5 Economic Considerations For Optimal Fertilizer Efficiency

Changes in crop prices often generate questions about the economics of fertilization. Prices for many crops, particularly corn, have recently fallen considerably from the highs of the past few years. This shift has some asking questions such as “should I reduce fertilizer rates in response to lower prices?” A detailed answer for a specific situation will depend on several factors, but a review of some fundamental principles can give us a foundation for addressing such questions.

There are four primary factors affecting profitability:

  • Crop price.
  • Production costs.
  • Yield level.
  • Crop quality (as it affects price).

Now, which of these factors does the grower have significant control over? Typically, producers are price takers and thus have little control over prices. However, they do have control over variable costs, which directly impact yield and quality. Thus, in this sense yield level is a controllable factor determining profit. Once a decision has been made to plant a certain crop, then it becomes a simple matter of making the most of the opportunity. This requires planning a program designed to optimize efficiency and produce maximum returns per acre — in other words, to produce yields that maximize profit while exercising responsible environmental stewardship.

Factors To Consider

There are several factors to consider at this point. These include the following:

1. Greater profits come from higher yields (to a point) since costs are spread over more production units (bushels, bales, pounds, etc.) resulting in lower cost per unit of production. Efficient and profitable production involves lowering unit cost to a point of maximum net return. This Maximum Economic Yield (MEY) concept was popular decades ago, and is as valid and legitimate today as it was then.

2. Crop and fertilizer prices have relatively little effect on optimum levels of fertilization. This is because in determining profitability yield level has an overshadowing effect on crop and fertilizer price. Economists at Kansas State University (KSU) have published an online Excel tool that helps demonstrate the impact of crop and fertilizer prices on estimated economic optimum rates of both nitrogen (N) and phosphorus (P) application. For irrigated corn with yield goal set at 250 bushels per acre, N and P2O5 prices set at 50 cents per pound, and all other settings left at default, when crop price was varied from $7 to $3.50 the estimated optimum N rate went from 340 pounds of N to 308 pounds of N per acre — a decline of 32 pounds of N with a halving of corn price.

For P, the rate dropped from 34 pounds to 27 pounds P2O5 per acre — a decline of only 7 pounds. This example is meant solely for illustrating that while shifts in crop prices do have an impact on optimal rates of application, that impact may not be nearly as great as one would first expect. Therefore, the tendency to react to crop price declines by deeply cutting inputs should be closely scrutinized.

3. Viewing corn as a form of currency is a useful exercise to illustrate the impact of market swings. The first table compares fertilizer prices in November 2012 to November 2013 as dollars per ton of product and dollars per pound of nutrient. The second table uses these fertilizer costs plus corn prices to determine the amount of fertilizer a bushel of corn would buy and also what the cost, in bushels, was for 100 pounds of each of the nutrients. The analysis shows that cost of 100 pounds of nutrient was 6 to 8 bushels in 2012 and 9 to 12 bushels in 2013. It took more bushels to buy fertilizer in 2013, but not much more relative to the full value of the crop. The analysis further shows that under current market conditions, N, P and potassium (K) remain good investments when a yield response is expected.

4. Adequate and balanced fertility may also produce non-yield profit affecting benefits. For example, in a KSU irrigated corn study (Dhuyvetter and Schlegel, 1994), P fertilizer hastened maturity, lowered grain moisture at harvest and resulted in greater profit due to lower drying cost. This work showed that P fertilizer reduced drying costs by an average of 10 cents per bushel.

5. Growers and their advisers are more than ever operating in a fluid global environment. Adaptation to massive swings and changes is necessary for survival; however, even in the face of change certain principles endure. One of these is the MEY principle discussed above, another is the principle of 4R Nutrient Stewardship. This column has discussed the effect of crop price on estimated optimum fertilizer rate. But none of the 4Rs (fertilizer rate, source, time and place) stands alone; all are interconnected, each affecting the other. A MEY program requires not only the right rate, but also source, time and place factors that collectively assure efficient and effective nutrient use.

So encourage growers to take a breath, “do the numbers” and apply sound agronomic and economic principles before reacting to recent market swings.

Topics:

Leave a Reply

One comment on “5 Economic Considerations For Optimal Fertilizer Efficiency

  1. Our experience on a wide variety of crops has shown that adding a 3rd Dimension – Bilogical – to the current Two Dimensional Ag system of Mechanical management and Chemical Management can be very cost effective. In a recent test at Rutgers on green peppers adding Quantum Growth increased the yield 23.55% while reducing fertilizer usage 23%. That resulted in a 29.88 Return on Investment.

Crop Inputs Stories

Photo credit: The United Soybean Board/The Soybean Checkoff.
Seed/BiotechKansas State University Researchers Find New Pathogens in Soybean Seeds
May 24, 2017
A single seed seems so simple. Put it in the ground, give it some care, and you’ve soon grown food. Read More
Soybean Field
HerbicidesNew Dicamba Herbicide Premix Coming Soon from Syngenta
May 24, 2017
Syngenta has announced the name of its new herbicide featuring the active ingredients of S-metolachlor and dicamba. Upon registration by Read More
FungicidesSyngenta Launches New Seed Treatment Fungicide
May 22, 2017
Syngenta has announced the launch of PLENARIS seed treatment fungicide for the control of downy mildew in sunflower. PLENARIS contains Read More
Corn close up
Crop InputsMonsanto’s First HPPD Herbicide Garners EPA Approval in Field & Seed Corn
May 19, 2017
Monsanto announced today that EPA has federally approved Harness MAX Herbicide, the first herbicide in the Monsanto portfolio to provide Read More
Trending Articles
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Agriculture
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Case sprayer nozzle closeup
EquipmentSpray Application: A Nozzle Renaissance
May 2, 2017
If you had asked four-decade ag veteran Mark Bartel, President of Wilger Inc., just a few years ago what lay Read More
ManagementWashington Update, Dow-DuPont Earnings, and the Passing of an AGCO Legend
April 27, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about the latest Beltway news, crop protection company 1st quarter numbers, and the Read More
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Latest News
Photo credit: The United Soybean Board/The Soybean Checkoff.
Seed/BiotechKansas State University Researchers Find New Pathogens …
May 24, 2017
A single seed seems so simple. Put it in the ground, give it some care, and you’ve soon grown food. Read More
Soybean Field
HerbicidesNew Dicamba Herbicide Premix Coming Soon from Syngenta
May 24, 2017
Syngenta has announced the name of its new herbicide featuring the active ingredients of S-metolachlor and dicamba. Upon registration by Read More
Eric SfiligojMonsanto ‘Picks Its Battles’ by Nixing Deere Deal
May 23, 2017
Having been in the trade journalism game since the mid-1980s, I remember several watershed moments during my career. One of Read More
FungicidesSyngenta Launches New Seed Treatment Fungicide
May 22, 2017
Syngenta has announced the launch of PLENARIS seed treatment fungicide for the control of downy mildew in sunflower. PLENARIS contains Read More
Corn close up
Crop InputsMonsanto’s First HPPD Herbicide Garners EPA Appro…
May 19, 2017
Monsanto announced today that EPA has federally approved Harness MAX Herbicide, the first herbicide in the Monsanto portfolio to provide Read More
ManagementPrecision Planting Deal, China Developments, and Enviro…
May 18, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the latest news on John Deere’s now dead deal for Precision Planting, China’s Read More
Soybean aphid leaf
InsecticidesMulti-state Research Reveals IPM Best Option for Treatm…
May 17, 2017
About 89.5 million acres of soybeans will be planted across the U.S. in 2017 — a record high, according to Read More
GROWMARK-2017-Interns
CropLife 100GROWMARK Names 2017 Summer Interns
May 16, 2017
Forty-two college students are exploring agricultural career opportunities this summer as GROWMARK interns. They are working at FS member cooperatives Read More
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Ag…
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
Flooded corn in Indiana
FertilizerBoth Wet and Dry Conditions Threaten Nitrogen Loss
May 15, 2017
The weather is notoriously unpredictable, leading to challenges for planting, harvesting and applying the nitrogen (N) your corn crop needs. Read More
farmer Kip Tom
Precision AgAg Tech: On the Cusp of Something Big?
May 15, 2017
The investment and ag-tech sectors’ continuing courtship of agriculture, smoldering for three or four years now, was well in evidence at Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Greg Musson, Gar Tootelian
ManagementOpinion: Shaking Your Perspective in Ag Retail
May 12, 2017
Some of you I’m sure have encountered our recently retired salesman extraordinaire, Dan Bellanger. He worked in the industry for Read More
Exterior view of CPS Big Lake facility which includes enclosed receiving and load out area
CropLife 100New Alternative Weed Resistance Traits Could Experience…
May 12, 2017
It wasn’t too many years ago that ag retailers and their grower-customers could hardly wait for new options to fight Read More
Diane Allemang and Dan Jacobs
Crop InputsFMC Agricultural Solutions, Casa Pacifica Partner to He…
May 11, 2017
FMC Agricultural Solutions is teaming up with Casa Pacifica Centers for Children and Families, an organization that supports vulnerable children Read More
UncategorizedWhat’s Up With ARA
May 11, 2017
CropLife Editor Eric Sfiligoj talks with Brian Reuwee regarding what issues are on the docket for the Agricultural Retailers Association. Read More
BASF Maglis tablet retailer grower
Precision AgQ&A: What BASF’s Latest Foray into Precision …
May 11, 2017
In late April, BASF agreed to acquire U.S. precision ag player ZedX, a leader in the development of agronomic weather, Read More
Pam Marrone
Crop InputsMarrone Bio Innovations Enters into Distribution Agreem…
May 11, 2017
Marrone Bio Innovations, Inc., a leading global provider of bio-based pest management and plant health products for the agriculture markets, Read More