Institute Releases Study on Cover Crop Economics
September 9, 2016
A recently completed study entitled “Economic analysis of cover crops: impact of interseeding red clover in wheat on corn production economics” evaluated the costs, returns and risk of this cover cropping practice and found that in addition to conservation benefits, it can significantly improve the bottom line.
It used published data from side-by-side mid-western comparisons of corn following wheat with and without clover in nitrogen sufficient environments to determine the positive rotational effect clover has on corn yield. It then valued additional costs and returns at current market prices over a range of corn yield potential and market prices using partial budgeting (which only analyzes system differences creating a pure evaluation by eliminating assumptions) to estimate a net return per acre. It also used sensitivity analysis to determine the effect changing price relationships on returns.
The study found an average yield increase of 12% with approximately 70% of the responses falling in the range of 2 to 22%. Under current market conditions, using a minimal value for the nitrogen credit when corn follows a legume, the average response always produces a positive return. For example, using a corn price of $3.50 per bushel and a corn yield of 150 bushels per acre (the approximate 10-average yield in Wisconsin), the net return is $23.34 per acre. Sensitivity analysis found that a yield response of 4 to 8% is required for the practice to produce a positive return, depending on corn price and corn yield potential. It also found that returns increase as either corn or nitrogen prices increase, and these two prices often move together.
The conclusion of the study, which was funded by the National Wildlife Federation, is that a practice which has soil quality and environmental benefits can also improve the bottom line. The report is available at our website: www.michaelfields.org