Economic and Financial Viability of Residue Management: An Application to the Texas High Plains

Abstract

Costs and benefits of no-tillage (NT) were analyzed and compared with conventional tillage (CT) for irrigated corn (Zea mays L.) in the northern Texas High Plains. Research results, from a 4-yr wheat (Triticum aestivum L.)/corn/fallow rotation, were used to validate the Erosion Productivity Impact Calculator (EPIC), a widely used daily time-step hydrologic and crop growth simulator. The yields generated by EPIC were used in the Farm Level Income and Policy Simulation Model (FLIPSIM), to analyze the long-term (10 yr) economics of NT and CT corn production on a whole farm basis under various irrigation strategies. The results indicated that NT increased the probability of survival for the low water irrigation strategy while increasing net cash farm income by 8,5% on the more frequent irrigations strategy. NT resulted in higher present values of ending net worth for all irrigation strategies. NT's ability to reduce water needs, decrease yield variability, and reduce machinery use (fuel, replacement, and repair costs) more than offset the increase in chemical costs associated with NT compared with CT. Research Question Economic impacts of residue management on Great Plains farmers producing irrigated crops were largely unknown when the Food Security Act of 1985 mandated that participants in farm programs who farm highly erodible cropland must implement SCS approved soil conservation farm plans by January 1995. The mandate was intended to reduce soil erosion, both by wind and water. While dryland crop production in the Great Plains often results in inadequate residue for erosion control, irrigation generally produces adequate residue for soil protection if properly managed. The threat of losing farm program benefits is a concern to both dryland and irrigated producers. The purpose of this research is to quantify the economic benefits (costs) of producing no-tillage (NT) corn for a representative feed grain farm in the northern Texas High Plains. Literature Summary Conservation tillage research in the Great Plains dates back to the 1930s. Early research investigated dryland benefits of residue management during nonuse periods, or fallow, primarily for enhancing soil water storage and reducing crop yield variability. Past research has found that NT practices increase yields proportionally more under dryland conditions than under irrigated conditions. Previous studies have also shown that furrow erosion can be reduced with NT practices, which may reduce seed bed preparation time and costs in subsequent years. Economic impacts of residue management are both short term and long term, depending largely on the immediate increase in herbicide expenses, which substitute for short-run costs of tillage, and the reduction in long-term equipment depreciation costs. Study Description Field research data is used to validate the Erosion Productivity Impact Calculator (EPIC), a widely used daily time-step hydrologic and crop growth simulator. EPIC is then used to develop long-term and stochastic corn yields for NT and conventional tillage (CT) under alternative irrigation scenarios for a representative northern Texas High Plains feed grain farm producing NT and CT corn. The stochastic yields for CT and NT corn generated by EPIC given alternative irrigation strategies are used as input into FLIPSIM. The financial outcomes of the farm for the CT and NT systems are compared to determine their impacts on the farm's long-run economic viability under alternative irrigation scenarios. Applied Questions How does NT compare with CT economically? The results of the 10-yr whole farm financial analysis indicated that NT was more profitable than CT. A reduction in expenses was the largest benefit gained from NT. The reductions included repair costs, fuel costs, irrigation costs, interest, and machinery replacement. While initial machinery debt was increased, the increase in net cash farm income and the longer useful life for machinery allowed NT to service debt faster than CT, thus decreasing interest expenses. How do the effects of NT vs. CT differ under alternative irrigation strategies? Corn yield increases and cost reduction benefits using NT are greatest for the limited water scenarios. This leads to greater increases in net cash farm income and equity growth. As the irrigation amounts increase, the need for NT as a source for maintaining soil moisture diminishes and thus NT yield benefits are diminished relative to CT at higher irrigation level.