Hybrid Return on Investment
University of Nebraska – Lincoln
Author
09/01/2020
Added
20
Plays
Description
Dr. Matt Stockton uses the UNL-TAPS program to highlight the importance of hybrid selection decisions and its impact on profitability.
Feedback form
Feedback form
Searchable Transcript
Toggle between list and paragraph view.
- [00:00:09.440]My name is Matt Stockton,
- [00:00:10.710]I'm a agricultural economist with the West Central Research
- [00:00:14.470]extension and education center in North Platte.
- [00:00:18.010]My specialty is in farm management.
- [00:00:19.940]I also work very closely with the TAPS program.
- [00:00:23.990]Today, I wanna talk about something that I,
- [00:00:27.490]we found to be very important, as we were working with TAPS.
- [00:00:31.880]The name of my talk is "Buying the Wrong Seed
- [00:00:34.040]May Cost You More Than You Think."
- [00:00:36.130]That's something you're gonna have to decide
- [00:00:37.600]after you watch the presentation today.
- [00:00:40.810]Let's talk a little bit about precision management,
- [00:00:42.677]and what is precision management.
- [00:00:44.610]Precision management is making the right decision,
- [00:00:47.350]at the right time, using the right tools
- [00:00:50.250]for the circumstance.
- [00:00:52.210]That's precision management.
- [00:00:53.530]'Cause that's exactly what precision farming's all about.
- [00:00:56.950]Using the right seed in the right place, at the right time,
- [00:00:59.860]with the right fertilizer, everything's gotta vary,
- [00:01:01.820]so that's what precision management is, it's using,
- [00:01:04.940]making the right decision at the right time
- [00:01:06.610]using the right tool for the circumstance.
- [00:01:08.730]We've been talking a lot today about technology
- [00:01:10.760]and that's the focus of the conference,
- [00:01:12.760]and it's wonderful, technology's a great thing,
- [00:01:15.430]it's a great assistant, helping us to make profit.
- [00:01:18.690]But the point is it's not the reason that we use
- [00:01:23.210]technology is to use technology,
- [00:01:25.620]we use technology so that we can increase profitability.
- [00:01:28.800]And so technology itself doesn't really provide extra yield,
- [00:01:32.110]or more success, or guarantee it, it's a way of
- [00:01:35.360]if we use it properly to get there.
- [00:01:38.070]Let me give you an example.
- [00:01:39.520]Two farmers have identical farms.
- [00:01:41.390]They have, everything's identical,
- [00:01:43.430]their cost, their, everything they do, they go out
- [00:01:47.000]and they use the same tractors, they got the same
- [00:01:49.160]amount of fuel, the land value's the same,
- [00:01:51.740]everything is exactly the same.
- [00:01:53.430]The only difference is farmer A uses seed
- [00:01:57.970]that costs $21 less than farmer B.
- [00:02:02.710]So that's the only difference between these two farms
- [00:02:04.970]and farmers, basically there's $21 less than B.
- [00:02:09.650]Now, at the end of the season, when they harvest
- [00:02:12.550]the crop, farmer B finds he gets seven bushels more
- [00:02:16.740]than farmer A.
- [00:02:18.490]So the question I have is, who makes the most profit?
- [00:02:21.850]Who did the best?
- [00:02:24.030]And if you can't answer the question, you're not alone.
- [00:02:27.450]You can't answer the question without more information.
- [00:02:30.160]You don't have enough information to figure out really
- [00:02:32.520]what's going on.
- [00:02:33.990]So what we do know is we know the difference in the cost.
- [00:02:36.630]So we know that $21 per acre was the difference in the cost
- [00:02:40.860]of the seed, we also know that the yields were different
- [00:02:43.780]by seven bushels.
- [00:02:45.310]The question is, does the benefit exceed the cost?
- [00:02:49.760]Or does the cost exceed the benefit?
- [00:02:51.450]And the only way to know that is we gotta know
- [00:02:53.680]what the value of the bushels are.
- [00:02:55.700]So if the bushels were $4 a bushel, that was the value
- [00:03:00.880]of those bushels, those seven bushels would be worth $28.
- [00:03:06.210]Well, $28 is more than $21, so farmer B would have made
- [00:03:11.230]a good choice by planting that more expensive seed.
- [00:03:14.790]Now, if they were $3 valued corn, then neither farmer
- [00:03:19.900]would have been better off.
- [00:03:22.360]Both varieties worked just the same.
- [00:03:24.760]In other words, he paid more, but he got more bushels,
- [00:03:26.930]but he got less for it, so the cost of the extra value
- [00:03:31.210]of the seed was eaten, the extra value of the production
- [00:03:35.010]was eaten up by the cost of the seed.
- [00:03:37.900]So, if though, prices were less than $3 a bushel,
- [00:03:44.350]and a very unique thing happening, then farmer A
- [00:03:47.030]who paid less for the seed got a better deal
- [00:03:49.090]because the, farmer B who spent the extra money on the seed
- [00:03:54.370]didn't get his return on investment, his seed didn't quite
- [00:03:58.160]pay for the extra cost of buying that seed,
- [00:04:01.510]or putting it in.
- [00:04:03.040]So that's an example of precision management.
- [00:04:06.870]Now let's take it a little bit further, and let's talk about
- [00:04:08.790]TABS, let's talk about the 2018 (mumbling),
- [00:04:11.950]there are 20 farms in TAPS, so this is an opportunity
- [00:04:14.680]where these guys had six basic decisions to make
- [00:04:18.610]during the year, only four of those decisions
- [00:04:22.190]really affect productivity, the seed variety selection,
- [00:04:25.950]the population per acre of seeds, the water they put on,
- [00:04:31.470]and the fertilizer that they put on,
- [00:04:34.650]which could be varied based on what they wanted to do.
- [00:04:37.900]But basically it amounts to three decisions,
- [00:04:40.340]what corn did you plant and how did you plant it
- [00:04:43.630]would be one decision.
- [00:04:44.800]The other two would be your fertilizer and your water.
- [00:04:47.840]We're not gonna talk about the other two decisions,
- [00:04:49.610]we're not gonna worry about that right this minute.
- [00:04:52.090]So let's talk about what it cost per acre to plant,
- [00:04:56.735]and the differences among.
- [00:04:58.350]I don't know if you can see this clearly,
- [00:05:01.150]but hopefully you can, there is a lot of variation
- [00:05:05.030]in the cost per acre of what it costs to plant corn.
- [00:05:08.930]I mean, there's population differences affect that somewhat,
- [00:05:11.710]but these, all these different numbers, B1, B2,
- [00:05:14.387]B3, B4, these are all different varieties.
- [00:05:16.647]A1, A1, these are all the same variety.
- [00:05:19.640]And so we can see that there's a lot of difference.
- [00:05:22.840]For example, this $94.95, I have zero here,
- [00:05:27.420]so in other words, if I had planted,
- [00:05:33.530]let's use A1 variety as the baseline variety.
- [00:05:36.970]So A1 is the baseline, we're saying, okay,
- [00:05:39.700]so I'm not gonna change seeds, so I'm not gonna cost me
- [00:05:42.960]anything to change seed, but B1, this farmer, farm two,
- [00:05:46.520]if he changed seeds, he would pay $22.53 more
- [00:05:51.180]to buy the seed.
- [00:05:52.970]If he planted it and everything, the way
- [00:05:56.291]we have anticipated.
- [00:05:58.670]Okay, so the same thing with each farmer goes through,
- [00:06:01.180]and here's their cost, but then here's what it would
- [00:06:05.040]save them or cost them if they did it.
- [00:06:07.100]For example, this farmer here, would have had to pay
- [00:06:09.257]$25.50 more per acre to plant his, plant variety A
- [00:06:16.310]versus the variety he planted.
- [00:06:18.410]And down here though we got a guy that's got $32.28
- [00:06:22.520]that he would have saved had he planted our,
- [00:06:24.620]the baseline variety A, versus the B11 variety.
- [00:06:29.110]So this would be what it costs them,
- [00:06:31.610]or the cost savings that they had.
- [00:06:33.490]Now, the next thing we need to know is if you compare costs
- [00:06:37.260]that doesn't tell you which one's better.
- [00:06:38.920]Oh, I saved $20 on seed,
- [00:06:41.640]so, you did?
- [00:06:43.140]Did that make you more profitable?
- [00:06:44.730]Well you don't know that.
- [00:06:45.760]Again, remember we had to find out the things
- [00:06:48.190]that we needed to know, which was the value
- [00:06:50.290]of the crop, and the cost, and then the difference
- [00:06:53.980]in productivity, and right now we don't know
- [00:06:56.450]the difference in productivity, nor do we assume a value,
- [00:06:59.580]but for the next part of this example,
- [00:07:01.390]we're gonna use $3.20 as a value,
- [00:07:04.400]'cause that's about what it was worth at the end
- [00:07:06.240]of the year during the 2018 season.
- [00:07:08.940]So let's take this now and put a value to this.
- [00:07:12.270]What we're gonna do before we do that though
- [00:07:14.360]is to try to understand what I've done here,
- [00:07:16.710]I hope it's not too complicated.
- [00:07:19.620]We took farms one, 12, 13, 17 and 18,
- [00:07:24.300]and used it to create a statistical model to predict yields
- [00:07:28.630]for all farms under all conditions.
- [00:07:31.790]In other words, different watering conditions,
- [00:07:33.500]different fertilizer conditions, all those things
- [00:07:35.440]were taken into account.
- [00:07:36.750]So in other words, this row right here,
- [00:07:40.372]if they had planted the variety A, this is the yield
- [00:07:43.420]we'd expect them to get.
- [00:07:44.860]Now to see how good of a forecast this is,
- [00:07:47.180]this is the actual yield, and this is the forecasted yield.
- [00:07:50.720]This is the actual yield, the forecasted yield,
- [00:07:52.840]actual yield, for variety A, and notice that they're pretty
- [00:07:55.760]close, I mean they're only off by 3.3, .5,
- [00:08:00.480]this is a negative, negative.
- [00:08:02.580]This is two bushels, a little bit more,
- [00:08:04.960]this is a very minute amount.
- [00:08:08.280]This is about 2.5 bushels.
- [00:08:10.610]So, that's how far off the model is.
- [00:08:13.360]So for our intents and purposes, and our analysis,
- [00:08:16.050]we're gonna just say, you know what?
- [00:08:17.760]It's close enough we're just gonna go with it,
- [00:08:20.000]'cause there seems to be a lot of variation more
- [00:08:22.450]than two or three bushels in these other ones,
- [00:08:24.340]so we're gonna go with it.
- [00:08:25.700]And we're gonna make that comparison.
- [00:08:27.410]So this farmer here, which would be farm number two,
- [00:08:30.800]he got 255.3 bushels with variety B, whatever he used,
- [00:08:35.990]and this is what he would have got had he planted
- [00:08:39.380]the A variety, with the fertilizer and everything
- [00:08:42.860]that he did included, so that it was the way it was.
- [00:08:46.100]That's why these yields are different, 'cause there's
- [00:08:48.200]different fertilizer rates, and different water rates.
- [00:08:51.290]Okay, so this 262 versus 278, 246, most of them go up,
- [00:08:58.280]however, in farm number seven, he had 288.3 bushels.
- [00:09:03.080]Well if he planted our variety, he used the same
- [00:09:05.060]fertilizer and all of the stuff that he used
- [00:09:06.770]on his variety, he would have got actually eight bushels
- [00:09:09.980]less, about 106.1 bushels, if you really wanna know,
- [00:09:12.413]it's right here.
- [00:09:13.480]6.1 bushels less if he would have went with our variety.
- [00:09:18.180]Well that's interesting.
- [00:09:19.350]Okay, now remember, farmer seven is also the one
- [00:09:21.650]that paid more for his seed.
- [00:09:23.780]All right, so now let's take this and translate this
- [00:09:25.790]into revenue, let's take the bushels that they would
- [00:09:28.320]have gained, or lost, and multiply it by that $3.20.
- [00:09:34.130]And that's what this column right here is all about.
- [00:09:36.730]Now I left out the farms that planted the same variety
- [00:09:39.122]'cause it would have had no change.
- [00:09:41.210]So this basically, farm two, if he had planted this
- [00:09:47.090]A variety, he would have got $105.64 worth more of corn
- [00:09:52.360]produced, and it would have cost him $22.53 more.
- [00:09:57.880]So he would have had a total gain of $83.11.
- [00:10:01.810]As you can see the one with the most gain, though,
- [00:10:03.860]was farm A, where he would have paid $7 less than
- [00:10:09.590]he would have for the seed that he bought,
- [00:10:11.800]and he would have made $166.58 more in corn,
- [00:10:15.750]if he had planted the variety.
- [00:10:16.960]That's quite a difference.
- [00:10:18.050]In other words, about the same cost, a little bit savings,
- [00:10:23.110]$7 savings, but man, he sure would have made
- [00:10:25.700]a lot more corn and made a lot more money, $173.58 more
- [00:10:29.850]had he planted the A variety, that's with the fertilizer
- [00:10:32.470]and everything accounted for.
- [00:10:35.600]So, the thing is now farm seven,
- [00:10:38.080]that's a little interesting, this is kind of interesting
- [00:10:40.210]because we have $23.09 for our cost savings, okay?
- [00:10:45.330]That's how much you would have made in savings and costs
- [00:10:47.320]for the seed, 'cause the seed would have cost less,
- [00:10:49.630]but he would have lost $19.63 in revenue
- [00:10:53.910]because of less corn produced.
- [00:10:55.330]Well, if this number was smaller than this number,
- [00:10:58.070]this would be negative, but it's not,
- [00:11:00.490]it's just, they're close, it's only $3.46 difference.
- [00:11:03.840]So that means, he only made $3.46 less than he would
- [00:11:08.590]had he changed his variety, which remember we got
- [00:11:10.430]a couple bushels of fudge room in there,
- [00:11:12.550]so this really probably is, we could just say
- [00:11:16.310]probably didn't make a difference in the variety.
- [00:11:18.880]Okay, so you can see the variety makes a huge difference.
- [00:11:23.760]Makes a giant difference in profitability
- [00:11:26.590]of what's produced.
- [00:11:28.030]So, when you select a variety it seems like
- [00:11:30.870]that's a really important decision, and should be
- [00:11:33.290]thought out as best and done as best as possible.
- [00:11:37.480]This is something that precision management
- [00:11:41.230]is something that we need to work on.
- [00:11:43.690]We need to find ways to figure out exactly
- [00:11:46.520]what that corn's gonna do in your field.
- [00:11:48.790]So that you can select the right variety based on
- [00:11:51.380]the value of its price, and the value of the corn,
- [00:11:55.160]and that way you know that you can maximize
- [00:11:57.210]your profitability, and that's just one way
- [00:11:59.860]that precision management can help you on your farm
- [00:12:03.160]and your farming decisions.
- [00:12:05.080]I wish you a good afternoon, thank you very much
- [00:12:08.900]for your time today, and I do appreciate the fact
- [00:12:13.530]that you came to this conference,
- [00:12:15.630]and thank you for being here.
The screen size you are trying to search captions on is too small!
You can always jump over to MediaHub and check it out there.
Log in to post comments
Comments
0 Comments