Case Study: Economic Impact of Restricting
Phosphorus Fertilization on a Minnesota Dairy

J. G. Schimmel, R. A. Levins and Z. Vincze
University of Minnesota Extension Service and Minnesota Pollution Control Agency

Currently, Minnesota's feedlot program focuses on nitrogen, as the major threat to water quality. Minnesota Pollution Control Agency (MPCA) ambient monitoring program detected nitrate concentrations exceeding the maximum contaminant level for drinking water (10 mg/liter) in 3.25 percent of the 954 wells sampled in various Minnesota aquifers (MPCA, 1998).

When it comes to surface water quality, many people see phosphorus as the bigger threat. This has led to suggestions that land application plans for manure also pay attention to phosphorus as well as nitrogen. The Mississippi River Phosphorus Study Report conducted by the Metropolitan Waste Control Commission, suggests that manure application rates based on phosphorus limits could be a possible solution to surface water pollution (Shaw, 1994). However, a manure management strategy based on phosphorus requirements would reduce the amounts of manure farmers are able to spread on their land (Hamilton, 1995). MPCA feedlot rules require that "animal manure be applied at rates not exceeding local agricultural crop nutrient requirements except where allowed by permit" (MPCA, 1996). A shift in the feedlot program rules to focus on phosphorus as well as nitrogen could impose an economic hardship on Minnesota's livestock and poultry industries.

The objective of this study was to determine the cost to an individual dairy farm of restricting manure application to the crop needs for both nitrogen and phosphorus versus the current policy with respect to nitrogen.

Here's how we determined the economic impact of changing the rules for land application of manure. We developed least cost manure application plans for the two scenarios with a computer program called the Manure Application Planner or simply MAP (Levins and Schmitt, 1995). MAP uses a linear programming technique to match the nutrients available from manure to the nutrients required by the crops. The matching process is guided by two goals: (1) keep commercial fertilizer costs at a minimum, and (2) avoid excess applications of nutrients that would endanger water quality. The optimal manure management plan is the least cost method of fertilizing crops subject to environmental constraints.

The case study farm is a 500-cow dairy farm in south central Minnesota.

Crop Acres

The 1500-acre farm grows corn and alfalfa in a four year rotation on the home farm of 500 acres. Crop fields on the home farm are one-half mile from the manure source. Another 1000 acres of corn and alfalfa are grown on a distant farm ten miles away.

Crop Fertility

The nutrient requirements of the feed crops can be met by applying manure, applying commercial fertilizer, or a combination of both. The fertilizer requirements, after accounting for residual nutrients from previous crops are taken from Vincze's (1996) analysis of a manure separator on this farm. The costs per pound of commercial nitrogen, phosphorus and potassium fertilizer were: $0.25, $0.27, and $0.18, respectively. The cost to apply commercial fertilizer was $4.50 per acre.

The dairy farm stores its manure in an above ground tank system. After accounting for nitrogen losses from the storage system, the cropping enterprises have 2.5 million gallons of liquid manure available from the dairy enterprise. Each 1,000 gallons contains 29 pounds of nitrogen, 18 pounds of phosphorus and 22 pounds of potassium. Manure application costs ($ per 1000 gallons) vary by incorporation method: $4.20 for surface application without incorporation; $5.50 for surface application and incorporation, and $7.00 for knife injection. A hauling cost of $0.75/1000 gallons/mile reflects labor, fuel and machinery repair costs. Manure was knifed into the soil on the corn acres and surface applied to the alfalfa ground. When applied to the land going into alfalfa, the manure was surface applied and incorporated within 4 days of application.

First we determined the least cost application plan to meet only the crop nitrogen requirements. Manure application rates based on nitrogen, amounts to limiting manure application rates so that plant available nitrogen expected during the growing season does not exceed the crop's nutrient requirement for nitrogen. In this scenario the phosphorus requirement was set at a minimum, i.e., we allowed maximum manure applications to an artificially large amount (400 pounds of phosphorus per acre). The least cost management plans for the nitrogen restricted scenario is shown in Table 1.

All 2.5 million gallons of manure would be applied, reducing the need for 26,761 pounds of nitrogen, 36,000 pounds of phosphorus and 49,500 pounds of potassium from commercial sources. This management plan exceeds the artificial upper bound of phosphorus by six pounds per acre on the corn following corn and an excess of 44 pounds of both nitrogen and phosphorus on the second year of alfalfa. MAP does not place an upper limit on nitrogen applied to leguminous crops. When nitrogen was the controlling nutrient, the cost for manure application and hauling was $19, 656 for the 1500 case farm. Besides the application costs, the crops required another $57,455 for commercial fertilizer. The total cost for the 1500 acres was $51.41 per acre.

We re-ran the same optimization procedure, with the same crop nutrient requirements for nitrogen, but this time constrained phosphorus, so that the maximum amount of manure applied could not exceed the phosphorus requirements of the crops. For example, corn following alfalfa on the home farm required exactly 20 pounds of nitrogen and 40 pounds of phosphorus per acre. The least cost management plans for the phosphorus restricted scenario is shown in Table 2.

The good news was that there was no excess phosphorus applied to any field and only 26 pounds of excess nitrogen per acre was applied on the second year of alfalfa. All but 30,000 gallons of manure could be applied reducing the need for 29,653 pounds of nitrogen, 35,565 pounds of phosphorus and 48,901 pounds of potassium from commercial sources. The manure application and hauling costs for the phosphorus restricted scenario was $23,410 and the cost of commercial fertilizer was $55,263 or $52.45 per acre.

Comparing the least cost management plans for both scenarios, we found that the manure application costs for the phosphorus-restricted scenario increased $3,754 but were offset with a decrease of $2,193 for reduced commercial fertilizer expense. The net result was an increase of $1,561, or $1.04 per acre over the current nitrogen restricted policy. The economic comparison is summarized in Table 3.

Hamilton's (1995) assertion that manure management plans based on phosphorus requirements would reduce the amount of manure farmers could spread on their land proved true for this case study dairy farm. But not because of agronomic or environmental reasons. Instead, 30,000 gallons were not applied because it was below a minimum application rate constraint. Nonetheless, these 30,000 gallons could be spread on ten acres of the 500 acres on alfalfa on the distant farm. This translates into a small additional "disposal cost" of $135 or $0.09 per acre to be borne by the dairy farm because the application cost exceeds the value of the nutrients in the manure.

Conclusion.

While this study does not suggest that the cost of restricting phosphorus on all dairy farms will be $1.13 per acre, the increased cost associated with constraining manure applications to both nitrogen and phosphorus requirements was modest and lower than expected.

Hamilton, Lynn Lemar. 1995. Minnesota's Livestock and Water Quality: The Case of Martin County. M.S. Thesis, Department of Applied Economics, University of Minnesota, St. Paul.

Levins, Richard A. and Michael Schmitt. 1995. Manure Application Planner - User's Manual. Center for Farm Financial Management, University of Minnesota Extension Service, St. Paul.

Minnesota Pollution Control Agency. 1996. Guidelines Land Application of Manure for Water Quality Protection. St. Paul, Minnesota.

Minnesota Pollution Control Agency. 1998. Baseline Water Chemistry in Minnesota's Major Aquifers. St. Paul, Minnesota (In Press).

Shaw, Byron. 1994. "Expectations for the Environment: Evolving Public attitudes Toward Agriculture", Babcock Institute Technical Workshop, Nutrient Management. Manure and the Dairy Industry. Madison, Wisconsin. pp. 16-22.

Vincze, Zsolt. 1996. An Economic Evaluation of a Manure Separation System for Minnesota Dairy Farms. M.S. Thesis, Department of Applied Economics, University of Minnesota, St. Paul

Table 3. Comparasion of Cost of Manure Application and Commercial Fertilizer and Application, by Scenario.

Manure Application & Commercial Fertilizer Cost
Field	Acres	Scenario	Hauling Costs	Cost	per Acre
1	125	Nitrogen	$1,272	$1,640	$23.30
		Phosphorus	$1,272	$1,640	$23.30
2	125	Nitrogen	$2,328	$1,762	$32.72
		Phosphorus	$1,921	$2,159	$32.64
3	500	Nitrogen	$9,192	$20,028	$58.44
		Phosphorus	$15,104	$15,511	$61.23
4	125	Nitrogen	$2,532	$6,350	$71.06
		Phosphorus	$2,532	$6,350	$71.06
5	125	Nitrogen	$4,332	$ -	$34.66
		Phosphorus	$2,581	$1,927	$36.06
6	500	Nitrogen	$ -	$27,675	$55.35
		Phosphorus	$ -	$27,813	$55.63
Total	1500	Nitrogen	$19,656	$57,455	$51.41
		Phosphorus	$23,410	$55,400	$52.54

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