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Mid-Atlantic Regional Cropping Systems Project:
1997-98 Economic Results
Farm Business Management Update, February 2000
By Jim Pease and Mark Alley
In today's rapidly changing agricultural environment, producers need to be more attuned to their production capabilities while taking advantage of risk management tools. The Mid-Atlantic Regional Cropping Systems Project integrates best management practices in the study of alternative rotational strategies for Eastern Virginia grain producers. The seven-year study, 1997-2005, compares a standard 3 crops in 2 years rotation (Rotation 1), a new 4 crops in 3 years rotation (Rotation 2), and a new 4 crops in 2 years rotation (Rotation 3) on Camden Farms in Caroline County. Table 1 summarizes all three rotations and the crops grown in each.
Table 1: Rotation Sequences of Mid-Atlantic Regional Cropping Systems Project
| Rotation 1 | Rotation 2 | Rotation 3 | |
|---|---|---|---|
| Year 1 | Conventional-till wheat / No-till DC soybeans | No-till wheat / No-till DC soybeans | No-till wheat / No-till DC soybeans |
| Year 2 | No-till FS corn | No-till FS corn | No-till barley / No-till DC corn |
| Year 3 | Repeat rotation or switch to alternative rotation | No-till FS soybeans | Repeat rotation or switch to alternative rotation |
| DC = Double Cropped FS = Full Season | |||
Using yield data obtained from Camden Farms during the 1997-98 crop year, and representative price and cost information, we calculated expected gross margins (income over variable costs) for the next three years of each rotation. The production costs for each crop used in the model cover only the variable costs of production. As such, the gross margins presented here overestimate the potential profit from each cropping rotation. Cost budgets were estimated using Cooperative Extension budget estimates (1999) from the Eastern Virginia area. Chemical and fertilizer application amounts were estimated from typical grain farm cultural practices. The sale prices for each crop were derived from national forecasts made by the Food and Agricultural Policy Research Institute at the University of Missouri-Columbia. The forecast prices were then adjusted to reflect Virginia harvest-time prices. Yields are averaged across the Bojac and Wickham soils of the experiment acreage.
Table 2: Rotation 1 Forecast Returns to Fixed Costs
| Rotation 1 Yields, Costs, and Returns | Year 1 | Year 2 | Year 3 | ||
|---|---|---|---|---|---|
| CT Wheat | NT DC Soybeans | NT FS Corn | CT Wheat | NT DC Soybeans | |
| Yield (bu./acre) | 64.50 | 29.00 | 158.50 | 64.50 | 29.00 |
| Forecast Avg. Price ($/bu.) | 2.78 | 4.88 | 2.44 | 2.93 | 5.54 |
| Gross Revenue ($/acre) | 179.31 | 141.52 | 386.74 | 188.99 | 160.66 |
| Costs ($/acre) | 129.11 | 107.04 | 185.56 | 129.11 | 105.57 |
| Gross margin ($/acre) | 50.20 | 34.48 | 201.18 | 59.88 | 53.62 |
| CT = Conventional till, NT = No-till, DC = Double crop, and FS =Full season | |||||
Table 3: Rotation 2 Forecast Returns to Fixed Costs
| Rotation 2 Yields, Costs, and Returns | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|
| NT Wheat | NT DC Soybeans | NT FS Corn | NT FS Soybeans | |
| Yield (bu./acre | )55.50 | 24.00 | 158.50 | 35.25 |
| Forecast Avg. Price ($/bu.) | 2.78 | 4.88 | 2.44 | 5.54 |
| Gross Revenue ($/acre) | 154.29 | 117.12 | 386.74 | 195.29 |
| Costs ($/acre) | 121.67 | 104.54 | 185.56 | 111.03 |
| Gross margin ($/acre) | 32.62 | 12.58 | 201.18 | 84.26 |
Table 4: Rotation 3 Forecast Returns to Fixed Costs
| Rotation 3 Yields, Costs, and Returns | Year 1 | Year 2 | Year 3 | |||
|---|---|---|---|---|---|---|
| NT Wheat | NT DC Soybeans | NT Barley | NT DC Corn | NT Wheat | NT DC Soybeans | |
| Yield (bu./acre) | 55.50 | 24.00 | 92.25 | 78.00 | 55.50 | 24.00 |
| Forecast Avg. Price ($/bu.) | 2.78 | 4.88 | 1.88 | 2.44 | 2.93 | 5.54 |
| Gross Revenue ($/acre) | 154.29 | 117.12 | 173.43 | 190.32 | 162.62 | 132.96 |
| Costs ($/acre) | 121.67 | 104.54 | 100.98 | 180.26 | 121.67 | 104.54 |
| Gross margin ($/acre) | 32.62 | 12.58 | 72.45 | 10.06 | 40.95 | 28.42 |
Table 5: Estimated Net Returns by Rotation over 3 Years
| Rotation | Total Net Returns |
| Rotation 1 | $399.36 |
| Rotation 2 | $330.64 |
| Rotation 3 | $197.08 |
Rotation 1 is preferable from an economic perspective given expected prices, costs, and yields experienced in 1997-98. The 1997-98 yields and economic results are strongly influenced by high corn FS yields, low DC corn yields, and relatively low wheat and soybean yields. A higher proportion of the lower quality Bojac (Soil Management Group DD) soils would tend to further favor Rotation 1, while a higher proportion of the better quality Wickham (Soil Management Group B) soils would tend to favor Rotation 2. Although these yields indicate a serious disadvantage for Rotation 3, preliminary results for 1998-99 indicate much more competitive yields for that intensive rotation. Further analysis will be conducted each year of the study to determine the sensitivity of rotation gross margins to changes in prices and yields and to suggest risk management strategies for crop farmers.
Contact the authors at peasej@vt.edu and malley@vt.edu .
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