PRODUCTION ECONOMICS TOOLS FOR FARM MANAGEMENT

AAE 320

Paul D. Mitchell

Learning Goal

• Many tools for farmers exist, review a few for WI • Show how they work • Show that the production economics principles we learned underlie them

• Mostly show in class on computer• Links on class web page• Some accessed as part of problem sets• Play with the tools on your own

Corn Seeding Density• Getting A Handle on Corn Seed Costs (Problem Set #1)• Guidelines for Managing Corn Seed Cost• Both require calculating the price ratio: seed:corn as

$/1,000 seeds to $/bu WHY?• 2014: about $300/bag or 300/80,000 x 1,000 = $3.75/1,000

seeds and $5.50/bu, so 3.75/5.50 = 0.682• 0.682 is about half way between 0.50 and 0.75

• Figure 1 in Getting a Handle: 34,500• Figure 2 in Guidelines: 35,000 seeds/ac for non-Bt corn

and 37,000 seeds/ac for corn borer Bt corn• Corn yield response to seeding rate is a quadratic function• (See Stanger and Lauer 2006, Agron. J. http://

corn.agronomy.wisc.edu/pubs/JL_JournalArticles/914.pdf)

Figure 2 in Guidelines

Figure 1 in Getting a Handle

Soybean Seeding Density & Seed Treatments

• Economic Risk & Profitability of Soybean Seed Treatments at Reduced Seeding Rates (Gaspar et al. 2014)

• Figure 1: Yield response to soybean seeding rate an exponential function, with a shift due to seed treatments

• Figure 2: Net returns at different seeding rates with different seed treatments and soybean prices

• Table 1 and Table 2: economically optimal seeding rates with & without seed treatments for $9 & $12/bu soybeans

• Insecticidal seed treat: 94,000 or 100,500 seeds• Untreated or fungicide only: 111,000 or 119,000

Figure 2: Net returns at different seeding rates with different seed treatments & soybean prices

Corn and N Fertilizer• Corn Nitrogen Rate Calculator or Mobile App• In Wisconsin, choose your soil type and previous crop• Choose fertilizer type & price ($/ton) combo, and the corn

price ($/bu), tool determines N Price• Why do the prices matter?• Tool reports optimum and range• Yield response to nitrogen is a quadratic response and

plateau: rises as a quadratic parabola until it hits the maximum, then yield plateaus at higher nitrogen rates

Dairy: Corn Feeding Strategies

• Spreadsheet: Enter milk & corn price, calculates price ratio: WHY?

• Holding other feeds fixed, how much corn to feed?• Estimates DMI (dry matter intake) based on % alfalfa (hay) & % corn in ration & week of lactation• Pick your ration and lactation week on this table

• “Marginal Milk Production to Corn (lbs milk/lbs corn)” We call this the Marginal Product

• MP estimated based on experiments• Tessman et al. (1991) & analysis Earleywine (2001)

Dairy: Corn Feeding Strategies• “Marginal Value of Milk to Corn ($)”

= (p x MP)/r What is this?• Economic optimum: p x MP = r• Divide by r to get (p x MP)/r = 1.0

• Economic optimum is the 1.0 dotted line, above means VMP > r, below means VMP < r

• Example: $24/cwt milk and $3.50/bu corn, 21st week of lactation: what’s the optimum?• 48% alfalfa and 34% corn (top right) and 18 lbs of corn

(bottom right)

Online Version

Income over Feed Costs• Enter Milk $24/cwt, alfalfa $180/ton, corn $3.50/bu and

soybean meal $475/ton• Plots show income over feed costs for a variety of

lactation weeks and set diets• Diet 1 “best”: 48% alfalfa, 40% corn, 10% soybean meal

• Documentation: shows is profit max problem, with quadratic production function in protein intake