RISK ANALYSIS OF NITROGEN-FERTILIZATION RATES FOR CORN AND SOYBEANS

Annual yields, net returns, and net return variation are examined for irrigated corn (Zea mays L.) and soybean [Glycine max (L.) Merr.] cropping systems under N fertilizer rates of 0, 75, 150, and 225 lb/acre. The profit maximizing fertilizer levels are determined. Profits are maximized with 150 N/acre on continuous corn (CC), 75 or 150 lb N/acre on a corn-soybean (CS) rotation, and 0 N/acre on continuous soybeans (SS). The appropriate cropping sequence and fertilization level for different risk preferences are determined. Producers who strongly seek to reduce risk or variation in net returns prefer to use less than the profit-maximizing application rate on a CS rotation. Those producers who generally seek to avoid risk and reduce variability by modifying cropping patterns and fertilizer rates would prefer a CS rotation which uses an application of 75 N/acre. The financial incentives required by farmers to reduce fertilizer use are estimated. The results indicate that it is very difficult to achieve 0 lb N/acre use in the continuous corn sequence, but encouraging reduced use to a level of 75 N/acre is more reasonable. In a CS sequence, 0 lb N/acre may also be reasonably achievable if reduced N application is a justifiable environmental concern.