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SWEEP Report #10

An Economic Evaluation of Tillage 2000
Demonstration Plot Data (1986-1988)

Researchers:
Richard Haack, Deloitte Haskins & Sells, Guelph, Ontario

Executive Summary

Evaluation Summary(Tech. Transfer Report Summaries)

View / Download Final Report  [128 KB pdf]

Associated SWEEP/LSP Research

 

 

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Completed: August, 1989

Key Words:

conventional tillage, conservation tillage, costs, returns, economics, corn, soybeans, winter wheat, barley, reduced tillage, minimum tillage, yields, no-till, fuel, labour, risk, model, Tillage 2000, revenue

Executive Summary

Deloitte Haskins & Sells undertook an evaluation of the costs and returns associated with a range of conventional and conservational tillage practices incorporated in the Tillage 2000 program.

The analysis incorporated results from 1986 to 1988 for corn, soybeans, winter wheat and barley.

Key findings are that:

  • Reduced (minimum) tillage practices produced generally higher yields and higher net returns per acre in corn, barley and winter wheat than conventional practices.

  • No-till practices typically resulted in lower yields and higher direct input costs per acre for all crops. At the same time, significant machinery and labour savings resulted in higher net returns to no-till than conventional or reduced tillage in winter wheat and equivalent net returns to conventional practices in corn.

  • No-till and reduced till practices also had the same or a higher level of probability of achieving the same level of net returns in corn as conventional practices. That is, there was no greater level of financial risk in using reduced or no-till practices relative to conventional practices.

  • High returns to labour for the no-till and reduced tillage practices are evident and could well prompt farmers with high "opportunity costs" to labour to beneficially switch to these practices. That is, farms with, for example:

    1. labour shortage or difficulties at key work times;

    2. higher returns to labour inputs in other enterprises e.g. dairy; and

    3. high returns from expanding the crop enterprise or the total farming enterprise.

Evaluation Summary

(From Technology Transfer Report Summaries - A. Hayes, L. Cruickshank, Co-Chairs)

The main objective of this study was to test the data management system, and economic evaluation models Deloitte Haskins & Sells developed for the SWEEP program. The Tillage 2000 data was used for the test. The test would allow evaluation of ease of operation, accuracy of results and the need for refinements to the model. The other objective of the project was to provide stakeholders with preliminary economic evaluation results of Tillage 2000 in a manner that will be consistent with the results to be generated for the rest of the SWEEP program.

The Tillage 2000 data from 1986-1988 was analyzed for corn, soybeans, winter wheat, and barley. The range of tillage systems used in T-2000 were grouped into three classifications: conventional tillage (CT), reduced tillage (RT) and no-till (NT). The data for corn was analyzed two ways: (1) paired, where side-by-side treatments of CT-RT, CT-NT, RT-NT were kept together and (2) aggregate, the data was put into one of the classifications and analyzed across all fields. The other crops were analyzed by method 2 due to the lack of data on those crops. The machinery costs for corn were also calculated two different ways: (1) purchase price - based on purchase price, age, interest rate and annual usage and (2) trade-in value. The trade-in value approach lowered the machinery cost component somewhat and narrowed the range of cost variability between farms.

The data management system performed well and provided necessary calculations for the financial simulation.

The study found that the adoption of reduced tillage practices produced generally higher yields and higher net return per acre in corn, barley, and winter wheat. In soybeans, yields and net returns were marginally lower than conventional practices. No-till practices typically resulted in marginally lower yields and higher input costs per acre. At the same time significant machinery and labour savings resulted in significantly higher net returns per acre compared to conventional and reduced tillage practices in winter wheat and equivalent net returns to conventional practices in corn.

The returns to labour for no-till and reduced tillage practices tended to generate equivalent results particularly for corn. However, in winter wheat returns to labour with no-till exceeded reduced and conventional tillage practices. The financial risk analysis for alternative tillage practices on corn indicates that reduced tillage is the least risky and that conventional and no-till practices are equivalent, with respect to net returns per acre. However, with respect to returns to labour, no-till is least risky compared to reduced and conventional tillage practices.

For soybeans only, it appears that conventional tillage practices generate higher net returns per acre compared to current reduced or no-till practices, however, the difference between conventional and reduced is marginal and likely not significant. Using the returns to labour criteria for soybeans, reduced tillage provided higher returns compared to conventional tillage practices. The use of "paired" or "unpaired" Tillage 2000 data for corn provided similar results, and did not affect the general conclusions of the economic analysis.

The authors concluded that there appears to be no ideal way of incorporating a calculation of machinery costs into an evaluation of net returns, particularly when comparing field-based demonstration plots.

Comments:

The report provides a reasonable overview of the economics of tillage systems. However, the shortage of data for all crops particularly for no-till result in numbers that are somewhat different than U.S. studies. Concerning data analysis method 2: aggregating observations into groups of no-till, reduced till and conventional till has the advantage of increasing the sample size but has the disadvantage of masking the effect of soil type and other site and management factors. The paired results were similar to the unpaired results but normally that would not be expected. There were difficulties in determining realistic machinery costs.

The winter wheat data appears to have a slight interpretation problem as cost of spring operations is higher in the spring than fall for reduced till and no-till. This does not affect the final outcome just those individual costs. Also the fertilizer costs for winter wheat appear to be at least double what one would expect.

It is interesting to note that no-till yields could be as much as 5 bu/ac. lower than conventional tillage and still have similar or higher net returns. Also the results show the high return to labour of no-till systems in particular. This would be of interest to farmers who may wish to spend their limited time farming more acres, running a livestock enterprise or working off-farm etc. Generally the results are encouraging.

Associated SWEEP/LSP Research:

  • SWEEP Report #3 - An Economic Assessment of the Distribution of Benefits Arising from Adoption of Conservation Tillage Practices in Crop Production in Southwestern Ontario.

  • SWEEP Report #11 - An Economic Evaluation of Tillage 2000 Demonstration Plot Data (1986-1989).

  • SWEEP Report #15 - An Annotated Bibliography of Socio-Economic Soil and Water Conservation Research.

  • SWEEP Report #32 - Optimal Herbicide Use in Conservation Tillage Systems

Future Research: ( ) indicates reviewers suggestion for priority, A - high, C - low.

(B) The Tillage 2000 data from the five years of the study could be analyzed. More studies need to be done into the economics of conservation, the risks involved and the costs of switching systems. The analysis could be repeated with a large group of farmers with several years of experience to give a more realistic picture of the economics of conservation tillage systems.

 

 

 

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Created: 05-28-1996
Last Revised: Thursday, May 19, 2011 01:16:31 PM