Professional Documents
Culture Documents
Policy Update
Graphic owner: UKZN SAEES: school website
Dairy Market
Continues to
Struggle
- Kenny Burdine
- Tyler Mark
The Economic Value
of Applying Poultry
Litter in the Fall
- Jordan Shockley
PAGE 2
While over half of dairy operations are enrolled in the MPP-Dairy program, very few chose coverage levels that would
have received payments in 2016. According to FSA, over three-fourths chose the lowest $4 coverage level and over
97% chose $6.50 or lower. So payments that were made this year went to a small number of operations that enrolled
at higher levels.
Given the current state of profitability in the dairy sector, it is very likely that many producers will choose to enroll at
higher levels for 2017. Further, USDA has extended the deadline for enrollment for 2017 into December of 2016. So,
producers will have the ability to decide on their enrollment levels up until about two weeks before the new year begins.
By all means, producers should consider their options with this program and see how it might fit within their overall risk
management plan.
We would also add that producers may want to consider other risk management strategies in addition to MPP-Dairy.
Producers currently enrolled in MPP-Dairy are ineligible for the LGM-Dairy program, but this remains an option for
many. Further, producers still have the ability to utilize contracting, futures, options, and other risk management
strategies to manage downside risk on milk price and upside risk on feed prices. There is no single solution for
managing risk for a dairy operation and no policy tool will work perfectly. Rather, producers should be aware of all the
tools at their disposal and make an informed decision about which fit best given their goals.
PAGE 3
% Change in
Current Commercial
Fertilizer Prices
+ 20%
+ 10%
0%
- 10%
- 20%
Economic Value
of Spring Applied
Poultry Litter
$45/ton
$41/ton
$38/ton
$34/ton
$30/ton
The above poultry litter values for the spring assume all fertilizer (N, P 2O5, and K2O) increase or decrease by the same
percent. Even if current fertilizer prices decrease by 20%, the economic value of litter stored properly in the fall and applied
in the spring is greater than poultry litter applied to fallow cropland in the fall ($30/ton vs. $28/ton).
The value of poultry litter differs in the fall if applied to pastures or land for hay production. If applying poultry litter to an
established stand of alfalfa with a legume mix of <25% of the stand, the average poultry litter in Kentucky at current
commercial fertilizer prices has a value of $42/ton. The value of poultry litter will vary based on grass type, established
stands vs. new seeding/renovation, and whether the land is used for hay, pasture, or silage.
Since the value of poultry litter is dynamic and always changing, decision tools have been developed so producers can
enter soil test data, nutrient content of measured litter, commercial fertilizer prices, and management practices of poultry
litter applied to determine the value. Tools for applying poultry litter to both grain crops and land in hay/pasture/silage are
available and can be found on my website at the following link: http://www.uky.edu/Ag/AgEcon/shockley_jordan.php
PAGE 4
Kentucky Farm
Business Management
PAGE 5
and needs to be factored into the overall decision along with grain prices to determine if double-cropping makes sense in
a particular year.
A major change this year is a continued drop in wheat prices while soybean prices have actually increased slightly. This
will make planting wheat less attractive this fall. The following analysis attempts to quantify the extent of the relative
change in profitability for 2016. The analysis includes estimated returns comparing double-cropped wheat/soybeans
with full-season soybeans for the 2016 crop, and the likely implications for Kentucky grain farmers.
Additional costs associated with the double-cropping are accounted for, including fuel, machinery repairs and
depreciation, labor, hauling, etc. 2016 new crop CME futures prices in early October, 2016 are used as the base, and
are adjusted for a basis of -$.20 for soybeans and -$.15 for wheat. This results in new crop prices of $9.50/bu for
soybeans and $4.25/bu for wheat. Two regions with different agronomic characteristics are evaluated. The first region is
along the southwest tier of counties near Hopkinsville, which traditionally does a lot of double-cropping. The second
region is along the northwest tier of counties (Ohio Valley region) that has some of the best yields for corn and
soybeans, but traditionally plants less wheat. Cash rent is assumed to be $175/acre for both these regions (note: this
will vary substantially, but is done here for illustrative purposes only). Net profit is estimated after subtracting out all
variable and fixed costs represented by an efficient operation. Major assumptions are: $2.00/gallon fuel, 25-mile oneway grain hauling, $.35/unit N, $.30/unit P, and $.25/unit K.
Southwest Tier Assumptions (Average Ground):
70 bu wheat
35 bu double-cropped soybeans
44 bu full-season soybeans
Resulting net profits:
-$99 double-crop
-$31 full-season soybeans
This results in a $68 difference in favor of the full season soybeans. The double-cropped soybean yield
would have to increase to 42 bu before wheat/double-crop soybeans were as profitable. This would amount
to only a two-bushel yield reduction over full-season soybeans.
Southwest Tier Assumptions (Best Ground):
90 bu wheat
44 bu double-cropped soybeans
55 bu full-season soybeans
Resulting net profits:
+$72 double-crop
+$71 full-season soybeans
This results in basically the same profitability as full season soybeans.
Northwest Tier Assumptions:
65 bu wheat
38 bu double-cropped soybeans
50 bu full-season soybeans
Resulting net profits:
-$91 double-crop
+$25 full-season soybeans
This results in a $116 difference in favor of the full season soybeans. The double-cropped soybean yield
would have to increase to 50 bu in this case before the wheat/double-crop soybeans were as profitable.
This would equate to the same yield as full-season soybeans.
PAGE 6
Given the current market conditions, double-cropping doesnt look remotely attractive in 2016-2017 for the majority
of Kentucky. On the very best wheat ground in the state it looks to be a breakeven situation compared to full-season
soybeans.
This analysis doesnt account for potential payments from the ARC and PLC Farm Bill programs. However, these
programs would pay on base acre crop allocation and not planted acres, so there would be no effect on the planting
decision.
To change the assumptions above to your specific conditions and evaluate your expected profitability, go to the grain
budget site at: http://www.uky.edu/Ag/AgEcon/halich_greg_rowcropbudgets.php
The Corn-Soybean Budgets and Wheat Budgets can be downloaded or opened directly from this page.
Educational programs of Kentucky Cooperative Extension serve all people regardless of race, color, age, sex, religion, disability, or national origin.
UNIVERSITY OF KENTUCKY, KENTUCKY STATE UNIVERSITY, U.S. DEPARTMENT OF AGRICULTURE, & KENTJCKY COUNTIES, COOPERATING.