PRODUCTION ECONOMICS TOOLS FOR FARM MANAGEMENT AAE 320 Paul D. Mitchell

Learning Goal Many tools for farmers exist, review a few for WI Show how they work Show that the production economics principles we learned underlie them Mostly show in class on computer Links on class web page Some accessed as part of problem sets Play with the tools on your own

Corn Seeding Density Getting A Handle on Corn Seed Costs (Problem Set #1) Guidelines for Managing Corn Seed Cost Both require calculating the price ratio: seed:corn as $/1,000 seeds to $/buWHY? 2014: about $300/bag or 300/80,000 x 1,000 = $3.75/1,000 seeds and $5.50/bu, so 3.75/5.50 = is about half way between 0.50 and 0.75 Figure 1 in Getting a Handle: 34,500 Figure 2 in Guidelines: 35,000 seeds/ac for non-Bt corn and 37,000 seeds/ac for corn borer Bt corn Corn yield response to seeding rate is a quadratic function (See Stanger and Lauer 2006, Agron. J. )

Figure 2 in Guidelines

Figure 1 in Getting a Handle

Soybean Seeding Density & Seed Treatments Economic Risk & Profitability of Soybean Seed Treatments at Reduced Seeding Rates (Gaspar et al. 2014) Figure 1: Yield response to soybean seeding rate an exponential function, with a shift due to seed treatments Figure 2: Net returns at different seeding rates with different seed treatments and soybean prices Table 1 and Table 2: economically optimal seeding rates with & without seed treatments for $9 & $12/bu soybeans Insecticidal seed treat: 94,000 or 100,500 seeds Untreated or fungicide only: 111,000 or 119,000

Figure 2: Net returns at different seeding rates with different seed treatments & soybean prices

Corn and N Fertilizer Corn Nitrogen Rate Calculator or Mobile App In Wisconsin, choose your soil type and previous crop Choose fertilizer type & price ($/ton) combo, and the corn price ($/bu), tool determines N Price Why do the prices matter? Tool reports optimum and range Yield response to nitrogen is a quadratic response and plateau: rises as a quadratic parabola until it hits the maximum, then yield plateaus at higher nitrogen rates

Dairy: Corn Feeding Strategies Spreadsheet: Enter milk & corn price, calculates price ratio: WHY? Holding other feeds fixed, how much corn to feed? Estimates DMI (dry matter intake) based on % alfalfa (hay) & % corn in ration & week of lactation Pick your ration and lactation week on this table “Marginal Milk Production to Corn (lbs milk/lbs corn)” We call this the Marginal Product MP estimated based on experiments Tessman et al. (1991) & analysis Earleywine (2001)

Dairy: Corn Feeding Strategies “Marginal Value of Milk to Corn ($)” = (p x MP)/rWhat is this? Economic optimum: p x MP = r Divide by r to get (p x MP)/r = 1.0 Economic optimum is the 1.0 dotted line, above means VMP > r, below means VMP < r Example: $24/cwt milk and $3.50/bu corn, 21 st week of lactation: what’s the optimum? 48% alfalfa and 34% corn (top right) and 18 lbs of corn (bottom right)

Online Version

Income over Feed Costs Enter Milk $24/cwt, alfalfa $180/ton, corn $3.50/bu and soybean meal $475/ton Plots show income over feed costs for a variety of lactation weeks and set diets Diet 1 “best”: 48% alfalfa, 40% corn, 10% soybean meal Documentation: shows is profit max problem, with quadratic production function in protein intake