THE ECO­NOMICS OF COVER CROPS

COVER CROPS BUILD SOIL AND CLEAN WA­TER, BUT THEIR ECO­NOMICS CAN BE MURKY.

Successful Farming - - MANAGING YOUR FARM - By Dan Looker

This year brought some clar­ity with new on­line tools for farm­ers and a sober­ing study by econ­o­mists. That won’t end dis­agree­ment about cover crop re­turns, though. For ex­am­ple, an In­di­ana farmer with 14 years of cover crop ex­pe­ri­ence in­sists farm­ers can gain fi­nan­cially from build­ing soil car­bon.

In March, Iowa State Univer­sity re­leased three down­load­able work­sheets for cover crops.

Two are for live­stock farm­ers to eval­u­ate graz­ing and for­age har­vest­ing. A third, “Cover Crops Bud­get,” helps es­ti­mate gains or losses on crop farms.

Each work­sheet has pre­loaded av­er­age costs in Iowa. They’re not eco­nomic stud­ies. Still, a glance at the Cover Crops Bud­get shows that even with cost share of $20 to $30 an acre, five ex­am­ple fields show re­sults rang­ing from a $6-an-acre gain to a $19 loss.

Wil­liam Ed­wards, a re­tired Iowa State Univer­sity econ­o­mist who built these work­sheets, ad­vises against re­ly­ing on ex­am­ples. “Peo­ple need to run their own num­bers,” he says. You can find the work­sheets on Iowa State Univer­sity’s Ag De­ci­sion Maker web­site.

The web­site’s “Eco­nomics of Cover Crops” page also links to the new study, “Eco­nomic Eval­u­a­tion of Cover Crops in Mid­west Row Crop Farm­ing.” ISU Ex­ten­sion Econ­o­mist Ale­jan­dro Plastina led the project. It gathered farm­ers’ ex­pe­ri­ences with a web-based sur­vey of farms in 11 states and a ques­tion­naire sent to 1,250 farm­ers in Iowa.

Its best news: Cover crops pay when used for graz­ing or for­age. The corn and soy­bean re­sults were more dis­cour­ag­ing. In an ISU press re­lease, Plastina called cost share pay­ments crit­i­cal, adding that “for most farm­ers, these pay­ments are in­suf­fi­cient to cover all costs as­so­ci­ated with cover crops.”

To see just how in­suf­fi­cient, click the link to Plastina’s 67-page re­port. The sur­vey’s most com­plete re­sults came from 440 farms in Iowa. They showed live­stock farm­ers sav­ing more than $30 an acre us­ing cover crops with corn or soy­beans. Crop farm losses av­er­aged $26.41 per acre on corn fol­low­ing cover crops and $18.29 on soy­beans. With­out cost share, losses av­er­aged $48.82 on the corn acres and $38.42 on soy­bean acres.

It’s hard to crit­i­cize one of the most thor­ough stud­ies yet on cover crop eco­nomics, but it seems to have an im­por­tant omis­sion. It ex­cludes farm­ers who plant all of their acres to cover crops. That’s be­cause the study needed acres with­out cover crops on each farm to use for a com­par­i­son.

Yet, farm­ers con­fi­dent enough to plant ev­ery acre to cover crops likely are mak­ing them pay. They prob­a­bly have used them longer, too, since no sen­si­ble pro­ducer would plunge a whole farm into cover crops in year one. The study is also vol­un­tary, which could skew re­sults.

years of ex­pe­ri­ence

An ex­pe­ri­enced cover crop farmer crit­i­cal of the study is Ken Ru­lon of Ar­ca­dia, In­di­ana. He’s one of five fifth-gen­er­a­tion own­ers of a 6,100-acre fam­ily farm that’s part of Ru­lon En­ter­prises LLC.

Since 1991, the Ru­lons have not tilled. They be­gan try­ing cover crops 14 years ago. To­day, most of their crops op­er­a­tion, about 6,100 acres with rented land, is in cover crops. A key farm goal is “to in­crease the or­ganic mat­ter con­tent of the soil while still max­i­miz­ing prof­its.”

They’re do­ing ex­actly that. Or­ganic mat­ter in one field has in­creased from a 2.47% av­er­age to 3.58%, a gain of 1.1 per­cent­age points over 14 years. Their corn pro­duc­tion costs are just over $3 a bushel.

“We’re kind of past telling peo­ple what they ought to do and just show what we do,” Ru­lon says. He shared slides he used in an Iowa talk last win­ter.

Let’s look at his slide of re­turn on in­vest­ment (shown above). I con­fessed some skep­ti­cism to it, es­pe­cially his To­tal LongTerm Ben­e­fit of $50.49 an acre. Wasn’t that dou­ble count­ing?

Ru­lon in­sists it’s not. Higher or­ganic mat­ter, or car­bon con­tent, im­proves root growth, low­ers sum­mer soil tem­per­a­tures, and con­serves soil mois­ture. That ben­e­fit re­ally shows up in a drought year. Five years ago, his corn planted af­ter cover crops yielded 30 bushels an acre more than the acres with­out cover crops. He di­vided that by five years and mul­ti­plied those 6 bushels by $4 to cal­cu­late a $24-an-acre ben­e­fit of drought tol­er­ance.

Drought tol­er­ance isn’t in­cluded in his 7-bushel-an-acre yield in­crease, an av­er­age of only the past four years (found in his To­tal An­nual Ben­e­fit). The car­bon con­tent in his long-term ben­e­fits counts to­ward fu­ture ex­pected yield gains, not the cur­rent av­er­age, he says.

We can quib­ble about the worth of ero­sion re­duc­tion. Ru­lon says it’s a con­ser­va­tive es­ti­mate of the value of top­soil saved.

Ru­lon’s short-term to­tal an­nual ben­e­fits are harder to dis­pute. He spends less on P&K than univer­sity rec­om­men­da­tions and finds no nu­tri­ent short­ages in soil tests and tis­sue sam­ples. This sav­ings on P&K is a key dif­fer­ence be­tween Ru­lon and the av­er­age of cover crop farms in Iowa. They re­ported vir­tu­ally no fer­til­izer sav­ings.

Ru­lon’s 7-bushel gain in corn yields is un­usual, but this is from a 100-acre mul­ti­year study with 67 reps each year. It’s the same as the top end of corn yields for some groups of Iowa farm­ers in Plastina’s study.

Ru­lon also saves on cover crop costs. He spends $14.50 an acre on seed us­ing a lower rate than some farms. Plant­ing it costs an­other $8.20 an acre, for a to­tal of $22.71 an acre. Spread over 5,200 acres, that’s a to­tal cost of $118,071.

“If you are go­ing to use cover crops and change noth­ing else, it will be hard to see ben­e­fits, ex­cept in added yield, which prob­a­bly takes four years to start see­ing,” Ru­lon says. “Just based on the re­duced leach­ing and in­creas­ing avail­abil­ity in fields with well-man­aged cover crops, [farm­ers] should im­me­di­ately re­duce P/K ap­pli­ca­tions, prob­a­bly by 40%.” To some, all this may seem un­con­ven­tional. Yet, much of Ru­lon’s data is from a decade-long stan­dard com­par­i­son of con­trol strips with­out cov­ers to corn af­ter oats and radishes and soy­beans af­ter rye. Ru­lon seems cred­i­ble. He, too, has agri­cul­tural eco­nomics train­ing, earn­ing his bach­e­lor’s de­gree from Pur­due Univer­sity. He did mar­ket­ing for the Plas­tics Busi­ness Group of Gen­eral Elec­tric be­fore re­turn­ing to the farm.

Ru­lon doesn’t claim cover crops are a panacea. His farm also re­lies on op­ti­mum eco­nomic yield and care­ful crop mar­ket­ing. He be­lieves farms are sus­tain­able busi­nesses only if they stop ero­sion and re­build or­ganic mat­ter.

“Ul­ti­mately, the point is that you can­not make [cover crops] a neg­a­tive re­turn on in­vest­ment. On our farm, there’s a ben­e­fit,” he says.

Some­one fa­mil­iar with many sides of cover crops eco­nomics is Sarah Carl­son, strate­gic ini­tia­tives di­rec­tor for Prac­ti­cal Farm­ers of Iowa, a farmer-run re­search group. Carl­son as­sisted Plastina’s study and the ISU work­sheets. She has heard Ru­lon’s pre­sen­ta­tion.

“The study shows that top pro­duc­ers are re­al­iz­ing enough pro­duc­tion sav­ings like Ru­lon does to make cover crops part of the long game to build or­ganic mat­ter and to im­prove yield over time,” she says.

“Yet, we don’t see an ur­gent re­sponse from Ex­ten­sion, ag re­tail­ers, or oth­ers to help coach farm­ers up. Farm­ers like Ru­lon and mem­bers of Prac­ti­cal Farm­ers again con­tinue to do the lion’s share of the coach­ing,” Carl­son says.

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