Long-term Rotations ……

1. Long-term Rotations …… Viable Alternatives? Craig Chase, Field Specialist Farm & Ag Business Management

2. Let’s Start with Organics: Is it profitable? • Based on the Neely-Kinyon research (with modifications) to reflect Iowa averages • Comparison of Two Production Systems • Conventional corn-soybean rotation • Organic corn-soybean-oat/alfalfa-alfalfa • Organic Rotations are assumed to be certified • Returns do not include direct or counter-cyclical payments

3. Yields by Crop and Rotation

4. Returns to Land, Labor, & Managementby Crop and Rotation Prices: Conventional - $2.15, $6.00; Organic - $4.50, $13.60 wt; $2.30, $90

5. Returns to Management by Crop and Rotation

6. Summary of Findings • Average production costs for the organic rotation were lower than the conventional C-Sb rotation. • Yields for organic crops were assumed to be less than the conventional crop yields. • Returns to land, labor, and management and returns to management were significantly higher in organic rotations.

7. Summary of Findings (cont’d) • Organic rotations held an economic advantage over the C-Sb rotation despite exclusion of organic premiums and wage rates (not shown in these slides). • Organic budgets are outlined in FM-1876. Can be downloaded at: http://www.extension.iastate.edu/Publications/FM1876.pdf

8. Non-Organic Long-Term Rotation:Is it Profitable? • Based on the Marsden research (with modifications) to reflect long-term oat yields • Comparison of Two Production Systems • Conventional corn-soybean rotation • Reduced input corn-soybean-oat/alfalfa-alfalfa • Returns do not include direct or counter-cyclical payments • Do not compare these results to the organic results – they have different assumptions…

9. Yields by Crop and Rotation

10. Returns to Land, Labor, & Management by Crop and Rotation Prices: Conventional - $2.15, $6.00; LT - $1.60, $60 straw, $85 alfalfa

11. Returns to Management by Crop and Rotation

12. Quick Note • The C-Sb rotational studies illustrated here had a difference of $102 per acre return to management for corn. Why? Two reasons… • Yield difference of 30 bushels per acre would increase returns about $60 per acre • Differences in fertility assumptions were the other $40. Marsden study used actual applications – no annual P and K whereas the first budget assumed annual removal rates. • The two soybean budgets were $12 apart…

13. Summary of Findings • Average production costs for the long-term rotation were lower than the conventional C-Sb rotation ($185 vs. $133). • Yields for long-term crops were assumed to be higher than the conventional crop yields. • Returns to land, labor, and management were significantly higher in the long-term rotation ($66 per acre higher).

14. Summary of Findings (cont’d) • Labor requirements for the long-term rotation were about .67 hours per acre higher. At a $10 per hour wage rate, the increase in labor would be $6.70 per acre. • Prices were held constant across the rotations. If a premium for low-input products could be received, profitability would increase.

15. Can Long-term Rotations Compete? • Crops selected for long-term rotations should be chosen for agronomic and economic reasons. • Inclusion of a high value crop, such as alfalfa, is critical to higher average rotational returns.(Note: average alfalfa return to LLM was $297 per acre versus $252 and $210 for conventional corn and soybeans.) • Integrated crop-livestock systems allow producers to supply on-farm compost, which is important to long-term rotations’ economic advantage.

16. Organic Transition Yields by Crop & Rotation Neely-Kinyon 1998-1999

17. Transition Returns to Land, Labor, and Management by Crop & Rotation Prices: Conventional - $1.80, $5.20; LT - $1.40, $60 straw, $85 alfalfa Neely-Kinyon 1998-1999

18. Organic Transition Summary of Findings • Note: Actual prices for corn and soybeans were below loan rate at that time so loan rates were used. Other prices were actual Iowa averages. • Average production costs for organic rotation were lower than the conventional C-Sb rotation. • Corn yields for organic crops were substantially lower than conventional crop yields. Soybean yields were similar. • Returns to land, labor, and management were about $12/acre lower in organic rotations.

19. Organic TransitionSummary of Findings (Cont.) • Growing organic crops is a classic risk/reward system. Higher risks for the transition years for potential higher returns after certification. • Can you start out the transition years with 2 years of alfalfa or oats followed by alfalfa? • Once nutrients and soil health are in place, corn yields tend to increase. The first certified year you could be selling higher valued crops such as corn.

20. Last Thoughts • For non-organic transitions - weed management, fertility, and soil health are equally important. • Picking the right product mix to minimize production costs while enhancing yields is key to transition profitability.

21. Questions? Thank you for this opportunity! Craig Chase, Field Specialist Farm & Ag Business Management cchase@iastate.edu