Weighing up the economics of nitrogen fertiliser

Grain Central July 11, 2018

THE INEFFICIENT or incorrect use of fertiliser can be a substantial cost in the cropping operation. Growers need to be clear about planned products, application rates and timing to optimise returns from expenditure – while being flexible enough to take advantage of changing season conditions.

David Pannell

The application rate for nitrogen (N) depends on the crop, soil, weather and rotation, but is essentially an economic decision, according to The University of Western Australia’s School of Agriculture and Environment’s WA-based researcher Professor David Pannell.

Professor Pannell said unless N fertiliser was obtained for free, the most profitable N rate was less than the amount that maximised expected grain yields.

At the yield-maximising rate, a reduction in fertiliser rate would typically save more in fertiliser costs than the resulting reduction in yield would be worth.

Professor Pannell’s studies show the best N rate depends on the balance between revenue and fertiliser costs. This depends on a range of factors, including:

  • Nitrogen supply from soil and residues
  • Fertiliser prices
  • Grain prices
  • Premiums for grain protein
  • Yield potential for the paddock in that year
  • Shape of the ‘production function’ (which is the relationship between N rate and crop yield).

As N rate increases, the crop revenue increases because yield increases (up to a point) and grain price may increase (due to protein) – but so does the cost of fertiliser applied. This is assuming that N is the only limiting factor to increased yield.

Professor Pannell said when combining revenue and cost into a ‘payoff function’, there would be an N rate that maximised profit.

At that rate, the expected revenue from cropping is increasing at the same rate as the cost is increasing. If the price of grain rises or the price of fertiliser falls, the optimal fertiliser rate for maximum profit increases.

Professor Pannell said the ‘payoff function’ for N was typically very flat, either side of the optimal N rate. This meant that there was a wide range of fertiliser rates that were only slightly less profitable than the profit-maximising rate.

He said, given this, there was little economic incentive for growers to precisely achieve the economically-optimal level of N application.

“If they are using too much or too little – for whatever reason – they can often continue to do so without sacrificing much profit,” he said.

Flat ‘payoff function’ for N also means there may be little profit to be gained from precision agriculture technologies that adjust N rates.

But Professor Pannell said price premiums for protein (in wheat) added some nuances to the flat ‘payoff function’ story.

He said the effect depended on the N application rate needed to get the grain protein above the threshold for the premium to kick-in. If that N rate was relatively low, protein premiums ‘steepen-up’ the left side of the ‘payoff function’, making under-fertilisation costlier.

If the threshold N rate was relatively high, protein premiums can make the ‘payoff function’ flat over an even wider range.

Professor Pannell said there was scope for growers and advisers to make more use of fertiliser decision-making tools, but recommended ensuring the tool being used accounted well for the economics.


Key Points

  • Soil organic carbon and nutrient levels and cropping history provide the best quantitative data to predict crop yield response to nutrients
  • Plant tissue testing in early crop development (such as at early cereal tillering) can be useful for decisions about topdressing nitrogen after sowing
  • Choose a test laboratory with Australasian Soil and Plant Analysis Council (ASPAC) certification
  • Regular planned sampling of paddocks allows monitoring of soil fertility trends over time.

Source: GRDC has a Fact Sheet stemming from its More Profit from Crop Nutrition (MPCN) project that provides tips for making ‘Better fertiliser decisions for crop nutrition.’


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