Fertilizer Economics : Optimal Nitrogen Rate for Corn

1. Fertilizer Economics:Optimal Nitrogen Rate for Corn Greg Halich Production Economist 859-257-8841 Greg.Halich@uky.edu Dept. Agricultural Economics University of Kentucky November 2008

2. What is Optimal N Rate? • Cost of the last unit of nitrogen applied just equals the benefit of additional corn produced.

3. Example of Optimal N Rate - Cost Urea $460/ton: • 2000 lbs X. 46 = 920 lbs (units) N. • $460 / 920 lbs N = $.50/lb N (unit). • Cost of last unit is $.50

5. Example of Optimal N RateBenefit Benefit: • Last unit of N produced .159 bushels. • Corn priced at $4.00 per bu (elevator). • Benefit = $4.00 X.159 = $.64 Benefit ($.64) > Cost ($.50) Have we reached the equilibrium point?

6. Example of Optimal N Rate Additional Costs Need to Account for Additional Costs: • P, K, lime. • Combining. • Drying and trucking. Estimated marginal cost = $.85/bu Net benefit =.159 bu x ($4.00 - $.85) = $.50 Benefit ($.50) = Cost ($.50) of last unit N

7. Main Factors that Influence Optimal N Rate for Corn • Price of nitrogen (-) • Price of corn (+) • Response rate of nitrogen (+)

8. Change in N Price $.50/lb N price: • 141 lbs optimal N rate. $.75/lb N price: • 114 lbs optimal N rate. Assumptions: $4.00 corn price. $.85/bu additional costs (harvest, truck, dry, P and K). Corn after soybeans. Iowa State Model using Southern Illinois data.

9. Change in Corn Price Corn at $3 per bushel: • 116 lbs optimal N rate. Corn at $4 per bushel : • 141 lbs optimal N rate. Assumptions: $.50/lb N price. $.85/bu additional costs (harvest, truck, dry, P and K). Corn after soybeans. Iowa State Model using Southern Illinois data.

10. Other Factors that Influence Optimal N Rate • Addition P, K, and lime needed (-) • Addition combining needed (-) • Addition drying needed (-) • Addition trucking needed (-) These factors not taken into account with Iowa, Ohio, and other optimal N calculators.

11. Account For Additional Costs (Harvesting, Trucking, Drying, P and K) Corn at $4/bu With Costs: • 141 lbs optimal N rate. Corn at $4/bu Without Costs: • 155 lbs optimal N rate. Assumptions: $.50/lb N price. $.85/bu additional costs (harvest, truck, dry, P and K). Corn after soybeans. Iowa State Model using Southern Illinois data.

12. Optimal N Rate Model for KY • We still do not have response functions for Kentucky conditions. • We’ll use second-best approach.

13. Second-Best Approach • Use Iowa State model (S. Illinois data) and evaluate relative changes in optimal rates. • Add/Subtract these relative changes from AGR-1 recommendations or farm-level applied N rates (2000-2004). http://extension.agron.iastate.edu/soilfertility/nrate.aspx

14. Second-Best Approach Example: • Current rate calculated at 130 units N.1 • Past rate calculated at 149 units N.2 • Subtract 19 units from the 2000-2004 rate or recommended by AGR-1. Note1: Using $4.00 corn, $.85 additional costs, $.60/lb N Note2: Using $2.25 corn, $.44 additional costs, $.25/lb N

16. Results from Iowa Model Rotational Corn

18. How to Use Table Example (Rotational Corn): • 165 lbs N recommended AGR-1. • Relative calculated rate = -19 units N.1,2 • Optimal rate = 165 - 19 = 146 lbs N Note1: Current $4.00 corn, $.85 additional costs, $.60/lb N Note2: Previous $2.25 corn, $.44 additional costs, $.25/lb N

19. Results from Iowa Model Continuous Corn

21. How to Use Table Example (Continuous Corn): • 175 lbs N applied 2000-2004. • Relative calculated rate = -17 units N.1,2 • Optimal rate = 175 - 17 = 158 lbs N Note1: Current $4.00 corn, $.85 additional costs, $.60/lb N Note2: Previous $2.25 corn, $.44 additional costs, $.25/lb N

22. Additional N Guides Forages: • Spring Hayfield N Profitability. • Optimal N Rates for Stockpiled Fescue.

25. Powerpoint Presentation Finished • Questions • Discussion