Economics of Direct Seeding

The deterioration of our soils and environment, along with increasing energy and labor costs, have encouraged more producers to adopt soil conservation practices such as one pass low disturbance seeding.

Many producers are aware of degradation issues on the farm, but have been hesitant to modify their current operations. Some producers are fearful of increased costs of new technologies and the business risk associated with change. Long time direct seeders realize there is a net economic benefit to adopting direct seeding practices. More importantly, they recognize zero till systems offer long-term soil conservation benefits. By treating the soil as a valuable economic asset, producers can positively impact crop production at present and in the future.

Producers considering a transition to zero till need to assess their situation and determine the economic viability of direct seeding. Making the change involves more than just buying equipment and reducing tillage. It also involves evaluating the existing practice and planning the transition to a direct seeding operation. Factors such as the capital cost of equipment and variable cost of production will no doubt have an effect on net return. Other factors such as farm location and size, soil type, crop rotations, current seeding technology, and the producer's age and management ability will also influence the transition.

A helpful method of evaluating change in farming practices is the creation of a partial budget. The budget produced by the Canada-Saskatchewan Agreement on Soil Conservation examines the costs, returns, and resource needs required for transition. Since both directing seeding and conventional till systems have needs that are unaffected by the transition, these factors are ignored. Once costs and returns are calculated, producers can determine whether a change in operations is feasible. Producers should, however, be aware that making a complete transition to direct seeding is not accomplished by simply purchasing an air drill. In most cases, it takes two or more years for the actual dynamics of the farm to evolve.

The following chapters emphasize the economic changes one might expect with the conversion from conventional seeding to low disturbance direct seeding.

The Production Side

The determination of the economic analysis of direct seeding is under investigation by many researchers in Saskatchewan. In most cases, yield potential and costs vary according to soil zone, as well as from farm-to-farm. This section focuses on the economics of crop rotations. For further information on the design, agronomics, and benefits of crop rotations, please refer to the Rotation section of the website.

One of the biggest challenges in developing a direct seeding crop rotation is identifying a system that is economically viable from year to year. Producers must strive to maximize yields and manage costs. Many variables contribute to yield potential when using direct seeding practices, including precipitation, fertility, weed management, rotations, and management ability. Although factors such as the weather cannot be controlled, producers who practice good agronomics can help maximize yield and quality.

The majority of research completed to date indicates direct seeded crops will, on average, yield equal to or higher than conventional seeded crops when extended and diversified rotations are used. Research has also shown monoculture rotations, such as wheat on wheat, provide the lowest economic return of all cropping sequences examined. (Zentner & Lafond et al; 1999, McConkey et al; 1996).

The enhanced economic performance of a diversified crop rotation versus a monoculture rotation is attributed to the agronomics of an extended rotation and the production of higher valued crops with in the rotation. Agronomic benefits resulting from extended rotations include less disease, insect and weed pressures, greater residual soil nutrient and moisture reserves, and reduced soil losses. Recent research suggests diversified rotations in the majority of soil zones provide higher, more stabilized net farm income. (Zentner et al; 2002). In most cases, these rotations also lowered the costs of production by incorporating pulses and oilseed crops with cereal grains. As one progresses from the Dark Gray and Black soil zones to the Dark Brown and Brown soil zones, the level of risk increases due to lower precipitation rates and higher evaporation rates. It is the SSCA's belief that the use of extended and diversified rotations in all soil zones decreases overall risks and increases net farm income. Producers should adopt well managed extended rotations that include pulses and oilseeds, and refrain from monoculture rotations such as wheat on wheat.

Direct seeded fields also benefit from the merits of conservation tillage and retention of surface residue. By leaving standing stubble, producers allow fields to trap more snow throughout the winter. This, in turn results in increased water infiltration and reduced evaporation losses. Excess soil moisture should result in increased yields, provided that good agronomic practices - such as disease and weed control and proper rotations - are practiced.

Costs of Production

Farm operation costs usually change when producers make the transition from conventional tillage to direct seeding. When evaluating the change, both fixed and variable costs must be taken into consideration. Variable costs are the operating costs required to grow the crop. They include fuel and oil, repairs, fertilizer and chemical, and labour. Fixed costs are costs associated with ownership of capital assets. They include equipment and building purchases, asset depreciation, and related costs. Operating costs ultimately vary between producers, partly due to factors such as farm size and location, current financing, and management style. If a crop is not sown then variable costs will not change, however fixed costs will accrue regardless if a crop is being sown or not

Fuel Costs

A significant change that occurs with the transition to direct seeding is a decrease in fuel usage. Direct seeding operations combine seeding, fertilizing, and packing into one field operation. Since producers make significantly fewer trips across the field, fuel costs can be reduced by as much as 40 to 60 percent In addition, spraying operations can be substituted for tillage operations to control weeds. Sprayers utilize much less fuel and accomplish the same task.

The following table utilizes the Nebraska tractor test to determine net fuel savings when substituting spraying operations for tillage operations. The study utilizes a 40 foot heavy duty cultivator as the initial tillage operation. The study references a second and third tillage pass using the same implement but at lower draft requirements.

Table 1: Net Fuel Savings from Substituting Spraying for Tillage

Western Canada

Cost Saving

Litres of Diesel

$0.50/litre

$0.60/litre

$0.70/litre

# Of tillage passes

Per acre

Spraying

Net

$/acre

$/acre

$/acre

1

2.4

0.3

2.1

1.07

1.29

1.50

2

4.4

0.3

4.1

2.05

2.46

2.87

3

6.3

0.3

6.0

3.02

3.63

4.23

Source: Nagy, 2001

The substitution of a sprayer for a heavy duty cultivator at a diesel price of 50 cents per litre show a fuel cost savings of $1.07 in one tillage pass. The cost savings on a second tillage pass would be $2.05, and on a third tillage pass would be $3.02. Note as the price of diesel increases, the savings in fuel also increases.

Repairs and Maintenance

In a direct seeding operation, existing machinery such as a primary tractor is used at a lesser rate than a conventional tillage operation. Decreased machinery usage will ultimately result in lower repair and maintenance costs while increasing the lifespan and salvage value

A recent Alberta study conducted by Lorne Erickson, Alberta Agriculture, Food and Rural Development, compared repair costs of three 2000-acre farms - one using direct seeding, one using minimum tillage, and one using conventional tillage. The study concluded the farm using the direct seeding approach had annual repair costs of about $3.70 per acre, the minimum tillage approach had costs of $4.00 per acre, and the conventional tillage approach had costs of $5.70 per acre. The differences in repair costs reflected the increased amount of acres that need to be covered in a conventional system, which correlated into greater amount of tractor hours, increased wear and tear on ground tools, and higher lubrication costs. In the direct seeding operation sprayers were used instead of tillage equipment which reflected the lower fuel usage and decreased tractor maintenance requirements

Labor & Management Costs

Reductions in time and labor requirements are usually associated with direct seeding systems. The major savings result from a reduced number of tillage passes and decreased amount of time spent on repairs and maintenance. In direct seeding operations that incorporate hired help, producers spend fewer dollars on labour costs. In operations with only one labourer, producers benefit from an increase in time. This extra time may be spent expanding the land base to distribute fixed costs, tending to other operations of the farm, or providing custom services to earn extra revenue. Some producers may choose to work off the farm, while others may take advantage of the time for personal, family, or recreational activities.

The transition to direct seeding results in another cost that may be viewed as positive or negative. Producers will need to ride the learning curve and commit to effective management practices. They will ultimately spend more time in the office or at the kitchen table devising rotations that are economically viable and environmentally sustainable. With their reliance on pesticides, producers must ensure they have a simultaneous understanding of the products and any residues they leave behind. Although direct seeders may spend extra time monitoring pests and diseases and devising control strategies, they can minimize problems through proper crop rotation management.

Chemical and Fertilizer Costs

With the transition from conventional tillage to direct seeding, another major change that occurs is the shift in weed populations and species. In some cases, tillage operations keep certain weeds in check. As the dynamics of the system change, producers need to implement different weed control measures to minimize crop losses. Direct seeding herbicide costs are often higher than conventional tillage herbicide costs, since tillage is being substituted for a pre-seeding burn-off treatment. Pre-harvest treatments are also used frequently to control perennials such as quack grass and Canada thistle, and post-harvest glyphosate or phenoxy applications are often used to control winter annuals.

The following table compares herbicide costs of various crops in direct seeding and conventional tillage systems. The figures are provided by Saskatchewan Agriculture and Food and Rural Revitalization, and are referenced in the 2002 Crop Planning Guide from each soil zone. Although there are other variables, the figures below provide a good estimate of transition related costs.

Table 2: Estimated Herbicide Costs for Direct and Conventional Seeded Stubble Crops

Conventional seeded stubble crops

$/acre

Direct Seeded Stubble Crops

$/acre

Crop Type

Brown Soil

Zone

Dark Brown

Soil Zone

Black Soil

Zone

Brown Soil

Zone

Dark Brown

Soil zone

Black Soil

Zone

Spring Wheat

10.49

14.46

14.46

13.88

17.84

17.84

Canola

-

19.73

19.73

-

23.70

23.70

Feed Peas

-

18.98

20.30

-

22.37

23.52

Lentils

33.19

33.19

33.19

36.58

36.58

34.90

Mustard

16.00

-

-

16.72

-

-

Flax

20.64

21.04

21.04

24.02

24.42

24.42

Feed Barley

10.80

15.03

15.03

14.19

18.41

18.41

Source: Saskatchewan Agriculture and Food and Rural Revitalization, 2002

The transition from the Brown to Dark Brown to Black soil zones reflects an increase in herbicide costs with both seeding methods. The comparisons made between seeding methods within each soil zone reflect the cost of pre-plant burn-off treatments. Many long time direct seeders believe that, over time, herbicide costs will drop to conventional cost levels as the benefits of lower soil disturbance and proper crop rotations take effect.

Fertilizer costs in a direct seeding system should not change significantly when compared to a conventional tillage system. In some cases, fertilizer costs may increase to take advantage of the increased soil moisture saved and to possibly gain a higher yield potential. However increasing the fertilizer rates to take advantage of the extra moisture saved is personal preference. On the other hand, many long time direct seeders state that since beginning direct seeding, their fertilizer costs have decreased without affecting yield. This decrease is a result of the benefits of crop rotation and increased residual nutrient status on the soil.

Machinery Costs

To make the transition into direct seeding, producers may be required to invest in specialized equipment such as a direct seed drill. The amount of equipment needed will depend on existing farm practices and current machinery complement. For example, a producer who requires a large amount of new equipment will have higher transition costs. A producer who uses existing equipment, such as a sprayer and a combine that provides decent residue management, along with a decent air seeder will face lower transition costs.

The switch to direct seeding will also make some current equipment obsolete, including cultivators, harrow packer drawbars, rock pickers and even secondary tractors. Although this equipment could be liquidated all at once, most producers choose to sell assets over a period of time until they are comfortable with the transition. In many cases, the adoption of direct seeding should result in a net reduction in machinery stock and a reduction in fixed costs of capital ownership

Since direct seeding systems reduce the number of tillage passes, primary and secondary tractors will have a lower hourly use rate per year. As such, the lifespan and salvage value of equipment should increase, and repair and maintenance costs should decrease.

When making the switch to direct seeding, producers can consider three options. They can modify existing equipment, purchase used equipment, or buy new equipment.

If the decision is to modify existing equipment, producers must ensure it is designed to seed into trash and residue. With this in mind, they may have to adjust combine spreaders so the straw and chaff are spread properly. Common modifications to existing air seeders include the addition of a floating hitch, the purchase of on row packers, and the use of ground openers that place seed and fertilizer safely in one operation.

If the decision is to purchase used or new equipment, producers need to match it to the available amount of horsepower on the primary tractor. The following table provides capital costs associated with the transition to direct seeding using three options of conversion. Note these figures do not reflect trade-in values of existing equipment.

Table 3: Capital Cost of Converting to Zero tillage ($/M of seeder)

Upgrade

Used Zero till

New Zero till

495 to 2100

3000 - 4000

6000 - 8000

Source: Nagy, 2001

The selection and use of equipment can greatly affect the financial success of the farm

In the short term, producers who switch to direct seeding may see an increase in capital cost expenditures. The amount of investment depends on the existing machinery complement. Producers must determine the amount of financial risk they can handle. If the cost of transition exceeds cash flow expectations or impacts debt load, producers may have to re-evaluate their decisions regarding investments and implement the transition into direct seeding over a longer period of time.

References

Zentner R.P., D.D. Wall. C.N. Nagy, E.G. Smith, D.L. Young, P.R. Miller, C.A. Campbell, B.G. McConkey, S.A. Brandt, G.P. Lafond, A.M. Johnson, D.A. Derksen. 2002. Economics of Crop Diversification and Soil Tillage Opportunities in the Canadian Prairies. Agron. J. 94:216-230.

Zentner R.P., G.P. Lafond, D.A. Derksen, D.D. Wall, R. Geremia, B.J. Blomert. 1999. The Influence of Conservation Tillage on Economic Returns and Riskiness of Cropping Systems in the Thin Black Soil Zone. P.98-108. In Soils & Crops 1999. Proc Workshop. Saskatoon, Sk. Canada 25-26 Feb. 1999. Ext Div., University of Saskatchewan, Saskatoon, Sk. Canada.

Zentner R.P., B.G. McConkey, C.A. Campbell, F.B. Dyck, F.Selles. 1996. Economics of Conservation Tillage in the Semiarid Prairie. Can. J. Plant Sci. 76: 697-705.

Lafond G.P., R.P. Zentner, R. Geremia, D.A. Derksen. 1993. The Effect of Tillage Systems on the Economic Performance of Spring Wheat, Winter Wheat, Flax, and Field Pea Production in East-Central Saskatchewan. Can. J. Plant Sci. 73:47-54.

Gray R.S., J.S. Taylor, W.J. Brown. 1996. Economic Factors Contributing to the Adoption of Reduced Tillage Technologies in Central Saskatchewan. Can. J. Plant Sci. 76:661-668.

Nagy C.N. 2001. Reduced Tillage Economic Impact Study - West. Prepared for Monsanto Canada Inc. 1-6.

Manitoba - North Dakota Zero Tillage Farmers Association. 1997. Economics. Zero Tillage - Advancing the Art. 8-10.

PAMI. 1999. Economics. Direct Seeding Manual. 107- 142.

Manitoba - North Dakota Zero Tillage Farmers Association. 1991. Economics of No Till. Zero Tillage Production Manual. 40 - 42

Saskatchewan Agriculture and Food. 2002. Crop Planning Guide - Brown Soil Zone.

Saskatchewan Agriculture and Food. 2002. Crop Planning Guide -Dk. Brown Soil Zone.

Saskatchewan Agriculture and Food. 2002. Crop Planning Guide -Black Soil Zone.

Alberta Agriculture Food and Rural Development. 1997. Direct Seeding Economics for the Black and Gray Wooded Soil Zones of Alberta. 1-4.

Alberta Agriculture Food and Rural Development. 1997. Direct Seeding Economics for the Brown Soil Zone of Alberta. 1-4.

Saskatchewan Agriculture and Food. Revised 1998. Comparing the Cost of Conventional and Direct Seeding. 1-11.

Saskatchewan Agriculture and Food. 1993. Chemical Weed Control in Direct Seeding.

1-6.

Green. M. 2001. Farmers Reap Fuel, Equipment Savings from Direct Seeding Systems. Grainews March 27th ed. 43.

Canada-Saskatchewan Agreement on Soil Conservation. Revised 1993. Economics of Zero Tillage. Soil Works. 1-20.