Achieving Profitability with On-Farm Conservation

Balancing On-Farm Conservation and Economic Priorities

Agricultural conservation practices are pivotal to addressing some of agriculture’s most important natural resources concerns. At the same time, it is critical that farmers run profitable businesses and that environmental stewardship priorities support farm profitability.

To expand on growing information around the profitability of conservation agriculture, Soil Health Partnership (SHP), Environmental Defense Fund (EDF) and K·Coe Isom collaborated to evaluate the financial impact of conservation tillage and cover crop usage among Midwest corn and soybean farmers.

The goals of this project were to:

Compare crop budgets for fields using conventional vs. conservation practices

Identify benefits, opportunities and limiting factors associated with common conservation approaches

Help farmers and their business partners better understand the financial dynamics of conservation practice adoption

Throughout 2020, the project team collected information about farm operations, management practices, and financial data, which was then analyzed to identify the impact on each farmer’s bottom line.

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Findings At a Glance

Based on the information collected, we identified three key financial impacts of implementing conservation practices among our participating farmers.

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1. Conservation Tillage Reduces Operating Costs

In the face of a challenging farm economy, reducing costs of production can be one way for farmers to improve profitability. By reducing or eliminating tillage, growers were able to reduce operating costs. In our study, growers practicing conservation tillage had higher net returns and lower per-acre costs than fields under conventional tillage for both corn and soybeans. Cost savings largely resulted from fuel and oil, machinery, equipment and repair expenses.

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2. Cover Crops Can be Part of a Profitable System, Especially as Experience Grows

All of the farmers we worked with used cover crops on at least a portion of their acres, but their scope of use, management practices, and experience level varied. We found that, while this conservation practice requires up-front investment (e.g., seed), profitability with cover crops improves as growers get more experience with this approach. For example:

Farmers in our study with more than five years of experience with cover crops had lower per-acre costs and higher net returns than farmers with less than five years of experience with cover crops.
Cost savings among more experienced cover croppers were most often seen in seed expenses and cover crop and fertilizer application costs, indicating a learning curve as growers identified their best “recipe for success” over time.

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3. Success with Conservation Practices is Optimized with a Targeted, Stepwise, Tailored Approach

Profitable conservation systems do not look the same on every farm since growers implement different strategies to address their specific needs. Farmers in our study achieved profitable conservation systems by aiming to address specific management challenges with in-field conservation practices. It is critical that we go beyond asking farmers what they are doing and expand to why they are using a certain approach and how that influences their decision making. For example:

Some of the most common challenges addressed through conservation approaches were attempting to improve soil structure as a way to improve water management and reduce erosion, and minimizing passes across the field to save time, machinery, and overhead costs.
Growers tend to take a stepwise approach to testing and adopting cover crops, but often transition to conservation tillage all at once. This reflects the learning curve for identifying the best cover crop species and mixes, seeding methods, and termination approaches – and then allowing time to make decisions based on observed outcomes. Financial and technical support can help farmers navigate the learning curve effectively. Programs like SHP help farmers test and measure the outcomes of their transition to conservation systems.

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About the Farmers

Ken Rosenow

Peter Rost

Ryberg Farms

Minnesota Farmer

Dwight Dial

Gaesser Farms

Indiana Farmer

Ken Rosenow

Ken Rosenow – Wisconsin

Crops: corn, soybeans and wheat
Acreage: 1,100 acres
Tillage Practices: no-till, conventional till
Cover Crop Practices (204 acres): aerial-seeded cereal rye

Peter Rost

Peter Rost – Missouri

Crops: corn and soybeans
Acreage: 3,500 acres
Tillage Practices: reduced tillage
Cover Crop Practices (1,362 acres)

Ryberg Farms

Ryberg Farms – Minnesota

Crops: corn, soybeans and sugar beets
Acreage: 4,800 acres
Tillage Practices: strip-till, no-till
Cover Crop Practices (2,900 acres): interseeded annual ryegrass, hairy vetch, turnips and rapeseed by broadcast with incorporation

Brian Ryberg of Ryberg Farms saw substantial savings by implementing conservation tillage. Learn more about his experience >>

Minnesota Farmer

Crops: corn and soybeans
Acreage: 914 acres
Tillage Practices: no-till, reduced tillage, conventional tillage
Cover Crop Practices (107 acres): drilled cereal rye

Dwight Dial

Dwight Dial – Iowa

Crops: corn and soybeans
Acreage: 640 acres
Tillage Practices: no-till
Cover Crop Practices (317 acres): aerial-seeded cereal rye and rapeseed

Dwight is an experienced adopter of cover crops. Learn more about the role experience plays in cover crop profitability >>

Gaesser Farms

Gaesser Farms – Iowa

Crops: corn and soybeans
Acreage: 5,000 acres
Tillage Practices: no-till
Cover Crop Practices (4,855 acres): drilled cereal rye

Chris Gaesser of Gaesser Farms is an experienced adopter of cover crops. Learn more about the role experience plays in cover crop profitability >>

Indiana Farmer

Indiana Farmer:

Crops: corn and soybeans
Acreage: 5,800 acres
Tillage Practices: strip-till, no-till, conventional tillage
Cover Crop Practices (188 acres): aerial-seeded oats, crimson clover, radish and rapeseed

Indiana Farmer is an early adopter of cover crops. Learn more about the role experience plays in cover crop profitability >>

Participating farmers were offered the option to remain anonymous. Farmers who requested to be anonymous (2/7) are referred to based on the state in which they reside and described by their farming practices and the financial and management data they provided through the project.

Why Digging Into Farm Financial Data is Important

Conservation practices can be profitable, but do not pay for themselves in all situations. The business case for adopting these practices is complex and variables that differ across farms – including soil type, precipitation, geography and crop rotation – can alter the optimal financial conservation system. However, as this and other studies have shown, adopting conservation systems can be profitable and can provide solutions for natural resource and management challenges. It is therefore important to provide more and increasingly refined financial information about conservation practices to farmers from different geographies, farm sizes, and crop productions.

Financial information on conservation practices is especially important for stakeholders to gather and communicate, since groups across the agriculture sector are raising their sustainability ambitions and looking to invest in environmental solutions. But, like any other investment, financial support for adopting agricultural conservation practices must be informed by the underlying costs and benefits that occur over time. Gathering financial and management data to better understand the financial impacts of conservation practices can help develop solutions that effectively provide the financial support farmers need to achieve profitable conservation management systems.

With that in mind, we encourage stakeholders across the agriculture sector – including federal and state agencies, farmer associations, agricultural lenders, food and grain supply chain companies, and conservation organizations – to integrate financial data gathering within their programs to inform their conservation solutions and to support farmers in establishing profitable conservation systems.

Our Project Team

Soil Health Partnership

SHP is a program of the National Corn Growers Association, dedicated to promoting the adoption of soil health practices among farmers. By building a peer-to-peer network – which, to date, spans more than 16 states and includes more than 200 growers – we collaborate with farmers to conduct on-farm research exploring the economic and environmental benefits and risks of soil health practices.

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Project Team Members:

Maria Bowman, PhD
Tricia Verville
Jack Cornell
Anna Teeter
Dustin Brucker
John Stewart

Environmental Defense Fund

EDF is a leading international nonprofit organization on a mission to create transformational solutions to the most serious environmental challenges. EDF links science, economics, law, and innovative private-sector partnerships in order to maximize the impact of our efforts. EDF’s agricultural finance work includes farm budget analyses, financial solutions, and agricultural finance policy.

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Project Team Members:

Vincent Gauthier

K·Coe Isom

K·Coe Isom is the nation’s leading agricultural business advisory firm serving the food and agricultural sector. To develop a deeper understanding of the financial impact of conservation on the farm businesses in this report, K·Coe Isom’s AgKnowledge professionals worked with farmers to make accrual adjustments to determine the relevant cost/benefit analysis. AgKnowledge is a managerial accounting and advisory service that serves farms and ranches.

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Project Team Members:

Laura Sands
Alan Grafton
Jenna Nichol

Have questions about this report? Contact Vincent Gauthier, Research Analyst with Environmental Defense Fund.

Our Data Collection Process

The project team took a multistep approach to gather, analyze and report on the data and findings, which we have outlined below. You can also visit EDF’s report “A practitioner’s guide to conducting budget analyses for conservation agriculture,” which covers best practices in collecting economic data and informs our work.

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Farmer Recruitment

Farmers were recruited through SHP’s grower network and K·Coe Isom’s client base based on the following criteria:

Located in the Midwest
Grow corn, soybeans, and/or wheat
Have at least three years of experience with conservation practices
Willing to share information from detailed management and financial records, including those dating back to before the adoption of conservation practices
Attend one virtual workshop session introducing the data-gathering process
Available and willing to work with SHP Field Managers and K·Coe Isom staff to complete questionnaire and discuss answers

Summary of Participating Farmers

*Participating farmers were offered the option to remain anonymous. Farmers who requested to be anonymous (2/7) are referred to based on the state in which they reside and described by their farming practices and the financial and management data they provided through the project.

Data Collection

Due to the COVID-19 pandemic, we relied primarily on digital tools like email and Zoom®, as well as phone calls, to collect farmer information. K·Coe Isom developed a Microsoft® Excel®-based workbook to gather data, including:

Basic operation information
Detailed conservation practice information
Estimated cost changes attributed to conservation practices
Farm-level financial information broken down by crop and conservation practice for the 2019 crop year

Farmers attended a virtual workshop in June 2020 to learn how to use the workbook and then, along with K·Coe Isom and their SHP Field Manager, worked to gather the necessary financial and management information.

Growers were asked to report numbers using accrual accounting methods instead of cash accounting, allowing us to look at a cropping (instead of a calendar) year.

Data Analysis & Follow-Up

K·Coe Isom analyzed financial outcomes and differences across production systems, both for individual farmers and at an aggregate level. After preliminary data analysis, a follow-up questionnaire was used to create more clarity around the details of each farmer’s soil health management system and participation in conservation programs.

In the aggregate, cost and revenue differences were evaluated between a variety of comparison groups. At the same time, detailed evaluation of each farmer’s production system was conducted to better understand the financial experience of each farmer, along with collecting contextual examples related to trends in the aggregated findings.

When analyzing cover crop data, farmers were further divided into experienced adopters (more than 5 years of cover crop experience) and recent adopters (up to 5 years of experience). This was informed by previous findings* that farmers tend to realize cost savings as they learn the best cover crop mix, application method, and weed suppression and nutrient cycling benefits for their farm.

Note that, while K·Coe Isom did collect nutrient management data, farmers' practices, goals and strategies varied widely and, with our small sample size, we decided not to separate that information into its own comparison group.

This study assumed $3.75/bushel for corn and $8.75/bushel for soybeans.

Labor costs are difficult for farmers to estimate since much of the labor is conducted themselves. Some of our farmers reported $0 per acre for the use of their own time, while others reported their hired labor, each of which are not appropriate representations of labor costs. Instead we used a flat labor cost across all our comparison groups of $33.19 per acre.

Comparison Groups

* Sources:
Sustainable Agriculture Research and Education (SARE). 2019. Cover crop economics. Opportunities to improve your bottom line in row crops. https://www.sare.org/resources/cover-crop-economics/

Monast, M., Sands, L., Grafton, A. 2018. Farm finance and conservation. Environmental Defense Fund and KCoe Isom. https://www.edf.org/ecosystems/how-farm-conservation-can-generate-financial-value

Achieving Profitability with On-Farm Conservation

Balancing On-Farm Conservation and Economic Priorities

Get the summary report

Findings At a Glance

About the Farmers

Ken Rosenow – Wisconsin

Peter Rost – Missouri

Ryberg Farms – Minnesota

Minnesota Farmer

Dwight Dial – Iowa

Gaesser Farms – Iowa

Indiana Farmer:

Why Digging Into Farm Financial Data is Important

Our Project Team

Soil Health Partnership

Environmental Defense Fund

K·Coe Isom

Have questions about this report? Contact Vincent Gauthier, Research Analyst with Environmental Defense Fund.

Our Data Collection Process

Summary of Participating Farmers

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