Net returns to cereal rye in integrated Iowa operations
Unproven economic returns at the farm level are a major barrier to large-scale adoption of cover crops. A recent study evaluated the short-run net returns to producers implementing a cereal rye cover crop preceding the no-till corn phase of a corn-soybean rotation in an integrated crop and cow-calf operation in Iowa. The net returns to cereal rye were estimated using experimental agronomic data and partial budgets for two practically relevant scenarios: no-grazing and partial-grazing.
How was the study conducted?
First, the net returns to cereal rye in the crop system were calculated using experimental agronomic data and local average prices in a partial budget framework. The agronomic data were collected from six location-years (northwest, central, and southeast Iowa, in 2019 and 2020), and included planting method (broadcast, drill), cereal rye seed density (low, medium, high), termination date (3 or 14 days before planting), cereal rye biomass at termination date, and corn yields. Partial budgets capture the differences between total profits from no-till corn production in fields planted to cereal rye in the fall, and total profits from no-till corn production in fields left fallow over the winter.
Second, using data on cereal rye biomass collected from the experimental plots and local average prices, researchers simulated the hypothetical net cost savings from grazing cows in the cover-cropped field for a typical cow-calf enterprise. The analysis focused on a typical Iowa cow-calf production system with 48 cows feeding on dry hay in a feedlot during winter and early spring. Cereal rye was assumed to be planted on 160 acres adjacent to the feedlot with proper fencing and watering facilities.
The short-term net returns to cereal rye in an integrated crop-livestock operation were calculated as the direct sum of the net returns in the crop system and the net cost savings in the cow-calf enterprise.
While partial budgets capture all short-term "direct" effects of adding cereal rye to the crop rotation, they do not include “indirect” benefits from cover crop use, such as reduced soil erosion or nitrate loading from subsurface drainage. This is appropriate because the "indirect" benefits do not affect the net returns to farming in the short-run.
What did the study find for the no-grazing scenario?
Corn yields following cereal rye were, on average, 4.7 bushels per acre lower than corn yields following a winter fallow. Sixty-four percent of the plots with cover crops obtained lower corn yields than their control plots left fallow in the winter. The yield drag was 12.1 bushels per acre, on average. Among the remaining 36% of the plots, the average corn yield bump following cover crops average 8.8 bushels per acre.
Plots where cereal rye was drilled averaged a corn yield bump of 1.8 bushels per acre, while plots where rye was broadcast averaged a corn yield drag of 12.0 bushels per acre. Furthermore, 91% of the broadcast plots showed yield drags, but only 42% of the drilled plots did. While higher seeding rates and later termination were associated with higher yield drags, those differences were not statistically significant.
Net returns to cereal rye in the absence of grazing averaged -$50 per acre and were negative for 82% of the treatments. Net losses for broadcast cereal rye were $67 per acre larger, on average, than for drilled cereal rye.
What did the study find for the partial-grazing scenario?
Broadcast cereal rye tends to produce higher biomass and larger net cost savings in the livestock enterprise compared to drilled cereal rye, but it also results in higher corn yield penalties.
Net returns to cereal rye in the partial-grazing scenario averaged -$10.21 per acre across all treatments, and were, on average, $39.86 less negative than in the no-grazing scenario. However, the dispersion of net returns around the mean (measured by the coefficient of variation) in the partial-grazing scenario (5.57) is higher than in the no-grazing scenario (1.40).
The average net return across the 24 treatments with negative returns amounted to -$48.06 per acre, which is $22.70 less negative than for the treatments with negative returns in the no-grazing scenario. The average net return across the 18 treatments with positive returns amounted to $40.25 per acre, or $5.37 lower than for the treatments with positive returns in the no-grazing scenario.
While net returns in the partial-grazing scenario tended to be higher for lower seeding rates, the contrasts of drilled rye compared to broadcast rye and late termination compared to early termination were not statistically significant.
What are the implications of the study?
Findings should raise awareness about the low probability of obtaining positive annual net returns to cereal rye in Iowa in the absence of sizable cost-share payments, and inform policymakers about the potential for improving the cost-effectiveness of cost-share programs by incentivizing cereal rye drilling in the program design when the biomass will not be grazed.
Alejandro Plastina, extension economist, 515-294-6160, firstname.lastname@example.org