Accounting By Soil Type (Update)
(This is an updated version of a previous post)
Accounting in farms has not changed much over the last several decades. Some farmers are simply content to know how much the farm operation made on a cash basis each year. Others go a step further to be able to determine how much did each crop make, or even how much each field generated in contribution margin to the farming operation (all Granular customers are able to do this!)
How do you know if accounting by soil type is worth it?
It depends largely on where you are. If your operation is blessed with entirely flat, black, well drained ground with minimal variation in yield, it may not be worth thinking this way. However, if, for example, you had a 1,000 acre operation in Wisconsin with a 50-50 split between high yield potential soils and sandy soils with yields of 180 and 130 respectively, $4 corn, and the same crop plan, input budget, and rent for each soil type, you could be making $25,000 on the good soil and losing $75,000 on the other half. In this situation, analyzing by soil might be for you.
But before we get into that, let’s go back to the basics to briefly discuss how soil quality is commonly measured, the indices that exist, and how we make use of them at Granular.
How is soil quality measured?
Ideally, soil quality is the same thing as soil productivity: soil quality should measure how well a given soil type yields crops. If you’re growing corn, for example, then the most intuitive measure of soil quality would be in units of corn grown. Comparing field A to field B, assuming management and weather conditions were identical across these two fields, the differences in yield of corn could be attributed to the differences in the quality of soil itself. Unfortunately it’s rare that such fine scale records of yield history exist, or that management and weather conditions are identical. That’s where soil indices come in.
Soil indices make use of available scientific work that relates characteristics of the soil (clay content, conductivity, acidity, for example) to the soil’s yields. Different indices combine these attributes in different ways, but all end up with a final number to describe how productive the soil is likely to be. The most commonly available soil index is the National Commodity Crop Productivity Index (NCCPI), but several states have their own versions (Iowa’s is the Corn Suitability Rating 2, CSR2, for example).
How common is extreme variation in soil quality within fields?
We analyzed over 10 million farm fields (CLU’s) from AcreValue to look at how within-field soil variability changes around the US. The Dakotas and Appalachia are hotspots for within-field soil variability, while the Des Moines Lobe in Iowa, Loess of Illinois and Lake Plain of Ohio are home to very low variability. For those of you in the corn belt, seeing that the most uniform soils in the US according to the NCCPI index are on the coastal plains of North Carolina might come as a bit of a surprise.
So what does this mean for the prospect of accounting by soil type? If you are in the red zones, it may be time to give it a try this winter while putting together your plans for 2017. For a grower, looking at this map should be able to help him or her judge where they land in comparison with peers in other regions as it relates to this important metric. If you are an advisor, accountant or other member of a grower’s trusted network, discussing this type of analysis in an area with more variable soils is more likely to hit home.