Mid-Atlantic Regional Cropping Systems Project: Preliminary 1998-2002 Economic Results

Farm Business Management Update, April/May 2004

By Jim Pease and Mark Alley

The Mid-Atlantic Regional Cropping Systems Project (MARCSP) was conducted from 1998-2002 to study alternative rotational strategies for Eastern Virginia grain producers. Replicated trials compared a conventional-till, 3 crops in 2-year rotations (Rotation 1), a no-till, 4 crops in 3-year rotations (Rotation 2), and an intensive no-till, 4 crops in 2-year rotations (Rotation 3) grown with site-specific management practices and commercial-scale equipment in Caroline County. Each phase of every rotation was grown during each of the five years of the study. Table 1 summarizes all three rotations and the crops grown in each. Trials were also replicated across each of the four soil types on the 60-acre study site. Soils included two low productivity Bojac soils and two high productivity Wickham soils. Strips were laid out across soil types. All crops were grown without irrigation.

Table 1: Rotation Sequences of Mid-Atlantic Regional Cropping Systems Project
Year	Rotation 1	Rotation 2	Rotation 3
1	CT Wheat / NT DC Soybeans	NT Wheat /NT DC Soybeans	NT Wheat /NT DC Soybeans
2	NT FS Corn	NT FS Corn	NT Barley /NT DC Corn
3	(Repeat Rotation)	NT FS Soybeans	(Repeat Rotation)
CT = Conventional-Till NT = No-Till DC = Double Cropped FS = Full Season

Table 2: Average Crop Yields by Rotation and Soil, MARCSP, 1998-2002
Rotation	Crop	Bojac1	Bojac2	Wickham3	Wickham4
		(bu/acre)
1	CT Wheat	74	43	78	83
	DC NT Soybeans	33	31	43	44
	FS NT Corn	104	80	168	160
2	NT Wheat	62	38	75	76
	DC NT Soybeans	33	24	44	40
	FS NT Corn	109	74	164	174
	FS NT Soybeans	47	29	58	60
3	NT Wheat	49	31	69	68
	DC NT Soybeans	35	26	44	44
	NT Barley	83	55	111	108
	DC NT Corn	94	54	91	104
CT = Conventional-Till NT = No-Till DC = Double Cropped FS = Full Season

The quality of the soils is clearly indicated in the average yields obtained by the MARCSP (Tale 2). The poor quality and droughty Bojac2 soil consistently yields well below the other soils for every crop and rotation. The Bojac1 soil produces some yields that are competitive with the high-quality Wickham soils (Rotation 1 Conventional-Till wheat and Rotation 3 DC corn), but generally produces yields that are intermediate between the low- and high-quality soils. Comparing across Rotations 1 and 2, FS corn yields are similar, but Rotation 3 DC corn yields are 10-45% lower than FS yields, with the largest differences on the best soils. DC soybean yields are very similar across rotations within the same soil, with the exception of the relatively high average yield for the poorest soil in Rotation 1. FS soybeans outperform DC soybean yields on better soils by approximately 25%. Conventional-Till wheat produces better yields than No-Till wheat on all soils and in all rotations. Rotation 2 No-Till wheat yields are 10-16% below those of Rotation 1 Conventional-Till wheat, but Rotation 3 No-Till wheat yields lag much further behind, probably due to the difficulties of timely and appropriate wheat seeding after the DC corn harvest. Overall, yields emphasize the importance of site- and soil-specific crop management, since a poor soil such as Bojac2 may yield less than one-half that of a good soil, even with top management as in the MARCSP.

In general, Rotation 1 and 2 yields are very similar, with Rotation 1 yields slightly higher for certain crops on some soils. Only an economic analysis can determine if any rotation obtains better returns than the others. Yields and input quantities from the study, along with input and commodity prices and expert opinion on machinery complements and efficiencies, were used to analyze machinery costs and net returns on 12 simulated 2,000-acre farms in eastern Virginia. This farm size is representative of top management and efficient machinery use in the mid-Atlantic Coastal Plain region. Each farm is assumed to be composed entirely of a single soil type (Bojac1, Bojac2, Wickham3, and Wickham4) growing one of the three rotations. To reflect the rotations and yields in the MARCSP, the total farm acreage was divided so that each phase of a rotation was grown each year (Table 3).

Table 3: Acreage Harvested on Simulated Farms 1998-2002, 2000 acres each soil type
Rotation	Crop	Acres
1	CT Wheat	1,000
	DC NT Soybeans	1,000
	FS NT Corn	1,000
2	NT Wheat	667
	DC NT Soybeans	667
	FS NT Corn	667
	FS NT Soybeans	667
3	NT Wheat	1,000
	DC NT Soybeans	1,000
	NT Barley	1,000
	DC NT Corn	1,000
CT = Conventional-Till NT = No-Till
DC = Double Cropped FS = Full Season

Although machinery complements on the simulated farms do not vary across soil types or years, they do vary across rotations. Rotation 3 requires significantly more equipment to accomplish planting and harvesting in a timely manner, while the least intensive rotation (Rotation 2) can adequately handle tasks with much less equipment. Each simulated farm requires one or more 235HP tractors and 290HP combines, one 60-foot, self-propelled sprayer, and other appropriately sized equipment. For the analysis, all equipment is assumed to be new, at prices normalized and averaged in 2002-dollar terms (as were all other input and commodity prices). Machinery costs for each power unit and implement were estimated using the MACHDATA machinery cost spreadsheet developed by Lazarus and Selley (who estimate machinery costs each year for Doane's).

Resulting machinery costs per crop acre and per acre over each 2000-acre farm are presented in Table 4.

Table 4: Machinery costs per Acre on Simulated Farms by Crop and Rotation
Rotation	Crop	Machinery Cost
		($/acre)
1	CT Wheat	78
	DC NT Soybeans	33
	FS NT Corn	42
Average*		77
2	NT Wheat	53
	DC NT Soybeans	32
	FS NT Corn	41
	FS NT Soybeans	34
Average		53
3	NT Wheat	59
	DC NT Soybeans	42
	NT Barley	50
	DC NT Corn	44
Average		98
*Rotation machine cost is per acre per year, other machine costs by crop
CT = Conventional-Till NT = No-Till DC = Double Cropped FS = Full Season

Average annual machine costs per acre differ considerably between rotations, depending on cropping intensity and the necessary timeliness of field activities. Rotation 2 machine costs are dramatically lower than the other rotations because the lower cropping intensity (4 crops in 3 years) and the efficiency of No-Till cropping operations require only one 235HP tractor and a reduced set of other equipment. It should be emphasized that these costs reflect efficient utilization of equipment necessary to cover 2,000 acres in a timely manner, and actual machine costs on Virginia farms will differ depending on age and purchase conditions of equipment, acres covered by equipment, and a host of other factors.

Net revenue for each crop and rotation on the simulated farms was calculated by subtracting variable and fixed costs from gross revenues (GR=yield times price). Harvest-month nominal prices from the period 1990-2002 were indexed to 2002 dollars, and the mean of such prices was applied to replicate-level yields in order to calculate gross revenues. Mean commodity prices were $1.38/bu for barley, $2.34/bu for wheat, $4.92/bu for soybeans, and $2.26/bu for corn. Similarly, nominal seed, fertilizer, chemicals, and other input prices were indexed to 2002 dollars. Average prices calculated in this manner remove the effects that market fluctuations and inflation/deflation may exert on estimates of annual costs and returns. Net revenue per acre for each rotation on each 2,000-acre farm is presented in Table 5.

Table 5: Average Net Revenue on Simulated Farms by Rotation and Soil*
Rotation	Bojac1	Bojac2	Wickham3	Wickham4
	$/acre
1	25	-43	119	119
2	64	-21	151	155
3	-25	-114	81	87
*Net revenues are per acre, per year, e.g. total net revenue for 2,000 acres on Bojac1 is 2,000 x $25 = $50,000

Resulting net revenue indicates a strong competitive advantage for Rotation 2 across all four soil types on the 12 simulated farms. Rotation 2 net revenue exceeded that of Rotation 1 by $22-$46 per acre ($44,000-$92,000 per farm). As noted above, the machinery cost advantage of Rotation 2 is substantial, even though Rotation 2 yields are not appreciably higher than those of Rotation 1. Rotation 3 net revenue lags far behind the other rotations, although even this rotation on Wickham soils is able to generate $162-$174 thousand in net revenues from a 2,000 acre farm. No rotation can break even with a farm composed of Bojac2 soils, and only the Rotation 2 farm on Bojac1 soil is likely to generate enough crop net revenue to pay for farm overhead costs and taxes, as well as funds for reinvestment and family living expenses. Preliminary results from analysis of the MARCSP study indicate that Virginia crop producers should consider site-specific management, since net returns vary so dramatically between high quality and low quality soils. Treating a droughty soil like Bojac2 as one would a high-yielding soil like Wickham4 and based on the same yield expectations is a waste of money. Similarly, by applying "average" practices and inputs to a high-yielding soil like Wickham4, a producer would not take advantage of the soil's potential for high production and dollar returns. Results also indicate that choice of an appropriate machinery complement and resulting machinery costs can spell the difference for farm financial growth. Rotations 1 and 2 obtain similar yields, but low machinery costs for Rotation 2 create high profits for that rotation.

The above discussion presents only the initial results available from the MARCSP. Additional agronomic and economic analysis will be conducted, and more complete results and their implications will be provided to Virginia producers.

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