Relative Cost Efficiency of 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 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

Top Number = Number of Farm Units Per County Bottom Number = Number of Extra Partners or Persons in the Multi-Operator Farm Units Kansas Farm Management Associations 2006 Membership

Detailed Cost Comparisons Per 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 Analysis Total Crop Cost per Harvested Acre

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 Analysis Cost Categories: NW KFMA

Detailed Cost Analysis Cost Categories: NC KFMA

Detailed Cost Analysis Cost Categories: SC KFMA

Detailed Cost Analysis Machinery Cost: NW KFMA

Detailed Cost Analysis Machinery Cost: NC KFMA

Detailed Cost Analysis Machinery Cost: SC KFMA

Detailed Cost Analysis Crop Cost: NW KFMA

Detailed Cost Analysis Crop Cost: NC KFMA

Detailed Cost Analysis Crop Cost: SC KFMA

Whole-Farm Analysis Western Kansas The rest of the presentation examines differences among farms in Western Kansas using a less tillage index and data from 2002 to 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 Analysis Western 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 Analysis Western 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 and Crop Intensity Low IndexHigh Index Crop Acres1,7682,119 Harvested Acres1,0071,576 Crop Intensity57.0%74.4%

Percentage of Acres Used for Wheat, Feed Grains, and Oilseeds

Value of Farm Production and Net Farm Income Low IndexHigh Index Value of Farm Production 144,562301,383 Net Farm Income29,39247,408

Value of Farm Production Categories

Number of Workers and Labor Efficiency Low IndexHigh Index Number of Workers 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 IndexHigh Index Profit Margin4.53%9.39% Asset Turnover Ratio 18.59%36.38% Adjusted Total Expense Ratio Percent of Farms with ATER < %53.13%

Significant Relationships Correlation Coefficients LTI and Value of Farm Production LTI and Crop Intensity LTI and Labor Cost LTI and Profit Margin 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.

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