Brown manure as a farm risk strategy – a whole farm perspective

Robert A Patterson,

Rural Management Strategies Pty Limited

Take home messages

• Farmers are faced with highly variable crop yields from one year to the next, with the overall trend in yields down, due primarily to decreasing Growing Season Rainfall and Available Moisture.
• The quantity and cost of key crop inputs used in continuous cropping, particularly herbicides and Nitrogen fertiliser, is increasing in spite of decreasing yields.
• The production and financial risk profile of continuous cropping farm businesses is increasing, due to crop yields trending down, coupled with costs of production steadily increasing.
• A crop production system involving brown manure legumes, can be as profitable as continuous cropping, but even if slightly less profitable, has considerably less production and financial risk due to lower input and operating costs.

Background

Many farmers in southern NSW, particularly younger ones, have switched from a traditional mixed farming system to a more intensive farming system involving no livestock at all.  While these decisions may have been rationalised or justified on the basis of dubious economics, or the notion that sheep are nasty for soil structure and incompatible with cropping, the reality is that many of these decisions have been made for reasons of personal choice or lifestyle.

However, it is acknowledged that not many farmers excel at managing both crop and livestock production systems, as compromises do exist and have to be managed on mixed farms.  Therefore the adoption of a production system where only crops have to be managed, can be rationalised on the basis that a manager is likely to perform better in an area in which he or she specialises and prefers.

The benefits of crop rotations, especially crop sequences where wheat follows broadleaf crops such as grain legumes or oilseeds is widely known and acknowledged.  So also are the benefits of lucerne to livestock production (especially sheep) and subsequent crops.

However, during the relatively dry decade of the recent past, the benefits of lucerne to subsequent crop production have been challenged by many farmers, due to failures of pasture establishment under cereal crops in dry springs, plus poor crop performance following lucerne where recharge of soil moisture has not occurred prior to cropping.

Continuous cropping would appear to be free of these negative impacts of lucerne, but obviously also fails to benefit from the positive aspects of lucerne.

Due to changes in traditional markets for lupins and field peas in southern NSW, there is only a very limited scope for using grain legume cash crops in rotation on any significant scale, which leaves canola as the only viable cash break crop.  This has resulted in crop sequences of CWCW or CWW being adopted.

These sequences however, require increasing quantities of artificial Nitrogen, in an attempt to maintain yields and grain protein, while weed control, particularly that of annual ryegrass and wild oats, has become more problematic with increasing incidences of herbicide resistance occurring.  Full stubble retention and the adoption of wide row spacing have also presented challenges for controlling grass weeds, through less efficacy of many pre-emergents due to stubble absorption, and less crop competition for weeds, depending on crop type and variety.

The author has serious doubts as to whether these continuous cropping sequences involving only canola and wheat, are sustainable in the medium or long term.

Therefore brown manure legume crops, comprising of field peas and vetch, are being adopted into cropping systems to address the shortcomings of continuous cropping, particularly with regards to Nitrogen input and herbicide resistance.

Rainfall and crop yields

The average annual wheat yields from a typical North Eastern Riverina farm in southern NSW, for the period 1986/87 to 2013/14 are presented in Figure 1.  The average wheat yield for this period is 3.19 t/ha and the median is 3.37 t/ha, but the trend line slopes down, depicting lower yields over time, coupled with significant variation from year to year.  Canola yields for this farm show a similar trend and volatility, with average yields for the same period being 1.46 t/ha (46% of wheat) and median yields being 1.58 t/ha (47% of wheat).

Figure 1. Average wheat yields 1986/87 – 2012/13 (NE Riverina farm).

The volatility and trend in wheat and canola yields is largely explained by decreasing Growing Season Rainfall and Available Moisture (30% November to March rainfall plus April to October rainfall less 110 mm). 

The very close relationship between average wheat yields and Available Moisture which averaged 296 mm for the period, is shown in Figure 2.

Figure 2. Available moisture versus wheat yield, 1986/87 – 2012/13 (NE Riverina farm).

The downward slope for both Growing Season Rainfall and Available Moisture is very similar, but steeper than the downward slope of the farm’s annual average wheat yields, depicting a slight increase in Water Use Efficiency over this time period.  The Water Use Efficiency calculation for wheat based on Available Moisture, expressed as kg/mm is illustrated in Figure 3

Figure 3. Average WUE 1986/97 – 2012/13 (NE Riverina farm).

Brown manure legume crops

Brown manure cropping has involved growing a grain legume crop with minimal inputs in terms of fertiliser and herbicides, with the aim of achieving maximum dry matter production before the major weed species being targeted, such as annual ryegrass or wild oats, have set viable seed.  The grain legume crop is sprayed with a knockdown herbicide before seed set to kill both the crop and weeds, ideally no later than the initiation of pod development of the crop, to also conserve soil moisture.  A second knockdown herbicide application is generally made to achieve a “Double Knock”.  This is in contrast to green manure where both the crop and weeds are killed by cultivation. 

Vetch is a common brown manure crop, but the author has favoured early sown field peas, due to their greater competiveness with weeds and potentially greater dry matter production. Higher dry matter production should lead to higher Nitrogen accumulation, while more stubble cover provides shading to reduce evaporation and sunlight available to germinating weeds.

Brown manure legume crops provide three major benefits over long fallowing.  These benefits are; competition for weeds (reducing the application of knockdown herbicides during the growing season), accumulation of soil Nitrogen and the maintenance of ground cover both during the growing season and over the summer preceding the next crop.  This brown manure crop residue should reduce soil surface evaporation and reduce wind erosion, but also provide a better environment for germinating weeds over the summer.

The major disadvantage of brown manure crops compared with long fallowing is the cost of the grain legume seed ($30-$35/ha), plus the cost of sowing, which is low in the overall scheme of things.  Fertiliser is not usually applied at sowing unless soil Phosphorus levels are low, as grain legumes are relatively non-responsive to Phosphorus if sown early.  Also, no nutrients are exported from the paddock in that year.

Crop sequences

Grain legume crops such as lupins in southern NSW have traditionally been followed by wheat, which responds well in terms of both yield and grain protein, due to the freedom from root diseases and high soil Nitrogen levels.  However in dry springs, many of these wheat crops “blow up”, due to high early dry matter production depleting soil moisture, resulting in reduced wheat yields, high protein but grain with high screenings.

The author has observed severe take-all in early sown wheat crops (mid to late April) sown on well managed canola, lupin and field pea stubbles, where successive wet winters and springs during the 1990’s were favourable for the build-up of the take-all fungus.  This occurred especially where liming had taken place recently and crops were direct drilled.  Severe crown rot has also been observed in wheat sown after well managed canola crops. 

One year’s control of wild oats in a break crop, does not appear to give sufficient control to the extent that control measures are unnecessary in the following wheat crop.

Given the desire to establish canola early with stored soil moisture and adequate Nitrogen to optimise yield potential, canola is now being grown after brown manure crops.  This enables almost complete prevention of wild oat seed set in two successive years, which depletes the seed bank significantly to the extent that control measures may not be necessary in the following two cereal crops.  This has significant cost savings and reduced risk of crop damage from post-emergent wild oat herbicides.

The two year broadleaf crop sequence of brown manure legume followed by canola is also predicted to provide control of crown rot, which a one year break does not.  Reduction of take-all levels under high disease pressure weather conditions, should also be adequate to allow early (mid April) sowing of the first wheat crop with little root disease risk.  The ability to sow early with confidence (subject to variety), is expected to lead to higher wheat yield potential.

The incidence of yellow leaf spot in wheat crops has also been observed to be substantially less following two sequential broadleaf crops.

A common crop sequence being adopted is brown manure legume, followed by canola, wheat and feed barley.  While field peas have generally been the first brown manure crop grown, vetch is being adopted in the second sequence, to minimise disease experienced with only a three year break between pea crops.

Economics

An economic analysis of two farming systems conducted in southern NSW with a 450 mm annual rainfall is presented below.  The two farming systems analysed were:

1. Continuous cropping of wheat and canola only.
2. Continuous cropping, but including brown manure field peas grown on 25% of the arable area.

The economic analysis is based on a 1,680 hectare property in Southern NSW, which is 95% arable (1,600 hectares) and run by two family labour units performing most of the operations themselves.  The data used is drawn from actual farm results and figures from clients of the author. 

The assumptions used for each of the two production systems are presented in Table 1.

Table 1. Assumptions used – 1,600 ha arable (95%) farm

Farm data from properties which have adopted brown manure peas, have shown
25 – 30% yield increases for both canola and wheat crops grown in the two years following brown manure pea crops.  Wheat crops grown either after PC or PW have also shown elevated grain protein levels.

The analysis conservatively assumes a 20% increase in yield above average in the first two crops following brown manure peas.  Wheat prices have been adjusted to reflect protein levels.

Table 2 shows the estimated capital required for each of the farming systems. The difference in plant investment is due to a larger header and bins being required for the continuous cropping system, due to the greater area and tonnage to harvest in a given time.  The working capital requirement of the continuous cropping system is higher than the brown manure peas system, due to the larger area of cash crop requiring higher inputs in terms of herbicides, fungicides and artificial Nitrogen.

The amount of working capital required is a measure of the degree of risk of the system, as while there is almost a guarantee that costs of continuous cropping will be higher, there is no guarantee that gross income will be higher.  This results in the potential for a greater loss to occur in that year if seasonal conditions are unfavourable, leading to the potential for this additional working capital to be capitalised into long term debt.

The brown manure system is considered to be relatively robust and low risk in drier seasons, as there is less potential to spend money on crop inputs, in the desire to achieve elusive higher crop yields.

Table 2. Capital required for business

The annual trading results measured by EBIT (Earnings before Interest and Tax) and three key financial ratios are shown in Table 3.

EBIT is a measure of profitability after allowances for plant replacement and family labour.

It is seen that based on the assumptions used, predicted EBIT from continuous cropping is slightly higher than that from the brown manure legume system.  There is little difference between the financial ratios, except that while the gross income and EBIT from continuous cropping is higher, it has the lower EBIT Margin, due to its higher costs relative to income.  This lower EBIT Margin suggests a higher degree of risk associated with this system.

The results of the comparison are very sensitive to the price of Nitrogen fertiliser, which is relatively cheap at present.  A $100/tonne increase in the price of Urea, increases costs in continuous cropping by
$19,200 pa compared to $5,200 in the brown manure legume system.  This would bring the respective EBITs within $2,000 of each other.

Table 3. Annual trading results and financial ratios ($pa)

Table 4 presents the annual cash receipts and payments for the two farming systems at average crop yields, based on current fertiliser prices.

It is seen that based on the assumptions used, the annual cash surplus from continuous cropping is slightly higher than that from the brown manure legume system.  However to achieve a higher cash surplus of $6,653, the outlay prior to harvest to produce the crops, is $115,000 more for the continuous cropping system.

Table 4. Annual cast receipts and payments assuming average crop yields

The annual cash receipts and payments for the two farming systems at one third (33%) of average yields, due to very low spring rainfall and/or late frost after all crop inputs have been used, are shown in Table 5.

Table 5 shows that based on the given assumptions, the annual cash deficit from continuous cropping is substantially greater ($71,930) than that from the brown manure legume system.

While there may be some savings in crop establishment costs in the second year after the adverse weather event depicted in Table 5, the savings are likely to be similar in both systems.  Assuming no significant savings, it is seen that the potential working capital requirement in the second year, are around $187,000 more for continuous cropping compared with the brown manure legume system.  When interest is added, the difference is close to $200,000, depicting the much higher downside financial risk of continuous cropping in years with dry springs and/or late frosts.

Table 5. Annual cash receipts and payments assuming crop yields 33% of average

Conclusion

Volatile and lower Available Moisture, coupled with an increasing reliance on artificial Nitrogen fertiliser and selective herbicides in continuous cropping systems, has increased the risk profile of those businesses significantly.

Actual farm data from recent years, suggests that a crop production system comprising brown manure legumes, canola, wheat and barley, can be as profitable as continuous cropping, but with less production and financial risk.  The brown manure legume system is considered to be more resilient in dry years, plus more sustainable due to the reduced reliance on selective herbicides for weed control and artificial Nitrogen for crop nutrition.

For those producers who prefer not to engage in mixed farming involving livestock, it appears that a brown manure legume system can produce acceptable financial results, with a relatively lower risk profile compared to continuous cropping.

Generally, simple but technically sound systems have less risk and perform better financially, than more complex systems.

Contact details

Robert A Patterson

Rural Management Strategies Pty Limited

PO Box 472, COOTAMUNDRA  NSW  2590

02 6942 3666

robertp@rmsag.com.au