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Economics of Intensive Wheat Management Practices - Analysis for 2011

John Hanchar, Farm Business Management
Northwest New York Dairy, Livestock & Field Crops

July 8, 2013

During the September 8, 2011 Advanced Wheat Management Seminar in Batavia, staff from Cornell University and the WNY Crop Management Association as well as a number of producers covered a variety of topics. For that program, we developed economic analyses to examine the benefits and costs associated with an intensive wheat management system compared to a standard or base system. 
We based analyses on Donn Branton's experiences and results for the 2011 wheat crop, and estimated the expected change in profit associated with the intensive wheat management system practiced by Donn versus a program of standard practices. The intensive wheat management system can be described as an information intensive system utilizing tissue sampling, additional soil testing, scouting and crop consulting services to make decisions regarding nutrient, pesticides, and other inputs in a controlled traffic (tramline) system. Application method, rates, timing, and location (as they relate to input use) receive emphasis.
Summary of Results
  • Intensive wheat management has the potential to increase value of production, income, but additional costs to realize that potential can be relatively large.
  • For 2011, analysis suggests that an intensive system outperformed a standard system based upon the estimated change in profit attributed to intensive management. Analysis for 2010 concluded the same.
  • Expected changes in profit are sensitive to a number of factors, such as expected price; expected increase in wheat yield; and expected input use decisions given growing conditions and resulting changes in input costs
Estimating the Expected Change in Profit Using a Partial Budget
One factor that producers use to evaluate possible changes in practices is the expected change in profit. Profit equals the total value of production, income minus the costs of resources, inputs used in production. Expected change in profit equals the expected change in total value of production minus the expected change in costs.

Refer to Partial Budget for Profit Table
Analysts construct a partial budget to estimate the expected change in profit associated with a proposed change in the farm business, such as a change from standard to intensive wheat management system.

Results
Expected changes in profit by expected yield increases by expected wheat prices range from negative $119 per acre to positive $60 per acre for 2011 conditions (Table 1). To illustrate some of the details of the analyses, the partial budget for an expected increase in yield of 30 bushels per acre, and $7.65 per bushel wheat price follows.
The intensive wheat management system outperformed the standard system in 2011 based upon the estimated change in profit of about $49 per acre attributed to the intensive management system. The intensive system outperformed the standard system in 2010 as well. However, the expected changes in profit were $126 and $49 and per acre for 2010 and 2011, respectively. Expected changes in total value of production were very similar for the two years wheat prices were $8.00 and $7.65 per bushel for 2010 and 2011, respectively, while the expected additional yield was 30 bushels per acre for both years.
Refer to Table 1: Expected Change in Annual Profit
However, in 2011 the total additional cost to realize the additional income was considerably higher compared to 2010. Higher prices for some inputs, for example nitrogen, and greater input usage, for example, an additional fungicide application in 2011 compared to 2010, underlie the difference in expected change in profit.
Based upon the 2011 analyses, break even wheat yield increases are approximately 37, 30, 26, 22 additional bushels per acre for expected wheat prices of 5, 6, 7, and 8 dollars per bushel, respectively.




Partial Budget for Profit Table (pdf; 422KB)


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Upcoming Events

Dairy Cattle Summer Research Update

July 18, 2019
7:00-9:00pm
Batavia, NY

After the day's work is done, come hear about two new research trials conducted by Julio Giordano's lab:
  • Strategies for improving dairy cattle reproductive performance and economics
  • Using automated sensors for improving dairy cattle health monitoring and management

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Weed Resistance Management Demonstration and Plot Tour

Event Offers DEC Credits

July 23, 2019
1:00 - 3:00 p.m.
Waterloo, NY

Come join us on July 23 in Seneca County at Quinten Good's farm for a demonstration and walking tour of 16 different pre- and post-emergence treatments in soybean and 12 different treatments and combinations in corn.
  • Tall waterhemp and marestail are two weeds that are resistant to glyphosate and ALS herbicide modes of action in the WNY and Finger Lakes regions.
  • Each year the number of acres with resistant weed populations expands.
  • For herbicides to be an effective tool in weed management, we have to know what chemistries & application timings are most effective against these resistant weeds.

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Pasture Walk with the Finger Lakes Graziers

July 29, 2019
12:45 - 4 pm
Waterloo, NY

Join the Finger Lakes Graziers on a pasture walk and learn about soil health. 
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Announcements

USDA Announces New Decision Tool for New Dairy Margin Coverage Program

WASHINGTON, April 30, 2019 ? Agriculture Secretary Sonny Perdue announced today the availability of a new web-based tool - developed in partnership with the University of Wisconsin - to help dairy producers evaluate various scenarios using different coverage levels through the new Dairy Margin Coverage (DMC) program.

The 2018 Farm Bill authorized
DMC, a voluntary risk management program that offers financial protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer. It replaces the program previously known as the Margin Protection Program for Dairy. Sign up for this USDA Farm Service Agency (FSA) program opens on June 17.

"With sign-up for the
DMC program just weeks away, we encourage producers to use this new support tool to help make decisions on participation in the program," Secretary Perdue said. "Dairy producers have faced tough challenges over the years, but the DMC program should help producers better weather the ups and downs in the industry."

The University of Wisconsin launched the decision support tool in cooperation with FSA and funded through a cooperative agreement with the USDA Office of the Chief Economist. The tool was designed to help producers determine the level of coverage under a variety of conditions that will provide them with the strongest financial safety net. It allows farmers to simplify their coverage level selection by combining operation data and other key variables to calculate coverage needs based on price projections.

The decision tool assists producers with calculating total premiums costs and administrative fees associated with participation in
DMC. It also forecasts payments that will be made during the coverage year.

"
The new Dairy Margin Coverage program offers very appealing options for all dairy farmers to reduce their net income risk due to volatility in milk or feed prices," said Dr. Mark Stephenson, Director of Dairy Policy Analysis, University of Wisconsin, Madison. "Higher coverage levels, monthly payments, and more flexible production coverage options are especially helpful for the sizable majority of farms who can cover much of their milk production with the new five million pound maximum for Tier 1 premiums. This program deserves the careful consideration of all dairy farmers."

For more information, access the tool at fsa.usda.gov/dmc-tool. For
DMC sign up, eligibility and related program information, visit fsa.usda.gov or contact your local USDA Service Center. To locate your local FSA office, visit farmers.gov/service-locator.


New Guidance for Mortality Disposal Issued

NYS Department of Ag and Markets has posted guidelines on disposal of livestock carcasses, in response to reports that some rendering companies have halted pickups from farms.

https://nwnyteam.cce.cornell.edu/submission.php?id=761&crumb=dairy|1

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