Determine Financial Value of Cover Crops


Boyer and Fredericks, who each plant cover crops on all their acres, say their crops are less stressed in dry years compared to neighboring fields without cover crops. Ponding after heavy rains and wind erosion isn’t a worry on cover cropped acres, the farmers contend. “I believe it’s because my soil is more resilient,” Boyer concluded.

Yet, cover crops are only planted on 15.4 million acres or 3.9% of U.S. cropland, according to the 2017 U.S. Census of Agriculture.

The ISA created the simulator, which went live in late 2020, with the financial help of an Iowa Natural Resources Conservation Innovation Grant. The online tool fulfills multiple goals of the organization, said ISA Data Analyst Suzanne Fey.

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By showing the financial potential of cover crops, that could boost adoption, Fey added. In turn, that can ensure the long-term sustainability and competitiveness of Iowa soybean farmers. However, farmers nationwide can use the free tool and benefit since individual data is used.

“What we’re trying to do is help farmers find ways to make it (cover crops) work,” Fey said.

SIMULATOR BASICS

The online interactive simulator shows visual illustrations of estimated economic outcomes of cover crops based on a range of market prices, potential yield changes and various income and cost offset opportunities. It also provides examples of cost offset opportunities and their impact on revenue, creating a sensitivity analysis of net return.

The simulator provides an easy starting point for those unfamiliar with cover crop management, as well as a useful platform for long-time cover crop beneficiaries. All formulas can be viewed, and input values edited and results automatically recalculated. Revenue sources have quick-select options to offset base costs, which can also be tweaked to reflect the specific programs available in your area.

The following are examples of data needed (data is cleared — not saved — when the application is closed):

1. Field and market information such as field size in acres (starting with a field size of 1 acre is recommended when drafting a simulation), cash crop after a cover crop, average cash crop yield and current market price of the chosen grain.

2. Cost to establish cover crop. Default, ballpark values are provided if needed.

3. Income opportunities such as grazing, harvesting forage or relay cropping cereal rye. If a user doesn’t select an income opportunity, the default value remains at zero revenue for this category. Default values are included in each income option.

4. Cost mitigation opportunities such as state and federal assistance, carbon program payments, reduced commercial fertilizer needs, improved soil health/organic matter, reduced erosion and lower crop insurance premium, just to name a few.

5. Although not included in the individual field calculation, there is information related to added value for the greater good. This includes flooding mitigation and water quality improvements, among other things.

When using the simulator to figure the net return of planting corn after cover crops, Fredericks conservatively uses an average corn yield of 200 bushels per acre (bpa) (2021 yields averaged about 220 bpa) and a $5-per-bushel selling price. His estimated cost to buy and plant cereal rye is $26.71 per acre (includes a $10-per-acre reduction in herbicide costs). The mitigation value totals $65.76 per acre: reduced commercial fertilizer needs, $38.74 per acre; reduced insurance requirement, $10.50 per acre (cheaper countywide protection is chosen instead of more expensive revenue protection due to soil resilience); improved water retention, $5 per acre; reduced erosion, $1.52 per acre; and crop insurance discount, $10 per acre.

Fredericks said the calculator “puts a different look at cover crops than anyone is used to seeing. But the calculator is only as good as the data that goes in.”

Building organic matter by 1% and reducing nitrogen needs by 40% are two of the big benefits of cover crops on Boyer’s farm. “If you go buy a piece of property, you know that you’re willing to give more money for one with higher organic matter. So, you know there’s value there,” he said.

Watch a video on how the Iowa Soybean Association Cover Crop Net Return Economic Simulator works: https://www.iasoybeans.com/….

Matthew Wilde can be reached at matt.wilde@dtn.com

Follow him on Twitter @progressivwilde

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Determine Financial Value of Cover Crops

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