Can lessons from the past help us with fertiliser decisions for 2023? To help answer this question, Profit Series fertiliser data over the last five years has been interrogated to look for information to help clients with fertiliser decisions in 2023.
The data being analysed covers Australian Ag seasons 2017 to 2021.
Questions that have been asked of the data are:
How strong is the relationship between fertiliser cost and yield?
How many kilograms of grain are produced per dollar of fertiliser spent?
What is the average fertiliser spend in $/ha?
What is the average spend on fertiliser per tonne of grain produced?
What is the expected yield with no nitrogen application?
What is the average response in grain yield per kilogram of Applied Nitrogen?
Does a higher spend on fertiliser result in higher Gross Margin?
What is the average Applied N per tonne of grain produced?
What is the average N uptake efficiency?
What do the growers who generate the highest Gross Margin per tonne do differently?
How can this analysis help in making fertiliser decisions in the 2023 Season?
How strong is the relationship between Fertiliser Cost and Yield?
Graph 1 and Graph 2 show that fertiliser costs explained 51% of the variation in wheat yield and 44% of the variation in canola yield in 2021. While there is a significant spread at any level of cost the trend is very consistent over the five-year period with Table 3 showing an average increase in wheat yield of 24 kg per dollar spent, with only the 2019 dry year being a lot lower at 15 kg per dollar spent.
The average increase in canola yield of 11 kg per dollar spent was also very consistent across years, except for the 2019 dry year, which dropped to 7 kg per dollar spent on fertiliser.
How many kilograms of grain are produced per dollar of fertiliser spent?
Table 4 shows that wheat growers with the best Gross Margins are producing 31 kg of wheat per dollar of fertiliser spend, which is 29% above the average. Canola growers with the best Gross Margins generated 15 kg per dollar spent on fertiliser, which is 36% above the average.
The take home message here is that the average wheat and canola grower tends to spend too much on fertiliser for the actual yield potential being achieved in their wheat and canola crops. They seem to be particularly optimistic of the potential of their canola crops.
What is the average fertiliser spend in $/ha?
Table 1 shows that the average fertiliser cost for wheat was $121/ha (26% of variable costs) and canola was $135/ha (28% of variable costs). The amount spent on fertiliser is critical to the profitability of a crop. However, you can spend too much so you need to get the right balance between being too conservative and constraining yield in better years, against thinking every year will be above average and applying too much fertiliser in those years.
Table 2 shows that wheat growers producing the best Gross Margins spend 4% less on fertiliser at $116/ha (25% of variable costs, which is 1% less than the average) but are making a 56% higher Gross Margin at $629/ha. The best canola growers did spend 10% more on fertiliser at $148/ha (28% of variable costs is the same as the average) but generated a lot more profit, with a 79% increase in Gross Margin at $827/ha.
What is the average fertiliser spend per tonne of grain produced?
Table 3 shows the average fertiliser spend on wheat was $51/t of wheat produced, which is 15% of the average wheat price over the same period. While the average fertiliser spend on canola was $119/t and 18% of the average price of canola.
The range for wheat was also less ranging from 13% to 22%, while canola ranged from 10% to 29%.
Table 4 shows that wheat growers producing the highest Gross Margins only spend 11% of the average wheat price, while the more profitable canola growers only spend slightly more at 12%.
Does a higher spend on fertiliser result in higher Gross Margins?
The best way to measure this is to look at the spend in $/t versus the Gross Margin in $/t as shown in Graph 3. This shows the better Gross Margins for wheat in $/t are generated by keeping fertiliser costs per tonne of wheat between $15/t and $50/t, which is well under the average of $51/ha.
Graph 4 shows the better Gross Margins for canola in $/t are generated by keeping fertiliser costs per tonne of wheat between $30/t and $100/t, which is also well under the average of $119/t.
This shows that the average client has spent 40% to 50% more on fertiliser per tonne of wheat and canola harvested than growers producing the Top 25% of Gross Margins in $/t.
Another way to view it is that many clients are likely to be applying at least 50% more fertiliser than the economic optimum.
What is the average Applied N per tonne of grain produced?
Table 5 looks at the average nitrogen efficiencies being generated by the Applied N in the year of application and ignores the amount of nitrogen in the soil. We need to keep in mind that applications in one year may still be available the following year, particularly in the medium to low rainfall zones, and on strong soil types in the high rainfall zone that aren’t prone to waterlogging.
Looking over five years reduces the impact of year-to-year changes.
Graph 5 shows how a trend line has been fitted to the data to establish the base yield and the average response to higher rates of nitrogen per hectare. As expected, there is a lot more than fertiliser that results in a particular yield. However, you need to put more nitrogen on to achieve higher yields.
The slope of the line is an indicator of the response achieved in 2017 across all businesses that grew wheat, which has been translated to the number of kilograms of nitrogen applied to increase the yield by one tonne per hectare. In 2017 the average was an extra 49 kg of Applied Nitrogen that was needed to increase wheat yields by one tonne.
This equates to an uptake efficiency of 51% if we assume the protein of wheat produced was around 10.5%, which equates to 25 kg/t of wheat harvested. A nitrogen efficiency of 50% is the commonly measured efficiency in many experiments around the world. The five-year average for wheat is slightly better at 48%. The five-year average for canola crops was less efficient than wheat crops and only achieved a utilisation efficiency of 43%.
If we just look at the simple average of Applied Nitrogen divided by the number of tonnes produced, wheat crops averaged 21 kg/t and canola averaged 52 kg/t. This clearly shows that the average canola crop has not used all Applied Nitrogen over the last five years and wheat has been one of the crops that benefited from carryover nitrogen.
Table 6 shows the results for the Top 25% of clients in terms of Gross Margins. What is interesting is that the graphs for wheat and canola consistently showed a higher zero rate intercept. Wheat’s five‑year average base yield was 16% higher than the average, while canola was 50% higher.
A likely factor in the canola high base yield is in the high and medium rainfall areas where canola crops are used in rotation with wheat and pasture phases. The average soil organic nitrogen in these phases is at higher levels. There are more grain legumes used in rotations with wheat and canola than the low rainfall zones. This higher zero rate yield has meant that Applied Nitrogen did have a lower nitrogen utilisation rate than average, which was surprising. It shows the impact of long‑term strategies that increase total soil nitrogen, and means crops will be less impacted by getting the rates wrong in any particular year. However, maintaining that level is still important over the longer term.
The average kilogram of nitrogen per tonne, with wheat at 18 kg/t and canola at 37 kg/t, shows that higher Gross Margin crops do have a percentage of legumes as part of the rotation to make up the difference in the amount of nitrogen being exported, as well as some losses from leaching and waterlogging.
What do the growers who generate the highest Gross Margin per tonne do differently?
They are more realistic in their assessment of the crop yield potential and vary their rates accordingly. Many clients are overly optimistic about the yields they will generate in most years. The table suggests that if we use the Top 25% as the benchmark for matching fertiliser costs to yields, the average is overestimating by 36% for wheat and 50% for canola.
They have farms that are less prone to waterlogging. Waterlogging and leaching in the high rainfall zone in wet years have a major impact on nitrogen utilisation efficiency.
They use legumes and pastures at the right level to get the maximum benefit for crops. This analysis doesn’t look at the whole of business profits, which would show that some of the high Gross Margins would be offset by low Gross Margins in the legume phases.
Good weed, disease, and insect control is needed to protect the potential yield set by the season.
Better Gross Margins will be protected by ensuring timing of seeding and other operations are performed as close to the optimum time as possible.
How can this analysis help in making fertiliser decisions in the 2023 season?
The 2022 estimates are based on estimated yields and estimated costs for 2022. This shows there will still be profits because of the well above average yields, but the profits are likely to be well below the 2021 results.
The 2023 estimates show that if you don’t change your use patterns in 2023 and continue using previous rates, the average fertiliser cost will be more than double the five-year average shown in Table 1. In the 2023 estimates in Tables 1 and 2, costs have been increased by 2.2 times the five‑year average. This shows that the expected operating profit for an average wheat yield of 2.65t/ha is minus $8/t and with an average canola yield of 1.34 t/ha is only $14/t.
A 10% cut in normal fertiliser rates will make a big difference with wheat profits becoming positive at $15/t and canola increasing to $44/ha. It is more important than ever to get the fertiliser rates right.
You need to have a good understanding of the background fertility of your soils. Soil testing will allow you to fine tune rates.
If your soils are in the non-responsive zone, you can draw down on the phosphorus bank.
Potassium is too expensive to apply in areas of the paddock where soil reserves are ample.
You don’t need to replace all the phosphorus and potassium that has been removed by the 2022 crop.
Calculate how many units of nitrogen will be available in the soil at the time of sowing and how much will become available by mineralisation throughout the growing season.
Use realistic estimates of potential yield to determine how many units of nitrogen are required.
Don’t chase yields too hard in canola because of the negative effects on oil percentage and therefore reduced oil bonuses.
It may be worth pushing harder on wheat if the grade spread between APW and ASW is more than $40/t.
Table 7 and Table 8 are simple models to show you the interactions between various components of the nitrogen fertiliser decisions you will need to understand in 2023. Use your agronomist and consultant to help you fine tune your fertiliser program.
Many thanks to Rob Sands and Eric Nankivell, Farm Management Consultants with Farmanco for this article. Rob Sands is also Product Director for Aglytica.