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The Relative Cost Efficiency of No-Till Farms Michael Langemeier –Professor –Department of Agricultural Economics –Kansas State University 1.

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Presentation on theme: "The Relative Cost Efficiency of No-Till Farms Michael Langemeier –Professor –Department of Agricultural Economics –Kansas State University 1."— Presentation transcript:

1 The Relative Cost Efficiency of No-Till Farms Michael Langemeier –Professor –Department of Agricultural Economics –Kansas State University 1

2 Objectives and Data Examine the relative efficiency of no-till farms in central Kansas. Kansas Farm Management Association (KFMA ) Data –Continuous data from 2003 to 2007 –To be designated as a no-till farm, a farm had to utilize a no- till production system for all of their crops –Farms categorized into two groups: No-till (73 farms) Reduced or conventional tillage (239 farms) 2

3 Kansas Farm Management Associations 3

4 Definitions Value of Farm Production –Sum of livestock, crop, and other income computed on an accrual basis minus accrual feed purchased. Net Farm Income –Return to operators labor, management, and equity (net worth) computed on an accrual basis. Less Tillage Index –Computed by dividing herbicide and insecticide cost by total crop machinery cost which includes repairs, fuel, auto expense, machinery and equipment depreciation, crop machine hire, and an opportunity interest charge on crop machinery and equipment investment. 4

5 Definitions Profit Margin –Computed by dividing net farm income plus cash interest paid minus opportunity charges on operator and family labor by value of farm production. Asset Turnover Ratio –Computed by dividing value of farm production by total farm assets. Technical Efficiency Index (ranges from 0 to 1) –Farms with an index of 1 are using the best available technologies and producing on the production frontier. Cost Efficiency Index (ranges from 0 to 1) –Farms with an index of 1 are producing at the lowest cost per unit of aggregate output. 5

6 Comparison of Tillage and No-Till Farms, Central Kansas Farm Characteristics No-TillMixed Tillage Value of Farm Production $360,109$266,618 Net Farm Income$74,432$53,114 Total Hectares Less Tillage Index

7 Comparison of Tillage and No-Till Farms, Central Kansas Financial Ratios and Efficiency No-TillMixed Tillage Profit Margin Asset Turnover Ratio Cost Efficiency Note: Technical Efficiency was not significantly different between the two groups of farms. 7

8 Comparison of Tillage and No-Till Farms, Central Kansas Income SharesNo-TillMixed Tillage Feed Grains Oilseeds Small Grains There was not a significant difference between hay and forage, beef, or dairy income shares. 8

9 Comparison of Tillage and No-Till Farms, Central Kansas Cost SharesNo-TillMixed Tillage Labor Seed Chemicals Capital There was not a significant difference between livestock and fertilizer cost shares. 9

10 Conclusions Summary –In addition to having a higher cost efficiency index, the no-till farms were larger, had a higher level of financial performance, produced relatively more feed grains and oilseeds, produced relatively less wheat, and more efficiently utilized their labor and capital inputs. Implications –Labor utilization –Management –Farm Size 10

11 Contact Information Contributor Site – Langemeier –www.agmanager.infowww.agmanager.info 11


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