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ECONOMIC ANALYSIS

Impact of Fuel and Nitrogen Prices on Profitability of Selected Crops: A Case Study

^a Shoshone First Bank, Cody, WY 82414
^b Dep. of Agricultural and Applied Economics, Univ. of Wyoming, Laramie, WY 82071
^c USDA-ARS, Sidney, MT 59270

^* Corresponding author (JJJ{at}uwyo.edu).

Increasing prices for fuel and N fertilizer affect crop production decisions and profitability. Nitrogen response functions are estimated for corn (Zea mays L.), sugar beet (Beta vulgaris L.), dry bean (Phaseolus vulgaris L.), and malt barley (Hordeum vulgare L.) using data from field studies conducted in the Big Horn Basin of Wyoming. These N response functions are used to evaluate the impact of increases in N and fuel prices on the profitable level of N use. Enterprise budgets are developed for seven selected crops to determine return to management [Return to Management = Price x Yield – Total Cost (preplant, plant, growing, harvest, land, and other)] under price increases for fuel and N. Finally, a linear programming model is used to determine the impacts of increased prices for fuel and N on farm profit and crop mix. Results illustrate that impacts of increasing fuel and N prices on individual crops are quite different and also vary with the overall crop mix. In particular, adding alfalfa (Medicago sativa L.) and perennial ryegrass (Lolium spp.) seed production to the crop mix reduced the impacts of increasing fuel and N prices. This suggests producers should adjust production practices on individual crops and also analyze their crop mix when faced with rising fuel and N prices if they are to minimize impacts on profitability.

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Received for publication March 14, 2007.