Foresight For Successful Cropping Systems

Crop Selection 2004 - Marking Strategic Choices

By Zachary Fore, U of M Cropping Systems Specialist,
forex002@umn.edu

Each year you have the opportunity to decide which crops to grow and which fields to grow them on.  The choices you make can have a dramatic effect on your profitability. There are many factors that we can’t predict with a high degree of certainty , so we use our best estimates.  However, there are other factors that are more predictable in nature. Some general things to consider when making cropping decisions include:

• Profitability – which crops do you think will make you the most money?

• Equipment – do you have the necessary equipment?

• Work load and timing – do you have the capacity to get the work done in a timely fashion?

• Crop rotation – good rotations increase yields and reduces production risks.

• Risk – too much of one crop can increase your production and marketing risk.

Economics are often an overriding factor in cropping choices.  However, economics alone are not enough.  Let’s say for example that you can lock in a good price for soybeans for the 2004 crop - a price that makes soybeans look on paper like your most profitable option. Why not put all your acres in soybeans?  Most of the reasons are obvious:

• Your work load would not be spread out very well.  Planting, spraying, and harvesting would all have to be done in the same time window.  Too many acres of one crop cause untimely field activities, which result in reduced yield and quality.

• Even if you have locked in a price, you have production risk.  What if it turns out to be a poor soybean year?

• Lack of crop rotation would increase the production risk with soybeans, and forfeit the rotation benefit with other crops.

There is a strategic process that you can use to help you choose which crop to grow on each field.  Here are some key steps in the crop selection process:

1. Know your production costs and yield potential.

2. Estimate what price you can expect.

3. Understand the rotation effect.

4. Do price/yield scenarios to help understand your risk.

5. Understand what effect the farm program has on each crop.

Production Costs and Yield Potential
Table 1 shows the average production costs for common crops grown in the region.  Production cost data is obtained from the 2002 Summary of the NW Minnesota Farm Business Management Association.  All direct and indirect costs are included.  Charges for labor and management are not included.  Production costs tend to be higher in the Red River Valley, so costs are given for both in and out of the Valley. Costs are for cash rented land.

The numbers in Table 1 give you a general indication of production costs for various crops. The averages are nice to know, but what’s really important is, what are your production costs ?  Each farm is different, so you should be using cost data from your farm. 

Table 1. Production Costs

Crop	Production Costs ($/a)
	Valley	Non-Valley
Spring Wheat	174	145
Barley	165	108
Corn	265	231
Sunflowers – Oil	188	162
Soybeans	170	149
Navy Beans	240	-
Canola	-	140
Alfalfa – Established	-	190
Sugarbeets	540	-

Table 2 gives a detailed listing of production costs for spring wheat for non-Valley cash rented land.  The table gives a break down of average costs, and costs for the low 20% and high 20% of farms based on their net income from spring wheat.  The table has an open column where you can input your actual costs. You should prepare a ‘crop budget’ like this for each crop you are considering planting so you have a reasonably accurate estimate of your production expenses.

Table 2. Spring Wheat Crop Budget (Source: NW MN Farm Business Mgmt. Non- Valley 2002).

Expense Catagory	Avg.	Low 20% *	High 20% *	Your Costs
Direct Expenses
Seed	9.80	11.43	9.74	_______
Fertilizer	24.56	25.53	25.59	_______
Crop Chemicals	18.12	21.75	18.33	_______
Crop Insurance	8.72	7.51	8.29	_______
Fuel and Oil	6.91	7.14	7.57	_______
Repairs	12.61	14.51	13.57	_______
Custom Hire	1.29	1.69	1.21	_______
Land Rent	36.36	39.65	32.69	_______
Operating Interest	2.78	3.86	3.02	_______
Misc.	0.48	0.09	1.36	_______
Total Direct Exp.	121.63	133.16	121.36	_______
Overhead Expenses
Custom Hire	1.94	1.17	2.64	_______
Hired Labor	2.96	2.59	4.84	_______
Mach. & Bldg. Leases	1.74	1.97	1.97	_______
Farm Insurance	2.20	1.87	2.50	_______
Utilities	1.70	1.70	1.88	_______
Dues & Professional Fees	1.16	0.93	1.53	_______
Interest	2.90	3.13	3.35	_______
Mach. & Bldg. Depreciation	7.50	6.87	11.42	_______
Misc.	1.19	1.56	0.88	_______
Total Overhead Expenses	23.29	21.79	31.02	_______
Total Direct and Overhead Expenses/Acre	144.92	154.94	152.38	_______

*  The high 20% and low 20% are based on total net income from wheat.

Understanding the Rotation Effect and Risk
Two important factors in crop selection are economics and agronomics.  You want to select crops that maximize profit potential while managing your risk.  Dr. Michael Peel, former NDSU Small Grains Extension Agronomist, has done an excellent job of presenting the agronomics of crop rotations in NDSU Extension Bulletin EB 48 ‘Crop Rotations for Increased Productivity’.  The bulletin is available on the web at: www.ext.nodak .edu/extpubs/plantsci/crops/eb48-1.htm.

The ‘rotation effect’ refers to the fact that the order crops are grown in affects their yield potential. Figure 1 shows the yield benefit of growing spring wheat after various crops compared to continuous spring wheat. Table 3 shows the rotation effect with various crops.  Data in Figure 1 and Table 3 were gathered from numerous research studies.  NDSU Extension Bulletin EB 48 also contains crop rotation yield data.

Table 3. Rotation Effects with Various Crops

Crop	Previous Crop	Yield Effect % Increase *
Barley	Spring Wheat	6
Barley	Soybeans	16
Barley	Flax	5
Canola	Spring Wheat	38
Canola	Barley	19
Canola	Flax	5
Corn	Soybeans	14
Soybeans	Corn	7
Sunflowers	Spring Wheat	17
Sunflowers	Sugarbeets	20

*  Compared to continuous cropping with the same crop

For various reasons, a farmer may decide to grow the same crop on the same field for two or more consecutive years. The question may arise, how much yield loss is likely if the same crop is grown on the same field for two consecutive years compared to three or more consecutive years? Does yield keep dropping for each added consecutive year of the same crop? 

The answer is that in general, yield drops for the first several years of continuous cropping, then tends to level out at some reduced level.  Research at the University of Wisconsin, Madison on soybeans found that yield was reduced until the third year of continuous cropping, then leveled out at that reduced level. Research on other crops has shown similar trends, though the magnitude of yield loss may be greater.  Keep in mind that growing the same crop continuously not only reduces your yield potential, but also increases your risk of catastrophic yield loss, usually due to disease outbreaks.

The rotation effect is not entirely understood, but many factors are thought to contribute including:  disease suppression, optimized water utilization, weed and insect management, and soil fertility. Good crop rotations reduce your production risk, while poor crop rotations increase your production risk.  Good crop rotations can also help minimize risk due to environmental factors, reduce soil erosion problems, and distribute work load over the season.

Due to high soybean prices after the 2003 harvest, soybean acres may increase in the Northern Plains in 2004. I am particularly concerned about soybeans that may be planted in high risk rotations, such as soybeans following soybeans, dry beans, canola, or sunflowers.  Soybeans following these crops may be expected to yield an average of 5-10% less than soybeans following wheat, barley, or corn. 

Of more concern, however, is the increased risk of larger yield losses due to crop diseases such as sclerotinia (white mold), root rots, and the potential spread of soybean cyst nematode. Soybeans have proven to be a very hardy crop with good disease tolerance, but farmers should know that high risk rotations result in lower and more variable yields.

Risk
One way to help you estimate risk is to construct price-yield scenario tables. Constructing such a table will quickly give you an understanding of what happens if price goes up or down, and/or if production goes up or down. 

Below is an example using spring wheat where your best estimate of price is $3.50/bu., and yield is 45 bu./A.  Profitability is calculated by subtracting expenses from gross revenue (bu./A x price/bu.). To be more accurate, your revenue estimation should include your actual production costs and any farm program payments or other crop income you expect to receive.

Using good crop rotations means you may select a higher ‘best guess’ yield, or you may feel more comfortable looking at higher yield scenarios.

Good crop selection planning will go a long way toward helping you have a profitable 2004. Good planning includes using your own expense data, using realistic yield and price estimates, using good crop rotation practices, and understanding your risk.

Figure 1.  Effect of previous crop on spring wheat yields compared to continuous spring wheat (% yield increase).

Figure 2. Effect of rotation sequence on soybean yield 1998 - 2000
(LSD 5% = 3 bu/a).