Relative Cost Efficiencyof No-Till Farms

2007 Ag Profitability Conference: Wakeeney Michael Langemeier December 20, 2007

Outline of Presentation

Introduction KFMA Data Detailed Cost Comparisons Whole Farm Analysis Summary and Conclusions

Introduction

Using the 2006 Crop Residue Management Survey, the adoption of no-till production has increased from 7.4% of planted acres in 1990 to 31.5% of planted acres in 2006.

This presentation documents cost differences between farms that have adopted a no-till production system, and those with a conventional or reduced tillage system.

KFMA Data

Identification of No-Till Farms Participating Associations:

Northwest North Central South Central

KFMA Data

Detailed Cost Comparisons (2006 data) Northwest North Central South Central

Whole-Farm Analysis (2002 to 2006 data) Western Kansas

142

265

8 2

92

71

3713

318

132

30

41

409

175

60

4 1

10

00

00

10

154

00

70

1910

84

82

4015

80

10

20

00

2210

3616

80

144

152

00

00

31

42 13

5120

247

111

65

103

137

135

195

40 32

13 158

30

104

153

122

278

4917

2214

6826

2911

22 4

3112

184

2511

365

4612

274

25

14 5

4011

356

3110 0

030

6

8

7

1

234 31

9254

205

248

273

5320

356

4725

2719 29

10

517

215

3913

3618 29

13

203

335

3415

4912

4912

2112

7715

3214

7711

238

365 15

14

5535

167

4010

Top Number = Number of Farm Units Per CountyBottom Number = Number of Extra Partners or Persons in the Multi-Operator Farm Units

Kansas Farm Management Associations2006 Membership

Detailed Cost ComparisonsPer Harvested Acre

Labor Hired labor and opportunity charges on operator and family

labor Machinery

Repairs on machinery and equipment, machine hire, gas, fuel, oil, and depreciation on machinery and equipment

Crop Seed, crop insurance, fertilizer, herbicide, and miscellaneous

costs such as irrigation energy, crop storage and marketing, and crop supplies

Improvement Asset Charges Other Expenses

Detailed Cost AnalysisTotal Crop Cost per Harvested

Acre

202 196 205201189 193

$0

$50

$100

$150

$200

$250

$300

$350

NW NC SC

Item

Avera

ge

TillNo-Till

Detailed Cost Analysis

The largest difference in total cost occurred for central Kansas.

Labor cost and machinery cost are relatively lower for the no-till farms.

Crop cost is relatively higher for the no-till farms.

Detailed Cost AnalysisCost Categories: NW KFMA

20

50

69

50

19

43

72

54

$0

$15

$30

$45

$60

$75

$90

Labor Mach Crop Asset

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisCost Categories: NC KFMA

26

50 5449

24

41

63

45

$0

$15

$30

$45

$60

$75

$90

Labor Mach Crop Asset

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisCost Categories: SC KFMA

28

59 58

46

22

49

73

38

$0

$15

$30

$45

$60

$75

$90

Labor Mach Crop Asset

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisMachinery Cost: NW KFMA

16

1013

1013

89

13

$0

$5

$10

$15

$20

$25

Repairs Hire Fuel Depr

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisMachinery Cost: NC KFMA

16

9

1412

14

5

11 11

$0

$5

$10

$15

$20

$25

Repairs Hire Fuel Depr

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisMachinery Cost: SC KFMA

18

11

161313

8

1316

$0

$5

$10

$15

$20

$25

Repairs Hire Fuel Depr

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisCrop Cost: NW KFMA

14

2018

16

24

19

$0

$5

$10

$15

$20

$25

$30

$35

Seed Fert Herb

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisCrop Cost: NC KFMA

13

28

1216

30

17

$0

$5

$10

$15

$20

$25

$30

$35

Seed Fert Herb

Item

Avera

ge

TillNo-Till

Detailed Cost AnalysisCrop Cost: SC KFMA

14

28

12

20

28

21

$0

$5

$10

$15

$20

$25

$30

$35

Seed Fert Herb

Item

Avera

ge

TillNo-Till

Whole-Farm AnalysisWestern Kansas

The rest of the presentation examines differences among farms in Western Kansas using a less tillage index and data from 2002 to 2006.

Less Tillage Index (LTI) = Herbicide Cost / Crop Machinery Cost Crop machinery cost includes repairs, fuel, machine hire,

machinery and equipment depreciation, farm share of auto expense, and an interest charge on machinery investment less custom work income.

A farm that has reduced tillage would typically have higher chemical costs, relatively lower machinery costs, and a higher less tillage index.

Whole-Farm AnalysisWestern Kansas

Comparison of Whole-Farm Characteristics Total Acres Crop Acres Crop Intensity (Harvested Acres/Crop

Acres) Percent of Crop Acres Planted to Wheat,

Feed Grains, and Oilseeds

Whole-Farm AnalysisWestern Kansas

Comparison of Whole-Farm Characteristics Value of Farm Production Net Farm Income Labor Cost as a Percent of Value of Farm

Production Value of Farm Production per Worker Adjusted Total Expense Ratio Operating Profit Margin Asset Turnover Ratio

Acres Farmed andCrop Intensity

Low Index High Index

Crop Acres 1,768 2,119

Harvested Acres

1,007 1,576

Crop Intensity 57.0% 74.4%

Percentage of Acres Used forWheat, Feed Grains, and Oilseeds

69%

13%

1%

55%

35%

4%

0%

20%

40%

60%

80%

Wheat Feed Grains Oilseeds

Crop

Perc

ent

LowHigh

Value of Farm Production andNet Farm Income

Low Index High Index

Value of Farm Production

144,562 301,383

Net Farm Income

29,392 47,408

Value of Farm Production Categories

35%

52%

13%

0%

9%

50%

25%

16%

0%

15%

30%

45%

60%

< 100 100 to 250 250 to 500 > 500

Value of Farm Production (thousands of dollars)

Perc

ent of Farm

s

LowHigh

Number of Workers andLabor Efficiency

Low Index High Index

Number of Workers

1.22 1.46

Labor Cost as a Percent of Value of Farm Production

28.0% 19.5%

Value of Farm Production per Worker

$118,057 $206,870

Financial Performance

Low Index High Index

Profit Margin 4.53% 9.39%

Asset Turnover Ratio

18.59% 36.38%

Adjusted Total Expense Ratio

1.040 0.973

Percent of Farms with ATER < 1

35.48% 53.13%

Significant Relationships

Correlation Coefficients LTI and Value of Farm Production 0.237 LTI and Crop Intensity 0.316 LTI and Labor Cost -0.182 LTI and Profit Margin 0.164 LTI and Asset Turnover Ratio 0.278

Summary and Conclusions

Cost per harvested acre was relatively lower for farms that have adopted a no-till system.

Farms that have reduced tillage were larger, have increased crop intensity, have improved labor efficiency indices, and have higher profit margin and asset turnover ratios.

Contact Information

Publications and Data: www.agmanager.info www.kmar105.com

E-mail: mlange@agecon.ksu.edu