Cost and Profitability Results of Farmers Using Direct Seed Systems in the Pacific Northwest

 

Doug Young, Professor and Oumou Camara, Graduate Research Assistant, Department of Agricultural Economics, Washington State University, Pullman WA

 

Introduction

USDA recently reported that farmers expanded use of no-till nationally from 5.1 to 14.8 percent of cropland between 1989 and 1996. In contrast, use of no-till in the Pacific Region, which includes the PNW, remained around 1 percent and showed comparatively little growth during this period. While some PNW growers have tried no-till on limited areas or for a few years and while nearly all farmers report some form of residue management in their conservation compliance farm plans, the overwhelming majority of cropland in the PNW is tilled.

Despite the dominance of tillage in PNW dryland farming, a small but visible minority of growers in the region claim they have used no-till with economic success over time in several agro-climatic zones. Some of these growers have spoken at farm meetings and shared their methods with others. It is apparent that successful no-till systems must be tailored to the agro-climatic and business situation of individual growers, but no systematic economic evaluation of long term PNW no-till farmers has been done. The objective of this paper is to report some preliminary results of a set of economic case studies of PNW no-till farmers. The case studies describe the cultural practices, production costs, and profitability of the no-till farming systems used by no-till farmers in various agro-climatic zones of the PNW. Hopefully, these case studies will provide useful guidance to potential adopters of no-till who are concerned about the profitability of the practice.

Farmer Interviews

We received formal funding for this project in mid 1998, but began conducting interviews with no-till farmers during the winter of 1997-98. We have completed all first stage interviews, but will continue to return to some growers to clarify information. The case studies include 11 no-till growers--nine from SE Washington, one from NE Oregon, and one from northern Idaho. Growers selected for interview were recommended by project cooperators from NRCS and from Cooperative Extension. For final selection it was necessary for the grower to have had adequate experience with no-till farming, have sufficient records or recall to construct detailed production costs estimates, and to be willing to participate in a lengthy interview and follow up process. The initial personal interviews typically lasted two to five hours. Not all no-till growers recommended for the study were prepared to participate, but most were.

Information was collected on the timing and composition of farming operations; the size, age, annual repairs, salvage value, and hours of annual use of machinery; speed of operations; type and rates of inputs used; fixed costs such as land costs, taxes, insurance, and overhead; and any other costs or special practices. Production history on crop yield and quality for as many years as records or recollection permitted was also collected. The data are then entered on input forms, cross checked with the farmer if necessary, converted to consistent 1998 dollar terms throughout, and a budget for all crops in the rotation is generated using the Cooperative Extension Enterprise Budget Generator in the WSU Department of Agricultural Economics. Preliminary results are sent or taken to the cooperating grower for review and possible correction. This validation process has not been completed with most of the growers so the results presented in this progress report are preliminary.

The sample contained six growers from the high rainfall (18-22 in. ppt/yr) annual cropping zone, four from the low rainfall (10-15 in ppt/yr) zone, and one grower from an intermediate rainfall zone who used irrigation. Among the six growers in the annual cropping zone, three used no-till with burning of stubble and three never burned. Three were zero-tillage farmers and three combined use of no-till drills with some limited tillage. There was similar variation in practices among growers in other regions.

Results

Even though the economic analysis and validation by growers has not been completed for all 11 case studies, some preliminary general comparisons from the 18 to 22 inch ppt. zone can be presented at this time. Average winter wheat yields varied from 72 to 110 bu/ac on these six farms and the preliminary total costs per bu of winter wheat ranged from about $2.80 to $3.50 per bushel. Interestingly, the no-till case study farm with the highest average winter wheat yield incurred one of the higher costs per bushel as did the farm with the lowest average yield.

Readers are cautioned not to make inferences about whole-farm profitability on the basis of these winter wheat cost figures alone. In the Palouse, the ratio of returns to costs for winter wheat is typically higher than for other crops in the rotation.

Based on our preliminary estimates, the composition of costs also varied considerably over the six high ppt. zone no-till case study farms. Planting and tillage costs were generally under 10 percent where zero till was used and were close to 20 percent where substantial supplementary tillage was done. However, the group of higher cost growers included representatives of both the zero till and supplementary tillage groups. Weed control costs varied from 10 to 20 percent of total costs with most growers in the lower range. Similarly, fertilization costs ranged from about 7 to 18 percent. Of course, regional soil and climate differences within the 18 to 22 inch ppt. sample area likely account for many of these differences, but the data indicate different philosophies on supplementary tillage, weed control, and fertility management among no-till growers. Future analysis will assess other factors which underlie these differences.

To illustrate the complete analysis underway for all 11 no-till case studies, we present below one of the seven budgeting tables prepared for each crop for each grower. Other tables in the analysis, not presented here, report results on machinery inventories and costs, rates and costs of fertilizers and pesticides, and other costs. Table 1 presents the schedule of operations and associated costs for one of the low rainfall case studies. This Walla Walla County grower has several years experience growing no-till continuous hard red spring wheat (HRSW) in a 10 inch precipitation zone. The grower reports an average yield of 31 bu/ac. With premiums for protein, the grower reported missing $5/bu for his wheat only three of the past 17 years. Annual records of prices received were not available, but the grower would gross $155/acre at $5/bu and $170/acre at $5.50/bu. The grower reported averaging about 8 bu/ac less with HRSW than with soft white winter wheat which often sells for about $1/bu less than high protein HRSW.

Production cost results were impressive with estimated average variable costs of only $102.40 per acre and total costs of $151.23 per acre. At the conservative HRSW price of $5/bu, the farmer would net $52.60/acre over variable costs. The break-even selling price to cover variable costs is $3.30/bushel; HRSW must sell for at least this price to cover all variable costs. At $5.50/bu for HRSW net returns over total costs would approach $20/acre. At the low HRSW price of $4.10/bu observed during 1998 the grower would incur a loss of over $24/acre for returns over total costs.

Potential benefits from this Walla Walla County case study include highlighting the importance of cost management and niche marketing in profitable no-till farming. Preliminary results indicate that efficiency in machinery management is critical to profitable no-till production of spring crops. Short planting windows for spring crops accentuate the importance of excellent machinery maintenance, few or no breakdowns, good timing, appropriate machinery capacity, and good overall speed in drilling and weed control. Also, achieving consistently high grain quality and HRSW protein premiums are important to economic success.

Even though the economic analysis and validation by growers has not been completed for all 11 case studies, some preliminary general comparisons from the high ppt. zone can be ventured at this time. Average winter wheat yields varied from 72 to 110 bu/ac on these six farms and the preliminary total costs per bu of winter wheat ranged from about $2.80 to $3.50 per bushel. Interestingly, the no-till case study farm with the highest average winter wheat yield incurred one of the higher costs per bushel as did the farm with the lowest average yield. Readers are cautioned not to make inferences about whole farm profitability on the basis of these winter wheat cost figures alone. In the Palouse, the ratio of returns to costs for winter wheat is typically higher than for other crops in the rotation.

Based on our preliminary estimates the composition of costs also varied considerably over the six high ppt. zone no-till case study farms. Planting and tillage costs were generally under 10 percent where zero till was used and were close to 20 percent where substantial supplementary tillage was done. However, the group of higher cost growers included representatives of both the zero till and supplementary tillage groups. Weed control costs varied from 10 to 20 percent of total costs with most growers in the lower range. Similarly, fertilization costs ranged from about 7 to 18 percent. Of course, regional soil and climate differences within the 18 to 22 inch ppt. sample area likely account for many of these differences, but the data indicate different philosophies on supplementary tillage, weed control, and fertility management among no-till growers. Future analysis will assess other factors which underlie these differences.

Conclusions

The detailed economic analysis for all 11 growers will be completed this year and reported in two bulletins, one for the low rainfall region and one from the high rainfall region. However, results to date permit some preliminary conclusions. One, no-till farming can be profitable, but it requires careful management of all components of the production and marketing system. Secondly, profitable no-till production requires more than high yields, it requires careful control of costs at each stage of the production process. Finally, as in other areas of farming, the economic performance of no-till varies considerably from grower to grower. These differences appear to be associated with site factors, management, and yes, even luck. Future analysis will provide more insight into the factors associated with no-till economic success.


 

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