AgDM newsletter article, December 1996

Valuing manure for crop production

Kelvin Leiboldby Kelvin Leibold, Extension Farm Management Specialist, 641-832-9597, kleibold@iastate.edu

Due to the recent expansion in large livestock operations, crop producers are considering substituting livestock manure for commercial fertilizer as a way of reducing costs. However, there are several issues to consider in making this decision. Also, each operation must be evaluated separately. Below is a discussion of the economics of valuing and transporting manure.

Based on commercial prices

The first step is to determine the nutrient content of the manure. Obtaining a one-quart sample that is representative of a 500,000 gallon manure pit is no easy task. However there are several strategies available to use in obtaining an accurate sample. Results from the testing lab will include content values for nitrogen, phosphorus, potassium, zinc, calcium, and a host of other elements.

The next step is to determine nutrient values based on commercial fertilizer prices. Do this by dividing the price of commercial fertilizer by its nutrient content. Commercial products such as urea, diammonium phosophate, and potash can be used. The value of the manure is computed by adding together the value of all the nutrients. This is the most that a crop farmer would pay for manure (after adjusting for transportation costs and other factors). At prices higher than this the crop farmer would opt for commercial fertilizer.

Next, you need to evaluate the nutrient needs of the field. This can be done by soil testing. From this you can evaluate how the nutrients in the manure complement the soil test results. For example, if the field is already very high in potassium, applying more potassium will not increase yields. The economic impact may be negative if the costs associated with handling the manure are greater than the benefits from the other nutrients in the manure.

Crop producers need to evaluate all of the benefits and all of the costs associated with handling the manure and alternative products. Some factors to consider are timeliness, compaction, uniformity of the product, uniformity of application, purchase price, and transportation costs.

Based on supply and demand

Another approach for valuing manure is to consider it a bulk commodity that can be freely traded. It is worth the price agreed on by a willing buyer and a willing seller. The cost of getting rid of the manure is a cost of raising pork. The benefit to a crop producer as its value as a replacement for commercial fertilizer. Any price agreed upon between these two extremes is advantageous to both parties. The actual price will depend on the party’s negotiation skills.

Transporting manure

Pork producers who apply manure to their own cropland need to determine the value of the manure and the cost of transporting it to the field. Although the cost of transporting the manure may be greater than its value, the manure has to be disposed of. The key is to dispose of it at the lowest net cost.

If you haul the manure to the field next to the hog lot, as you have done for the last 20 years, the value of the phosphorus and potassium may be nothing due to the very high test levels. However, what if you haul the manure down the road two more miles? What is the additional cost? The cost of loading and unloading the manure, and the fixed costs of owing the equipment are incurred whether you just “dump it” or you put it where it has more value. So the added cost is only the transportation cost for the additional two miles. With this approach, producer can economically afford to haul manure a lot farther than originally thought.

Example

Assume a farrow-to-finish swine operation that produces 1500 head of hogs each year. These hogs produce 450,000 gallons of manure annually. Assume that by using the “commercial fertilizer equivalent” method of valuation, the value of 1,000 gallons of manure is $12. The total value is $5,400 (12 x 450,000/1,000).

The cost associated with hauling manure is shown below. Fixed costs include the cost of owning the manure transporting machinery and equipment and remains the same regardless of how far the manure is hauled. The variable costs are those that are dependent on the distance hauled.

Distance

Variable

Fixed

Total

(miles)

cost

cost

cost

.5

$1,400

$3,600

$5,000

1.0

1,800

3,600

5,400

2.0

2,600

3,600

6,200

3.0

3,400

3,600

7,000

If the cost of hauling manure one miles is $5,400 and the value of the manure is $5,400, you might conclude that you can’t afford to haul manure very far. However, if you compare the cost of hauling manure one mile to a field (field 1) that doesn’t need fertilizer, to the cost of hauling manure to a field (field 2) that is three miles away that needs fertilizer, the net cost of hauling to field 2 is substantially less as shown below.                                                     

 

Hauling
Cost

Fertilizer
Value

Net
Cost

Field 1

$5,400

$0

$5,400

Field 2

7,000

5,400

1,600

 

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