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

Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked Microbial Seed Treatments Result In Increased Yields
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
Corn Field
InsecticidesArysta LifeScience, DuPont Collaborate On Rynaxpyr Premix Formulations
February 8, 2017
Arysta LifeScience recently announced that it has entered into a global collaboration with DuPont Crop Protection for the development of Read More
World Agri-Tech Innovation Summit Panel 2016
Crop InputsWorld Agri-Tech Innovation Summit To Be Held In San Francisco
February 8, 2017
“Breakthrough Applications and Business Models for Sustainable Farming” is the theme of the World Agri-Tech Innovation Summit to be held Read More
Trending Articles
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Latest News
ManagementSouth Africa Update and the New New Leader G5
February 24, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the recent visit to South Africa by sister magazine AgriBusiness Global and the Read More
Fall Creek Watershed
StewardshipUpdate: Nutrient Stewardship In Indiana Requires Cool, …
February 24, 2017
Update: The application deadline for NCRS funding has been extended to March 17, 2017. Green leaves sparkle in the sunlight. Trees Read More
Greenleaf Technologies TADF03-D Dual Fan Nozzle
NozzlesSix Greenleaf Nozzles Approved For XtendiMax With Vapor…
February 22, 2017
Greenleaf Technologies has announced that six of its TurboDrop D Series nozzles have been approved for use with Monsanto’s XtendiMax Read More
Winter Wheat
Industry NewsTiger-Sul Hires Manitoba And Eastern Canada Account Man…
February 22, 2017
Tiger-Sul, a global leader in sulphur fertilizers and crop performance products, has announced that sales veteran Trevor Loewen has joined Read More
NFMS 17 Hagie Sprayer
Eric SfiligojThe Read From Louisville: Uncertain
February 22, 2017
By the time this column appears across the country, the annual Commodity Classic will be in full swing. This means Read More
SprayersApache 1000 Series Sprayer Earns 2017 EquipmentWatch Hi…
February 21, 2017
ET Works has been named a winner in the 2017 EquipmentWatch Highest Retained Value Awards program, the industry’s only award Read More
Measuring Bulk Tanks
StewardshipMeister Media Among 2017 Award Winners Presented By The…
February 21, 2017
The Pesticide Stewardship Alliance (TPSA) held its annual conference in San Diego, CA, earlier this month where three awards were Read More
John Reifsteck
CropLife 100GROWMARK’s Reifsteck Earns NCFC Director Of The Y…
February 21, 2017
GROWMARK Chairman of the Board and President John Reifsteck has earned the prestigious Director of the Year Award from the Read More
Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts …
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmatio…
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by S…
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Heritage Cooperative Finished Building Aerial
ManagementHeritage Cooperative, Agland Co-op Approve Merger
February 17, 2017
Agland Co-op and Heritage Cooperative stockholders have both approved the merger agreement between Agland Co-op and Heritage Cooperative. Now begins Read More
LegislationARA Fly-In: Ag Retail Descends on Capitol Hill, Lawmake…
February 15, 2017
More than 100 agricultural retailers, distributors and suppliers headed to Capitol Hill Tuesday morning for the Agribusiness Congressional Fly-in, according to a Read More
Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked M…
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
NL5000 With G5 Technology
SpreadersNew Leader Introduces NL5000 Dry Nutrient Applicator Wi…
February 13, 2017
New Leader, a division of Highway Equipment Company (HECO), has announced the next generation of spreading technology with the NL5000 Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
CropLife 100Pinnacle Agriculture Agrees To Credit Agreement Amendme…
February 9, 2017
Pinnacle Operating Corp. has entered into an amendment (the “Amendment”) to its First Lien Credit Agreement that will provide for, Read More