Badger, Daniel D.

Rathwell, P. James

Tucker, Billy B.

English

Research Papers in Economics

Economic  Impacts  of Land  Use  Changes  from
a Restricted Nitrogen  Fertilizer Strategy
P. James Rathwell, Daniel D.  Badger and Billy  B.  Tucker
The  impact  of increased  nitrogen  fertilizer use
on  agricultural  productivity  and  indirectly  on
land use has  been most significant.  The  impact  of
nitrogen  fertilizer  use  or non-use  obviously  is not
isolated  in  the  farming  sector  of  our  economy.
Indirectly  through  farm  yield  changes,  nitrogen
fertilizer  use  impacts  on rural  areas  by  changes  in
income  and  employment  levels.  These  rural
communities  have  oriented  their  level  of business
around  the  nitrogen  induced  increases  in  agricul-
tural  productivity.  It  is  quite  possible  that many
of  the  services  provided  by  these  communities
would  be  curtailed  if  nitrogen  induced  produc-
tivity  is  diminished  through laws  restricting nitro-
gen fertilizer  use.
An  uncertain  aspect  of nitrogen  fertilizer  use
relates  to  the  impacts  of  enforcement  of  PL
92-500,  The  Federal Water Pollution Control Act
Amendments of 1972.  Guidelines  have  been pro-
mulgated  for  both  point  and  non-point  sources
of agricultural  pollution. A key  issue  is what may
happen  to regional agricultural production patterns
if  restrictions  are  placed  on  the  quantities  of
actual  nitrogen  which  can  be  applied  per  acre
of cropland.  Some  areas  may  be  able to obtain  a
competitive  advantage  in  the  production  of food
and  feed  grains,  and  shifts  in  production  of the
crops may occur. However  this issue is not analyzed
in this paper.
This  paper  represents  an  effort  to analyze  the
regional  impact  of restricting  nitrogen  use  on the
amount  of agricultural  land  required  to maintain
current and projected regional shares of production
Jim  Rathwell  is  an assistant  professor at  the Texas A & I
University  Citrus Center  in  Weslaco,  Texas.  Dan  Badger
is a  professor of resource  economics and Billy Tucker  is a
professor  of  agronomy  at  Oklahoma  State  University,
Stillwater.
Journal  Article  J-3183  of the Oklahoma  Agricultural
Experiment  Station.  The  authors  appreciate  the  review
comments of Dean Schreiner  and Odell Walker.
for  wheat,  grain  sorghum  and  corn  in the  Texas-
Oklahoma  Panhandle.  The  paper  represents  some
of  the  results  of  an  Oklahoma  State  University
study completed in early  1975  [Rathwell].
Procedure
The  study  region  selected  for  the  analysis
includes  a  12  county  area  in  the  Panhandle  of
Texas  and  a five  county  area in  the Panhandle  of
Oklahoma.  The  region  is  a  major  wheat  and
grain  sorghum  producing  area.  Corn  acreage  is
increasing  rapidly  with  most  of  the  production
utilized locally as cattle feed.
Two nitrogen fertilizer strategies were developed
for  this  analysis.  The  baseline  strategy  was  based
on  the  1972  agricultural  situation  and  nitrogen
fertilizer  use  in  the  region.  Its  function  was  to
serve  as  a  base  for  comparison  of the  restricted
nitrogen  strategy.  The  1972 crop year  was selected
since  it precedes  the  1974 fertilizer  shortages  and
the relaxation of government  acreage restrictions.
The  restricted  nitrogen  strategy  reduced  the
per  acre  application  rate  of  nitrogen  fertilizer  to
a  point  where  rates  lower  than  this  level  would
take  the  acres  out  of  crop  production.  This  is
especially  evident  on  irrigated  lands  in  the
Oklahoma-Texas  Panhandle  area.  Agronomic  data
suggests  this  cut  off level  is  30  pounds  of actual
nitrogen  applied  per  acre  on  irrigated  wheat  and
80  pounds  of nitrogen  per  acre  on  irrigated corn
and  grain  sorghum  in  the  TexasOklahoma  Pan-
handle  region.
Restricted  nitrogen  does  not  affect  dryland
wheat or  grain  sorghum  in the Panhandle  area. In-
sufficient  rainfall limits  dryland  nitrogen  fertilizer
applications  to  only  better  quality  lands,  where
yields  warrant  approximately  8  to  14  pounds  of
nitrogen per acre,  depending  on the  soil class.
260Rathwell, Badger, and Tucker
Market  prices  are  the  same  as  for the baseline
strategy.  Production  expenses  per  acre  were  de-
creased  by  an  amount  equal  to  the  per  bushel
yield reduction  based  on the actual nitrogen  fertil-
izer application  rates.
The Model
The analytical tool used to evaluate the impact of
restricting  nitrogen use  and land use patterns is an
aggregate  linear  programming model  developed  on
the 1972 base year. The model projects land adjust-
ment patterns for 1975 and  1990 assuming regional
shares of production are met for each time period.
The  model assumes  the  total regional  land area
as  the unit  of analysis  with  yield levels varying ac-
cording  to soil  classes,  fertilizer  application  rates,
and  land  development  costs attributable  to an  in-
dividual  acre.  Aggregation  across all  acres for the
soil  types and land  use capability  class determines
the model's total impact.
The  advantages  of  this  macro  approach  lies
largely  in  the  data  requrements  and the time  and
costs of analysis. Another  advantage,  and a crucial
part  of  this  analysis,  is  the ability  to incorporate
soil information.  Only  rarely  is there soil variation
within  a  given  farm  large  enough  to induce  large
yield  differences.  A  macro  approach  allows  for
significant  differences  in  soils  and  the  necessary
production  variations,  which can  give  rise  to con-
siderable  differences  in the  optimum  organization
of the region's farm  enterprises.
The model  solved  the  combination  and level of
enterprises  which  maximized  net  returns  to  the
region,  given  the  fertilizer  levels.  These  land  ad-
justments were obtained  as follows:
Max  Z  =  -C1 - C2 - -Cn  + Pw  W + Pgs
GS+PC  C - P  N
Subject to the following restrictions:
AllX1
A21X1
A31Xt
D1lX1
D21X1
+
+
+
+
+
A12X2
A22 X2
A32X2
D12X2
D22X2
+
+
+
+
+
DmlXl  +  Dm2X2  +
N11X1  +  N12X2 +  *
AlnXn
A2nXn
A3nXn
DlnXn
D2nXn
Y1
Y2
Y3
Ri
R2
DmnXn  <  Rn
NlnXn  <  B
Where  Z  =  Total  area net  returns  to management
from  wheat,  corn,  and  grain  sorghum  less  a  nitro-
gen  cost per  pound applied. Operating labor, oper-
ating  and  capital costs,  including land costs, were
included in C 1 . ...  Cn.
C1 . ...  Cn = cost  of producing a given crop on a
given capability class and soil type.
Pn= nitrogen  fertilizer  cost  per  pound
applied
Pw, Pgs, Pc  = price  received  for  wheat,  grain sor-
ghum and corn,
W, GS, C = bushels  of  wheat,  grain  sorghum
and corn produced,
X1  '*  *  Xn = acres of various land use activities,
All-'  ^  A3n= yield per acre per crop activity,
D1l' **Dmn=  acres  of  land  by  soil  capability
classes,
N1l  1 Nln= amount  of  nitrogen  applied  per
acre,
Y1  * * * Y3 = total production  per  crop per time
period,
R1 Rn  =land  restraints  by  capability  class
for dryland and irrigation  acres.
Y1, Y2, Y3  = wheat,  grain  sorghum,  and  corn
production,  respectively.
B = regional  allocation of nitrogen  fer-
tilizer;  zero  for restricted  nitrogen
fertilizer strategy.
The  basic  sets of model restraints  were:  1) pro-
duction  requirements,  i.e.,  nitrogen fertilizer  (N  1
...  Nln) and yield  per acre  (A11 . . A3n);  and
2)  land resources, the  amount of land available  to
produce  the products (R1 ..  . Rn). These  restraints
were  exogeneously  determined.
This objective function was of the standard max-
imization  linear-programming  type.  The  basic cost
components were operating,  ownership,  and capital
expenses; these costs and prices received are explain-
ed  in Rathwell.  The objective function was specifi-
ed for each soil type, for currently producing lands
and  potentially  producing  lands.  For  example,
enterprise  budgets  designate the cost per acre  asso-
ciated  with Panhandle  area  wheat being produced
on  Class  II  clay  loam  soil.  Using  the  Oklahoma
State  University  Budget  Generator  as  a  reference
budget,  the deviations  due to soil and land capabil-
ity were  considered,  e.g.,  irrigated wheat yields on
Richfield  clay  loam  soils  in  the  Oklahoma  Pan-
handle area are estimated to be 46 bushels per acre,
Utilizing  63  pounds  of  N  per  acre  [Rathwell,  p.
155].  Richfield  clay  loam is  designated  as  a  Class
III  soil  in  the  Oklahoma  Conservation Needs
Inventory, published  by the Soil Conservation  Ser-
vice.  Other  soils lower  in productivity were  assign-
ed lower yields per acre  [Rathwell; Gray].
261
Impacts of Land Use ChangesWestern J. Agr.  Econ.
The  production  level  requirements  for  the
model  (Yi)  were  developed  by  using  the  regional
supply  history.  County  data for  wheat,  grain  sor-
ghum  and  corn  production  from  the  Oklahoma
and  Texas  Statistical  Reporting  Services  were  ag-
gregated  by  study  region.  The  percent  that  the
area's  production  was  of  the  1972  United States
production  of wheat,  grain  sorghum  and  corn was
considered  the  area's  regional  share  of  United
States supply.  This percent  was then applied to the
OBERS  estimates for United States production for
the years  1975 through  1990.
Land Use  Changes and Related Economic
Adjustments for the Restricted Nitrogen  Strategy
The  comparison  of the  two  strategies  indicates
the possible changes required  in land utilization  due
to a nitrogen restriction  per acre.  In 1975,  335,291
additional  acres  of  wheat  are  required  to  pro-
duce  the region's share  of production (2,487,404 -
2,152,113)than if nitrogen had not been  restricted
on irrigated wheat (table  1). In  1990,  an additional
90,832  acres  of  land  are  needed  to  meet  the  re-
gional  share  of wheat  for  the  restricted  nitrogen
strategy,  when  compared  to  the  baseline  strategy
of no  restrictions  on nitrogen  (i.e.,  nitrogen appli-
cation  rates based on  1972 levels).
Grain  sorghum  acreage was substituted  for corn
acreage  in  1990  due  to  the  nitrogen  restriction.
The  1975  estimate  shows  an  increase  of 315,900
acres  of  grain  sorghum  and 45,601  acres  of corn.
The  1990  figures  indicate  grain  sorghum  acreage
still  increasing by  116,045  acres but corn declining
by  29,041  acres.  The  reason  for this  substitution
of dryland  grain  sorghum  for  irrigated corn  lies in
the  reduced  profitability  of  corn  relative  to  the
lower  yielding  but lightly  fertilized  dryland  grain
sorghum.
The  impact  of nitrogen  restrictions  on  agricul-
tural  production  patterns  in  these  17  Texas  and
Oklahoma  counties is  an increase of 177,836 acres
needed  to meet  regional  shares of production  for
these  three  crops  in  1990.  These  additional acres
are  more  marginal  lands.  However,  due  to  the
nitrogen  restriction,  these  lands  used  in  dryland
grain  sorghum  and dryland  wheat  are more profit-
able  than irrigated corn or wheat.
Nitrogen  fertilizer  use  by  crop  for  the  two
strategies  indicate  a  similar  pattern.  The  baseline
strategy  utilized  about  175  million  pounds  of
actual  nitrogen  in  1975  and  about  222  million
pounds  in 1990 (table  2). This is almost 29 million
pounds  more  than  the  restricted nitrogen  strategy
in  1975  and  about  83  million  pounds  more  in
1990.  The significant  decrease in  nitrogen fertilizer
use  can  be  traced  to the  increased  acreage  of dry-
land  grain  sorghum  brought  into  production  to
meet feed  grain  regional  shares of production. The
Table  1. Panhandle  region's  total land  adjustments  by crop for two  nitrogen  strategies: 1972, 1975,  1990
Baseline Strategy  Restricted  Nitrogen  Stragegy
Crop Year  1972  1975  1990  1972  1975  1990
---------  .---------  --....-  ..----  ---  acres ----------------  -----------------
Wheat  2,138,425  2,152,113  2,285,417  2,138,425  2,487,404  2,376,249
Grain  Sorghum  1,090,310  1,191,277  1,488,075  1,090,310  1,507,177  1,604,120
Corn  280,301  217,659  312,764  180,301  263,260  283,723
Total  3,409,036  3,561,049  4,086,256  3,409,036  4,257,841  4,264,092
Table  2. Panhandle  region's fertilizer consumption  by crop for two fertilizer strategies: 1972, 1975, 1990
Baseline  Strategy  Restricted  Nitrogen Strategy
Crop  Year  1972  1975  1990  1972  1975  1990
-----------------.----------------  pounds ----------------------------------
Wheat  35,044,547  37,148,608  42,320,822  35,044,547  28,822,860  28,596,799
Grain  Sorghum  93,970,486  98,784,764  122,064,828  93,970,486  93,238,261  87,830,640
Corn  29,804,853  39,227,193  57,586,200  29,804,853  24,379,289  22,866,640
Total  158,819,886  175,160,565  221,971,850  158,819,886  146,440,410  139,293,709
262
June 1977Rathwell, Badger, and Tucker
upper  limits  on  nitrogen  fertilizer  use  reduce  the
profitability  of  irrigated  wheat,  corn  and  grain
sorghum.  Consequently,  farmers  shift  to  dryland
grain  sorghum  and  dryland  wheat.  Many  of the
dryland  grain  sorghum  acreages  are  not fertilized
at all;  relatively  small  rates of nitrogen are  applied
to the remaining acres.
Implications of Study
The  Panhandle  area  of  Texas-Oklahoma  is  a
unique  area.  It typically  utilizes  large  amounts  of
nitrogen  fertilizer  on  highly  productive  irrigated
crops.  Farmers  apply very  little nitrogen  fertilizer
on  dryland  crops. Restriction  of nitrogen fertiliza-
tion makes irrigated lands much less profitable  and
reversion back to dryland farming more likely.
The  impact  of  this  forced  land  change  could
have  other  influences,  both  agricultural  and envi-
ronmental.  Increased  acreages,  especially  of land
previously  taken  out  of production,  or  new  land
brought  into  production  initially  require  greater
cash  outlays.  This  is  especially  true  on  marginal
agricultural  land  brought  back  into  production.
Lower  on-farm  income  levels  result  from  this
forced  changed land  use pattern,  if nitrogen fertil-
izer application  rates are  restricted.
Environmentally,  the  restriction  of  nitrogen
fertilizer  appears  at  first  to suggest  an  improved
natural  environment.  This  is  especially  apparent
for  aquatic  environments  as  there  is less nitrogen
runoff  into  streams.  However,  increased  acreages
brought  into production  also  suggest that acreages
previously  used  as  habitat  for  terrestrial  wildlife
will  be  reduced,  adversely affecting  quail,  deer and
turkey  populations  in  the  Panhandle  region.  The
environmental  impact  analysis  is  explained  in
detail in Rathwell.
In  summary,  substituting  land  for nitrogen  fer-
tilizer in the production  of out food and feed crops
does  not  improve  our  agricultural  outlook.  Farm
incomes  are  decreased.  The  environmental  quality
issue  becomes  a  tradeoff-slightly  improved  water
quality  and  aquatic  habitat,  but a significant  loss
of terrestrial wildlife habitat.
References
Gray,  Fenton,  Productivity of  Key  Soils in  Oklahoma,
Bulletin  No.  B-650,  Oklahoma  Agricultural  Experi-
ment  Station,  Oklahoma  State  University,  Stillwater.
October  1966.
Rathwell,  J.  Paul,  "Economic  and  Environmental  Im-
pacts  of Nitrogen  Fertilizer  Use,"  unpublished  Ph.D.
dissertation,  Department  of  Agricultural  Economics,
Oklahoma  State University,  Stillwater.  May  1975.
Soil  Conservation  Service,  Oklahoma Conservation Needs
Inventory, USDA, Stillwater, Oklahoma.  March  1970.
263
Impacts of Land U/se Ch~anges

ECONOMIC IMPACTS OF LAND USE CHANGES FROM A RESTRICTED NITROGEN FERTILIZER STRATEGY

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics