AGRONOMIC NEWS ITEMS
From Agronomists of the
Potash & Phosphate Institute
655 Engineering Drive, Suite 110
Norcross, Georgia 30092-2837
Phone (770) 447-0335
Fall 1999, No. 4
The economic analysis of variable-rate application of inputs is somewhat easier to evaluate with available cost and benefit data, but some guidelines are important to consider. Partial budget analysis is a useful analytical tool, focusing on cost and revenue items that change as a result of site-specific management. All costs that vary must be included, and they should be allocated over an appropriate time period. To complete the partial budget, multi-year costs, such as soil testing, should be converted to an annual basis, adjusted for the time-value of money invested.
When soil testing is done on a 4-year cycle, the costs of sampling and analysis should be spread over a 4-year period. Site-specific equipment such as yield monitors, variable-rate controllers, global positioning system (GPS) receivers and computers should be assumed to have a useful life of about 3 years, so their costs should be annualized on that basis. This avoids one crop being charged the full amount and provides a more realistic assessment of the profitability of the management system.
Costs of spreading fertilizer with variable-rate systems should also be allocated over the time intervals between spreading. In a rotation, different nutrients might be handled differently. In a corn-soybean rotation, for example, charge the costs of nitrogen application to the corn crop, but the costs of soil testing and application of potash and phosphate and lime should be divided between the corn and soybean crops. These costs might be allocated on the basis of the relative removal rates of the two crops. If phosphorus and potassium applications are made for a longer period, distribute the costs accordingly.
It is difficult to show a major economic benefit to site-specific management on the basis of saving fertilizer costs. The costs are relatively low compared to the costs of more intensive sampling and variable-rate spreading. But if yields can be increased by better allocation of nutrients within the field, there is a chance to show economic gain from site-specific management. The more productive areas of the field may have the lowest soil tests because nutrients have been depleted under field-average nutrient management. The benefits of correcting nutrient deficiencies on parts of the field will vary, too. Research has provided data on the probability of response to added nutrients at different soil test levels. These agronomic responses can be assumed to work on a site-specific basis as well as on a field-average basis. The new technologies provide a means of applying agronomic principles on a smaller scale, thus fine-tuning management.
It is especially important to accurately charge the cost of information, which is often seriously underestimated. Collecting information costs money. But a properly designed and maintained information system adds considerable value to the field, and that value increases as the database is updated with each season’s information. Recognizing the value and turning it into increased profits depends upon the farmer’s ability to act on the information. That ability is determined by the nature of variability, its impact on yield and profit, and the knowledge, experience and resources of farmers and their advisers. The probability of economic returns to site-specific management is thus also site-specific.