Tillage Systems and Profitability: An Economic Analysis of the Iowa MAX Program

Using the Iowa MAX program participant's survey data set, this study found that conventional tillage (plowing, PL) resulted in lower profits per acre than most conservation tillage systems (no-till [NT], reduced-till [RE], ridge-till [RT], and mulch-till [MT]). The primary reason for higher profits with conservation tillage systems is the difference in operating costs. This study also found that it is not always true that conservation tillage uses more chemicals than PL. Ridge-till is very attractive in terms of profit and the expenditures on chemicals per acre. This indicates that, other than conservation compliance, economic benefits may be another major reason that farmers are adopting conservation tillage systems. Research QuestionSoil erosion is a problem associated with agricultural production. Conservation tillage is one way to reduce soil erosion. However, conservation tillage could lead to reduced profit for some farmers and increased N and pesticide use. The major objective of this study is to provide information on the short-term economic consequences, expenditures on agricultural chemicals, and other input costs with different tillage systems. Literature SummaryTotal conservation tilled acres were 88.7 million in 1992 and exceeded 100 million in 1993. About 40% of the total acreage planted to corn and soybeans was conservation tilled in 1992. Successful Farming magazine organized a program to help farmers evaluate conservation tillage. This program is called MAX. The word MAX is the abbreviation for Farming for Maximum Efficiency. The participants in 1993 covered 14 states from Corn Belt, lake states, Appalachian states, and northern Great Plains (Successful Farming, 1994). There was a little participation in any states except Iowa and Indiana. Iowa data were used in this study because the number of participants in Iowa were about three times as many as in Indiana in 1993. Both conventional and conservation tillage systems were used by MAX program participants. The purpose of the program is to provide a way for farmers to share information and to analyze the profitability of alternative tillage systems. The key point of the MAX program is to compare profits rather than yields. Study DescriptionThe available data include 1992 and 1993 corn and soybean production for farmers participating in the MAX program. Data were collected from 450 corn fields and 371 soybean fields in 1992 and from 340 corn fields and 245 soybean fields in 1993. The Iowa MAX program participants covered more than 80 counties in 1992 and more than 70 counties in 1993. For each field, there were 11 categories collected in the data set: crops planted in current and previous years, tillage system used, residue level, crop yield, crop price, soil type, planting rate, fertilizer cost, pesticide cost, field operation cost, and other costs. Applied QuestionsWhich tillage system produced the highest yield? For corn, conventional tillage's yield in 1992 was the highest among the four systems that included no-till, reduced-till, ridge-till, and conventional-till (plow). But in 1993, ridge-till had the highest yield per acre, and conventional tillage had the second highest. The results for soybeans are very similar to those for corn. However, almost all differences are not significantly different from zero, even at 0.1 level. In other words, yields are relatively constant across different tillage systems for both corn and soybeans. Which tillage system produced the highest profit? High yields do not necessarily mean high profits. No-till and ridge-till corn compared favorably in terms of profit per acre in 1992 and 1993. Based on statistical inference, profits per adre with conventional tillage were significantly inferior to other tillage systems in both 1992 and 1993. For soybeans, reduced-till, ridge-till, and no-till had higher profits than conventional till and mulch-till. Fanners using ridge-till had the highest profit per acre in 1992 and the second highest in 1993. In 1993, no-till yielded the highest profit per acre. Farmers using reduced-till had the second highest profit per acre. Average profits per acre for plowed land were significantly lower than all other tillage systems in both 1992 and 1993. The differences in average seed costs, operating costs, yields, and fertilizer and pesticide expenditures all contributed to the differences in average profits per acre. However, operating cost was a major factor in the difference in profit per acre between conservation tillage and conventional tillage. Do conservation tillage systems use more fertilizer and pesticides? The differences in average fertilizer costs per acre among the different tillage systems for corn were not consistent between years. The cost of fertilizer was the summation of the costs on N, P, and K. Farmers using ridge-till spent less on fertilizer than others in 1992 and more than others in 1993. In contrast, famers practicing conventional tillage spent more on fertilizer than others in 1992 and less than others in 1993. The differences in most of these values were not statistically significant, even at 0.1 level. This indicates that, for corn production, fertilizer use does not vary substantially across different tillage systems. Differences between means of expenditure for soybean fertilizer costs among different tillage systems are limited and their variances are very small. On corn acres, farmers using conventional tillage showed the highest expenditures per acre for pesticides in both 1992 and 1993. Means comparisons were only occasionally statistically significant for both 1992 and 1993. For soybean production, farmers using conventional tillage spent less on pesticides than any other tillage system in 1993. Farmers practicing no-till spent more on pesticides than any other tillage systems in both 1992 and 1993. In 1992, reduced-till had the lowest pesticide expenditures. Therefore, it is not necessarily true that conservation tillage will use more pesticides than conventional tillage. This is consistent with the results found by Lin et al. in 1993. RecommendationsFor fanners growing corn and soybeans, conservation tillage systems may be more profitable than conventional tillage. With an appropriate technology, conservation tillage systems can put farmers in a win-win situation in terms of higher profit and lower expenditure on pesticides. For corn growers, yield of rotated corn is higher than continuous corn.