Crops > Costs & Returns > Profitability
November 2018
Estimating costs of crop production vital for 2019 farm businesses
A study funded by the North Central Region of the Sustainable Agriculture Research and Education Program and the Center for Agricultural and Rural Development at Iowa State University has resulted in a new free online tool that helps farmers make decisions about planting cover crops.
The tool is intended to help farmers who don’t currently use cover crops to evaluate expected annual net returns to cover crop adoption under alternative scenarios, and to serve as a benchmark for farmers who already use cover crops and want to improve the return on their investment.
"The rate of adoption of cover crops in Iowa is low (about three percent of all tillable acres) due to a variety of reasons, including thin windows of opportunity to plant due to weather, uncertainty associated with adoption of new practices, and low corn and soybean prices that limit the ability of farmers to use their own resources in conservation practices," said Alejandro Plastina, assistant professor of economics and extension economist at Iowa State.
Plastina led the NCR-SARE/CARD funded study that used farmer surveys to evaluate the net returns to cover crops in row crop production in the Midwest. Ultimately, the study found that although some farmers profit from cover crops, the average farmer in the sample incurred annual losses when using cover crops, even after accounting for cost-share payments.
“Uncertainty about the net returns to cover crops has been a major barrier to adoption, and this new tool is intended to help farmers evaluate their own net returns, and reduce uncertainty," Plastina said. Plastina said he hopes the new tool will promote cover crop use and help farmers identify ways in which they can make cover crops profitable.
"I expect that by using this tool, farmers will be better able to identify areas in which cost savings are required to generate positive net returns, and increase cover crop use," he said. "However, the tool might steer some farmers away from using cover crops if they cannot realize the required cost savings. In the end, both groups of farmers should benefit from the tool, one through realizing gains in profits and the other through avoiding losses associated with cover crops."
Though the initial survey focused on Iowa, Plastina said the new cover crop tool is suitable for farmers anywhere in the United States.
"Since the tool allows the user to create his or her own scenario using their own data, it can be used by any farmer in the U.S. to evaluate the net returns to cover crops in a corn-soybean rotation," Plastina said.
The cover crop tool is available online. A video presentation on the economics of cover crops is also available:
About the Center for Agricultural and Rural Development
For 60 years, the Center for Agricultural and Rural Development (CARD) at Iowa State University has conducted innovative public policy and economic research on agricultural, environmental and food issues. CARD combines academic excellence with engagement and anticipatory thinking to inform and benefit society. Center researchers develop and apply economic theory, quantitative methods and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers, the research community, agricultural, food and environmental groups, individual decision-makers and international audiences.
Alejandro Plastina, extension economist, 515-294-6160, plastina@iastate.edu
Nathan Cook, communications specialist, 515-294-3809, nmcook@iastate.edu
