Skip to Content

Economics of reducing nitrate loss

Posted on May 26th, 2017

More than 90 percent of the nitrogen transported by Iowa streams is in the form of nitrate (NO3-N). Three separate but similar methods have recently been used by me and others to estimate the amount on NO3-N exiting Iowa in its major streams draining to the Missouri and Mississippi Rivers during 2016. These methods have all produced a similar number: around 1 billion pounds. It should be noted that 2016 was likely a very large loading year because of wet weather in western and northern Iowa.

The price of this nitrogen in the spring of 2016 for the four most common formulations (anhydrous ammonia, urea, liquid 28% and liquid 32%), ranged from $0.33/pound to $0.50/pound (USDA Dept. of Ag Market News: Iowa Production Cost Report). Using an average of $0.415/pound, the value of the nitrogen leaving Iowa in its streams was about $415 million during 2016. Although the vast majority of this nitrogen is applied to corn, similar amounts are lost from corn and soybean fields on a per acre basis. In Iowa this area totaled 23.4 million acres total in 2016. Thus on average, the amount of nitrogen lost per cropped acre was worth $17.74 in 2016.

It’s interesting to compare this amount within the costs of crop production. According to Iowa State University, total 2016 production costs (labor, land, seed, machinery, chemicals, insurance, fertilizer) for corn following soybean, assuming a yield of 180 bushels per acre, were $719/acre ($3.99 per bushel). For GMO soybeans, these costs were $533/acre and $10.67/bushel, assuming a yield of 50 bushels per acre. From that, the value of the N lost to Iowa streams was 2.5% of the production cost for corn and 3.3% for soybean. These percentages should be considered higher than average because of the large N loads in 2016.

In terms of remediation, cover crops are perhaps considered to be the best hope for mitigating long-term nitrogen loss. This is because they can retain N for future crop growth that would otherwise be lost to streams, and potentially provide production benefits for corn and soybean through improved soil quality and drought resistance. Buying and planting cover crop seed costs between $20 and $40 per acre (average of $30), thus increasing 2016 production costs 4.2% for corn and 5.6% for soybean.

Considering the fact that cover crops sequester on average 31% of the nitrogen that would otherwise be lost (according to Nutrient Reduction Strategy Science Assessment), and considering that 2016 was probably an exceptional year for statewide N loss, clearly the cost associated with cover crops is substantially higher than the value of lost nitrogen: a $30 per acre cover crop application cost would have preserved about $5.50 worth of nitrogen in 2016. The question then becomes, how do we pay for the balance, in this case $24.50 per acre. In Iowa this would translate to nearly $563 million for all 23.4 million crop acres, or about $175 for each person in Iowa.

At current prices, the crop yield benefit to using cover crops would need be about 8 more bushels of corn and 3 more bushels of soybeans to cover the balance of $24.50 (average implementation cost minus the value of N sequestered) to make their use a break-even proposition for the farmer, assuming he/she absorbed the entire cost of implementation. Evidence exists that cover crops can increase commodity crop yields; there is also some evidence that they can decrease yields in certain circumstances.

What about a tax on fertilizer to pay for cover crops and other conservation? According the 2004 state nutrient budget, about 1 million tons (2 billion pounds) of fertilizer nitrogen are applied every year in Iowa (this does not include manure N). There are reasons to believe that this has not changed substantially since 2004. A tax of $0.28/lb would generate $560 million for cover crop implementation. This would increase current fertilizer costs 67% to $0.70 per pound, clearly much higher than the current price but within the historical range of nitrogen prices in Iowa. Assuming a 150 pound per acre N rate, this would have increased input costs for corn by $42 from $719 to $761 per acre (5.8%). There can be no doubt this would affect how Iowa farmers compete economically with other corn producing states and countries.

This illustrates that solving our water quality problems is not just a technological challenge, but is also a very sobering economic challenge as well. The value of the nitrogen lost to streams is not large relative to the total cost of production. The cost to stem this loss using cover crops and other strategies, while also not large relative to production costs, is larger than the value of the nitrogen itself (a fact that is true for most types of pollution) and would affect the competitiveness of Iowa commodities. So the questions are: How badly do we want streams with good biodiversity and desirable native species, lakes without nuisance algae blooms, and drinking water with low levels of nitrate? How much are we willing to pay for this? And who is going to pay?

 

Leave a Reply