : Rice = 0.64 Soybean = 0.70
PS ’ g ( C , PS , PA , Runoff , dlY ) )5(
t t&1 t&1 t&1 t&1
adj R 2 : Rice = 0.87 Soybean = 0.89
Runoff ’ h ( C , PS , PA , W , dlY ) )6(
t t t t t
adj R 2 : Rice = 0.71 Soybean = 0.82
where: C inatnei rosctatv eenhaprder tm ri adbaealrfbeeiaos nsv e ed. exApse c tyteihdee,l d,
soil P and runoff equations were a function of the same variables when estimated for rice and
for ricewith associated often is as form quadratic the in estimated were equations Yield soybean.
and soybean yield response to available P (Norman, 1999). The soil P and P runoff equations
were estimated in the linear functional form as expected based on previous research (Daniel,
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Profitability of Variable Rate Phosphorus....AAEA 2000
1999). M a n oy ft hec oefficientsw eres ignificanta tt he9 9p ercentc onfidencel evelT. h es igns
and magnitudes of all coefficients were as expected 1 .
krowemar Fnoitazimitp On an isnoitacilpp APevitanretl Af ostcapmI
Once ModelingAlgebraic General the into placed were equations regression the estimated,
System, or GAMS, (Brooke et al., 1998) a mathematical optimization program, to ultimately
determine the profitability of VRT on fields with combinations of dif feresnoti lHso.w evebre,f ore
profitability questions could be addressed on fields comprised of multiple soils, relationships
between raPt eysi ,e ldanrsnee,dtv einonunde i vsidodeiwut le aesrlr e m itsniwcenoed n arios.
Defining Two Scenarios
Two scenarioeach of objective The soil. each for run were scenoaprtiiomsi zation of types
was tmo a ximiznee rte venuoev etare y ne aprl anninhgo rizons,u bjecttco o nditionpsu fto rtihn
each scenario. This study varied rice prices, soybean prices, P prices, and the discount rates
(using price/discount 36 of total a create to numbers) average and high low, year five and current
rate combinations. All 36 price combinations were applied to all four soils, creating 144
optimization runs. Crop yield, applied P, and net revenue values were calculated for each
optimization. The two types of scenarios were as follows:
Scenario One: ezimixaM ratesapplication P appropriate most the choosing by revenue net
for rice and soybean for the 10-year planning horizon ( optimal P rates )
Scenario Two: Maximize net revenue when P application rates are fixed at uniform rates
across all soils for the 10-year planning horizon ( uniform P rates )
A tyeepnal ra nnihnogr izwcoahnso sftreowenroa sonFsip.rl saat n,n ihnogr iztohwlnaao tsn g
enough to observe any trends in phosphorus carryover between rice and soybean production
1 d eg tn r ais oemdthsf hirnclttaeais gieaefect orie fD esfshnentoo o icr4i3to2t(afauuqq2ee
spor cno 4)s leil o bssmaiolri. fasevrhaothtua
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Profitability of Variable Rate Phosphorus....AAEA 2000
years dataof years 5 to 4 least at that literature the in suggested been has it Second, desired. was
was needed before a farmer could choose to switch from uniform rate to variable rate so a
planning horizon was desired that would capture the economic returns to gathering this
information and allowing for a change in management strategy.
Scenario One - Optimal Phosphorus Application Rates
Table 1 presents the phosphorus rates, yields and dollar amounts that maximized
revenues in scenario one. As expected for silt loam soils, the optimal P rate on Calloway and
yelworC soiw lessri em ilaUrn.e xpectedloyp,tr iamPtfar eoliwsr ce m eruh eci hgC hoaenlr h oun
soils. This may be the result of a problem within the simulation of the data, but Norman (1999)
stated t hatt heser atesw eres tillw ithinn ormalr angesPr. a teso nt heS harkeys oilsf orr icea nd
soybean expected,were zero of rates Althougrhe spectively. acre, per pounds nine and two were
this aresoils loam silt the on yields the expected As 1999)(.N orman,r ange normal a within is too
higher than those on the Sharkey clay soil.
Surprisingly, rangersda.itsec ounotr pricei nsteon wseairptepir lvaietc east Pi oonp timal
NPV, defined as the discounted sum of net returns over direct costs of production over the ten
year acrossnegative consistently or positive consistently were but ratios price with varied horizon,
scenarios, pastthe over ratios price these in variability narrow the Given differed. magnitudes only
five years, results were insensitive to changes and therefore only results using current (1999)
numbers (rice $3.85/bu; soybean $6.50/bu; phosphorus $0.25/lb; 8 percent discount rate) are
reported here.
Scenario Two - Uniform Rate Technology Rates
Simulations were run using three different uniform rates, which for simplicity can be
abbreviated as U1 , U2 , and U3 . U1 represents a uniform P rate appropriate on a Calloway or
yelworC soil.loam silt Calhoun a on appropriate rate P uniform the represents U2 soil. loam silt
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Profitability of Variable Rate Phosphorus....AAEA 2000