Farmers typically focus on yield maximization with the idea that the higher the yield, the more profitable you will be. However, that is not always the case. For all inputs, at some point, you will achieve diminishing marginal returns on that input.
This is the point where if you apply one more unit of fertilizer or another thousand seeds, the additional yield you gain from that application will not pay for itself, so you are reducing your profit. Two optimal points exist for inputs: an agronomically optimal rate and an economically optimal rate.
Crop farmers across the U.S. are looking at lower projected returns for 2025. According to the U.S. Department of Agriculture Economic Research Service, total income from selling crops, livestock, and livestock products is projected to decline across the U.S. in 2025. The data in the South Dakota State University crop budgets also reflect the decline in farm income.
While the numbers provided in the budget are only estimates of averages and not based on actual farmer financial data, they can give us an idea of what economic conditions some farmers in the state face. Throughout the three cropping regions in South Dakota, with estimates for four different crops, the return to land is negative for half the crops in the budgets. If the land is rented, the farmer will still need to subtract their cash rent from the return to land. You can find the SDSU Extension crop budgets here.
With lower commodity prices and higher input costs projected for the 2025 crop year, farmers must consider their input management decisions when evaluating ways to keep their costs low.
Switching the mindset from yield maximization to profit maximization is one way to do that. Farmers should re-visit their input rates and soil test results yearly to evaluate the most effective and cost-efficient input rates for their farms. The latest agronomic recommendations based on field research from South Dakota can be found on the SDSU Extension website.
Another way that farmers can consider making the most of the inputs is by doing experiments on their field using precision agriculture. The Data-Intensive Farm Management Program is a project based at 15 land grant institutions across the U.S. with the idea that farmers and crop consultants can implement experiments in their own fields using precision technology. The farmer implements an on-farm precision experiment of their choosing with a research question in mind. They can investigate such questions as:
- What is the optimal seeding rate in this field?
- What is the optimal fertilizer rate in this field?
- Does this biological product give me any yield advantage?
The farmer provides their status quo input rate and selects the rate range or product they would like to test on that field.
The DIFM team designs a checkerboard field trial for that field and provides it to the farmer so they can apply it using their precision equipment.
The DIFM team collects the precision data from the trial. It is inputted into their software, providing a detailed report of the fields agronomically maximum and economically optimal input levels. The farmer can see their economic results from the trial and how much money they would save or lose by applying at different rates. Farmers are provided monetary compensation for any profit losses due to participation in the DIFM trial, as well as a thank you stipend.
You can learn more about DIFM at https://difm.farm/. For more information on Data Intensive Farm Management in South Dakota, you can contact Sarah Sellars at [email protected], Jason Clark at [email protected], or Aaron Sunndquist, On-Farm Precision Experiment project coordinator, at aaron.sundquist@mitchelltech.
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