Economics of Conservation Fallow

Many farmers consider summerfallow to be a necessary practice for dryland crop production in the Brown and Dark Brown soil zones of the Canadian Prairies. Moisture conditions, grain prices and the level of present farming technology limit the opportunities for extended crop rotations in this area of the prairies. Summerfallowing, however, has not been very kind to the land. The preferred method for summerfallowing is to till with a heavy duty cultivator. This extensive use of cultivation has resulted in tremendous soil degradation in terms of losses in soil organic matter and topsoil.

If summerfallow is to remain part of modern crop production systems, alternate methods of summerfallowing must be adopted in order to sustain our land resource. One successful method being practiced by producers is to substitute conservation fallow techniques for some or all tillage operations in a summerfallow system. Techniques such as chem fallow, wide blade cultivating, tilling at slower speeds without mounted harrows and green manure plowdown can accomplish the main objectives of summerfallow without the harmful effects soil degradation.

Why is conservation fallow better than tillage?

• Lower operating costs
  Conservation fallow replaces some or all tillage with spray operations or alternate weed control practices. It has been shown that one spray operation can replace two tillage passes. Operating costs are reduced because sprayers require less fuel to operate than tillage equipment. Also, repair and overhead costs are lower with sprayers and smaller tractors.
• Lower labour requirements
  One spray operation replaces at least two tillage operations. Also, it generally takes less time to spray than to till because sprayers are most often wider than tillage equipment.
• Better moisture retention
  Retaining surface residues will help trap snow and reduce evaporation losses. Over time, reduced tillage will lead to improved soil structure which will increase water infiltration. Improvements in water infiltration and retention can lead to higher yields, especially during years when water is limited.
• Protection from erosion
  Retaining surface residues will reduce wind speed at ground level which helps prevent erosion. More surface residues will also aid in slowing water runoff, reducing soil losses due to water erosion.
• Improved wildlife habitat
  Tillage at certain times during the spring can drastically alter and damage waterfowl nesting sites. Spraying with recommended herbicides has less of an effect.

How does conservation fallow affect crop yields?

Research undertaken at Indian Head¹ and at various locations in the Brown and Dark Brown soil zones ² has shown that in years of high moisture stress, chemical fallow results in higher fallow wheat yields than conventionally tilled fallow.

Recent studies conducted by Agriculture Canada at Saskatoon showed yield benefits to spring wheat grown on fields which included a reduced tillage program in the fallow year. (see Table 1) The benefits of conservation fallow over conventional fallow systems were more pronounced during conditions of severe drought stress. In 1988, planting on chem fallow plots produced 45% more grain than conventionally tilled treatments.

It was concluded that, under most conditions, using tillage as the sole method for weed control in summerfallow systems would limit crop production potential. This reduction is directly related to soil moisture losses due to tillage.

Economic Considerations

Even if conservation fallow provides the potential for higher yields and protection from soil erosion, it must also be an economically viable practice. The most efficient budget tool for evaluating changes in farm practices is the partial budget. Partial Budgeting is defined as the process of examining only those costs, income, and resource needs that change with a proposed adjustment. The cost, returns and resource needs of the business that are not affected by the proposed adjustment are ignored.

This exercise involves four main steps to determine revenue and cost changes from adopting a conservation fallow system. Once these changes are known, the advantages can be weighed against the disadvantages to indicate if conservation fallow is a viable alternative.

¹ Lafond, Loeppky, and Derksen, 1991
²Tanaka, 1989 and Tessier, Peru, Dyck, Zentner, Campbell, 1990

Worksheet 1

Step one: Added Revenues

1. List the acres of crops that will be seeded next year on land that is budgeted for conservation fallow this year.
2. For each crop, list the expected price and yield (in bu/ac). Use figures from the appendix or local experience to determine if there will be a yield advantage to the conservation system.
3. Calculate the gross return by multiplying column A times column B times column C.
4. Add the numbers in column A. Do the same for column D. These numbers will be transferred to the Added Revenue section, line 1, of the Partial Budget Worksheet.

Reduced Revenues

In the partial budget process, an existing practice is being evaluated against a proposed practice. The revenues from the proposed practice are considered in the Added Revenues calculation. Revenues from the existing practice are considered in the Reduced Revenues section and will be subtracted from the added revenues in the partial budget. In this way you determine the difference in revenues between the existing and proposed systems.

To determine Reduced Revenues:

1. List the same crops, prices and acres as were listed in the Added Revenue worksheet.
2. In column F. list average yields (in bu/ac) expected for the existing practice.
3. Calculate the gross return by multiplying column E times F times G.
4. The totals of the sums of columns E and H will be transferred to the Reduced Revenue section, line 10 of the Partial Budget Worksheet.

Worksheet 2

Step two: Calculate Machinery Operating Costs

Determine total annual fallow operating costs for both the proposed and current systems. Include only the costs of fuel, lubrication and repairs. Other costs components will be considered in other worksheets. The steps necessary to complete Worksheet 2 are as follows:

1. For each system, list the acres and field operations in the order that they are performed.
2. Determine the number of hours required to perform the operations listed in columns B and G. If you don't know the hours required for each operation you can calculate them as follows. Use the Acre per Hour formulas for tillage and spraying to determine the number of acres done in an hour. Divide this work rate into the acres for each operation to determine the hours required for the operation.
   
   Example. For HD cultivation using a 40 ft. cultivator at 5 mph.
   
   Work rate = 40 x 5 x .85/ 8.25 = 20.6 acres per hour
   
   where .85 is the percentage of time the machine actually works Hours required to do operation =acres/work rate = 160/20.6 = 7.77
   
   List the hours figures in columns C and H.
3. Determine the cost/acre for each operation. Costs to include are fuel, lubrication and repairs only. Do not include any fixed costs such as investment or depreciation here.Table 2 lists some example costs for typical fallow operations as compiled by farm management specialists at Sask. Agriculture & Food, Economics Branch.
4. Calculate the total cost for each operation by multiplying the acres for the operation times the cost/acre. For the conservation system multiply columns A times D. For the current system multiply columns F times J.
5. Total the hours spent on field operations (columns C and H) for each system, and the total costs for the operations (columns E and K). List them in the shaded areas.
6. A cost for labour is determined and listed at the bottom of Worksheet 2. Labour can be valued at any rate you feel comfortable with. For example, if you hire labour then use that figure. If you work off the farm then use your hourly wage. The total labour cost for the conservation system is the labour rate in $/hr (L) times the total hours required to complete the year's conservation fallow program (II).
   The total labour cost for the current fallow system is the labour rate (L) times the total hours required to complete the year's current fallow program (III).
7. The total operating costs and total labour costs for each system are transferred to the Partial Budget Worksheet 4. Total Operating costs for the conservation fallow system are put on line 6. Total labour costs for the conservation fallow system are put on line 7. Total operating costs for the current fallow system are put on line 2. Total labour costs for the current fallow system are put on line 3.

Worksheet 3

Step three: Calculate extra input costs

Determine chemical needs and costs for conservation fallow. Use rates and prices from provincial guides, agrologists or chemical suppliers.

1. List the acres, product used and rate per acre for each herbicide operation.
2. Calculate the herbicide cost per acre for each operation and list in "Price/Acre" column.
3. Calculate total cost of herbicide for each operation by multiplyingthe Price/Acre times the acres for the operation.

Total cost is transferred to the Added Costs section on line 8 of the partial budget Worksheet 4.

Worksheet 4

Step four: Partial Budget: Conservation Fallow vs Current Fallow

Use figures from Steps 1-3 to calculate a net advantage or disadvantage in switching to a conservation fallow system.

1. Place the Total Added Revenue from Worksheet 1 to the Added Revenue section, line 1, of the Partial Budget worksheet.
2. Place the Total Reduced Revenue from Worksheet 1 into the Reduced Revenue section, line 10, of the Partial Budget Worksheet.
3. Determine the Total Reduced Costs by adding the Current Fallow Operating Costs, line 2, and the Current Labour Costs, line 3. Place this figure in the Reduced Costs section of the Partial Budget Worksheet on line 4.
4. Determine Total Advantages by adding the Total Added Revenue, line 1, and the Total Reduced Costs, line
5. Place this figure in Total Advantages, line 5.
6. Added costs are the sum of the conservation fallow operating costs, line 6, labour costs, line 7, and herbicide costs, line 8. The total added costs figure is placed on line 9, Total Added Costs under the Added Costs section of the Partial Budget Worksheet.
7. The Total Disadvantages, line 11, is the sum of the Total Added Costs, line 9, and Total Reduced Revenue, line 10.
8. Calculate the net change by subtracting the Total Disadvantages, line 11,from the Total Advantages, line 5. Put this figure on line 12.
9. To calculate the Net Change per Acre, divide the Net Change value on line 12 by the Total Acres, line 13.

Summary

Converting from a conventional fallow to a conservation fallow system can provide many benefits. An economic assessment is an important consideration in evaluating the best system for your operation. There are other important considerations including:

1. Erosion protection Conservation fallow may provide better erosion protection due to increased surface residues and better soil structure.
2. Time savings Conservation fallow will provide more "free" time in the summer. How will this affect personal life? Will this extra time allow more personal activities and recreation, or will it allow for off-farm work or the addition of more land to the farm operation?
3. Reduced equipment wear and tear Tractors may not work as hard spraying as they do tilling so their lifespan may be extended. Also, tires wear may be less, due to less slippage (spraying vs tillage). These factors will affect depreciation or salvage value and should be considered in a more extensive budget.
4. Reduced investment costs If tillage is eliminated completely from the operation, are there surplus pieces of equipment that may be liquidated, such as cultivators, rodweeders, tractors etc.? This change in investment will have an effect on farm fixed costs and should be considered in a more extensive budget.

The above considerations may influence the decision to implement a conservation fallow system even if the net change as calculated in the worksheets towards conservation fallow is negative. Other considerations that may affect the decision to adopt a fallow system are:

• Will I need a new or different sprayer or marker system?
• Am I comfortable with the handling and application of herbicides?
• Are perennial weeds too major a problem now to adopt this system?
• Can I handle the change in management?

The decision to implement a conservation fallow system in your operation can best be made after the advantages and disadvantages in making the change are evaluated. Conservation fallow may well be a practical alternative to conventional summerfallow on your farm.

Appendix

Information in this Appendix is intended as a guide for worksheet calculations. Use your figures if they are more accurate or check with your local extension Agrologist/Conservationist to determine if more accurate information is available from local research or demonstration sources.

Additional resource materials (available through contact list below)

• Wide Blade Adjustment, Ducks Unlimited Video, discusses operation of wide blade cultivators.
• Using herbicides to reduce tillage factsheet, rpovides herbicide recommendation inc onservation fallow systems
• Tillage Practices that reduce soil erosion factsheet, outlines equipment and tillage practices as they relate to soil erosion
• Seeding equipment for conservation tillage factsheet, compares seeding equipment for conservation tillage
• Soil Conservation: A practical video guide and soil conservation video guide 2, available through Saskatchewan Soil Conservation Asssociation

Acknowledgements

This publication was prepared by PFRA by Branik Resource in Association with the Saskatchewan Advisory Council on Agricultural Economics. PFRA thanks the many reviewers who provided valuable comments in development of the economic fact sheets.