AGRI-BRIEFS
  AGRONOMIC NEWS ITEMS
From Agronomists of the
Potash & Phosphate Institute
655 Engineering Drive, Suite 110
Norcross, Georgia 30092-2837
Phone (770) 447-0335

Spring 2000, No. 3

MEY IS ALWAYS IN FASHION

Fashions come and fashions go, but basic economic principles remain the same. That’s why MEY (maximum economic yield) is always in fashion.

Scott Maple, an Indiana farmer speaking at the recent InfoAg99 Conference stated, “We must strike a balance (in nutrient management). We need to balance agronomic soundness and economic advantage with environmental responsibility. The most important piece of the balancing scale, however, is the fulcrum, which must be molded using the metal of common sense.”

Such rational considerations can be, and sometimes are, forgotten when crop prices drop. There seems to be a “knee-jerk” reaction…forgetting the agronomics…ignoring the economics…just reducing expenses regardless of the consequences at harvest. When income prospects look bleak, it’s hard to not focus on cost cutting. And cost cutting is certainly a consideration, but the resultant impact on yield and ultimate profit should be carefully evaluated.

Farming is a complicated business, but the basic economic principles are simple. Gross income (crop price x total yield) … less total cost of production … determines profit. The question becomes which of the three, 1) price (marketing), 2) yield or 3) cost, should be the focus of growers in tough times. Since economic principles are the same in good as well as bad times, they all deserve attention. But where are the real profit opportunities? That is, where should growers focus their efforts?

The most profitable farmers grow high yields. After all, crop yield is the source of income against which all costs are subtracted. Many university studies have shown that the unit cost of production (i.e., cost to produce each bushel of grain…each ton of hay…each bale of cotton…) usually decreases as yield increases. When the corn price is only $2.00/bushel, the high-yield grower producing corn at $1.90/bushel is still profitable, whereas a less efficient neighbor producing corn at $2.10/bushel is losing money.

Many growers tend to over-react to declining crop prices by cutting fertilizer rates. This is obvious from general fertilizer consumption statistics that too closely follow price trends. That should not happen because the optimum fertilizer rate for any given situation is relatively inelastic compared to crop price and fertilizer cost. Large swings in prices and costs, in other words, have relatively small effects on the economic optimum rate of fertilizer. One study by Iowa State University showed that a 25 percent drop in corn price from $2.50 to $2.00 per bushel decreased that optimum rate of phosphorus fertilization by only 3 to 6 pounds of P2O5 per acre, which is less than the precision of most application equipment.

The value of fertilizer is widely recognized. It is estimated that approximately one-third of all crop production in North America is directly attributable to this single input. Rates and methods of application vary widely among regions depending on multiple factors, but it is clear that management decisions for a prosperous future begin with sound agronomic decisions that maintain high yields.

Remember, MEY is always in fashion.

—AEL—

For more information, contact Dr. Albert E. Ludwick, Western Director, PPI, P.O. Box 970, Bodega Bay, CA 94923. Phone: (707) 875-2163. E-mail: aludwick@ppi-far.org.
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