Average Returns and Risk Characteristics of Site Specific P and K Management: Eastern Corn Belt On-Farm Trial Results

The objective of this study was to provide an economic assessment of site specific management (SSM) of P and K. The data were collected from 1993 to 1995 in farmer managed on- farm trials coordinated by Purdue University and DeKalb-Agra, a Waterloo, IN, agricultural input supply and marketing cooperative. Whole field management (WFM) was compared with SSM using either three acre grids or soil type for soil sampling and fertilizer recommendations. The data indicate that site specific P and K application on corn (Zea mays L.), soybean [Glycine max (L.) Merr.], and wheat (Triticum aestivum L.) did not reliably increase net returns. The main effect of the site specific P and K applications on physical quantities of fertilizer was to redistribute the nutrient applications within fields. Both grid and soil type treatments had lower net return standard deviations than WFM. Both mean-variance and stochastic dominance (SD) analyses indicate that the soil type approach dominated the WFM for risk averse decision makers. Research QuestionSite specific management (SSM) using precision farming technology is an intuitively appealing concept for almost everyone connected to crop production. Many producers and agribusinesses have started using some form of SSM. Others are waiting to see if the approach proves both practical and profitable. The objective of this study is to provide an economic assessment of SSM of P and K under farm conditions. Literature SummaryMany economic studies indicate that returns from current SSM technology often fail to cover additional costs in bulk commodity production. Most previous studies of SSM have used research station or simulated data and have focused on changes in average yields or returns. Some studies report benefits in the production of bulk commodities, but omit the costs of SSM soil testing, mapping, and variable rate input application. Other studies assume target yields would be reached with adequate fertilizer, but do not provide data to support this assumption. Key factors in SSM profitability include the potential for yield increases, the sampling density, and the number of years over which soil testing and mapping costs are allocated. Study DescriptionThe data were collected in farmer managed on-farm trials coordinated by Purdue University and DeKalb-Agra, a Waterloo, IN, agricultural input supply and marketing cooperative. Whole field management (WFM) was compared with SSM using either three acre grids or soil type. The project started in 1993 with three farmers. Three more farmers were included in 1994. A total of 12 yield observations are available for each treatment during the 1993–1995 period. Farmers were in northeastern Indiana, northwestern Ohio, and southern Michigan. All participating farms had custom soil testing and fertilizer spreading by DeKalb-Agra. Fields averaged about 59 acres. Each field was divided into three approximately equal plots, and treatments were randomly assigned. All other cropping practices were decided by the farmer and were uniform for the entire field. Farmers used either a corn-soybean or corn-soybean-wheat rotation. Yield data were collected using combine yield monitors. Applied QuestionsDid the amount of fertilizer change substantially with SSM? Grid and soil type management did not seem to have a major impact on the total amount of P₂O₅ and K₂O used (Fig. 1). The data do not support the contention that SSM will reduce fertilizer use. The main effect of the site specific P₂O₅ and K₂O applications was to redistribute the fertilizer within the field. Did SSM increase average returns? Average returns to land, labor, equipment, and management were similar across treatments (Fig. 2). The average return to the soil type approach was slightly higher than returns to WFM. The average return for the grid treatment is somewhat lower, but the ranking varies from farm to farm and year to year. In some cases the grid treatment has the highest return. This study focuses on SSM P and K as a stand alone practice. Returns to SSM would be higher if costs of gathering site specific soil test information could be spread over more inputs. Did SSM affect risk? For these data, grid and soil type management are less risky than the WFM approach because they reduce the chance for low returns. Grid and soil type management appear to reduce the variability in growing conditions and, as a consequence, the likelihood of low return fields. Is the grid or soil type management better? In these data, average returns to soil type management were about $9.50/acre higher than that of the grid approach, but ranking varies from year to year and farm to farm. Statistical tests indicate that the difference may as well be due to weather, choice of fields, and other random errors as a real difference in returns. Comparison of grid and soil type management return variability suggests that the grid approach has risk benefits on lower return fields, but the soil type approach appears to be more effective at reducing overall variability. As with the comparison of average returns, statistical tests indicate that differences in return variability were not very reliable. They only suggest possible risk patterns. RecommendationThe results of this study suggest that farmers and agribusiness should be very careful about implementing site specific P and K management plans, especially those based on grid soil sampling. SSM is intuitively appealing, but data from this and other studies suggest that it may be difficult to make it pay as a stand alone practice. Risk reduction using SSM is a promising concept, but more data are needed before it can become an important part of crop management plans. Fig. 1Fertilizer quantities by treatment. Fig. 2High, low, and average returns by treatment