Financial

Cover cropping has been increasingly recognized as a valuable conservation practice. The U.S. Census of Agriculture first questioned producers about their cover crop use in 2012. At that time, the census reported that cover crops had been planted to 10.3 million acres, excluding Conservation Reserve Program acreage. The census also shared that 133,124 operations had adopted cover crops in 2012.

Cover crops have gained appeal as they can promote soil health and create a highly productive growing environment. Depending on the cover crop(s) selected, producers may observe that cover crops increase soil organic matter content, improve nutrient management, decrease nutrient leaching, reduce soil erosion, alleviate soil compaction, ease pest pressure and possibly suppress disease. Realizing these benefits may lead to reducing input costs and driving cash crop yields.

Producers interested in using cover crops are encouraged to choose those that can facilitate field condition improvements for a given environment. Thus, cover crop selection hinges on specific field conditions, individual farmer or landlord preferences and overall farm goals.

Costs

For producers considering cover crop adoption, they can relatively easily estimate cost requirements. Producers should account for potential input cost reductions linked to cover crop use, and they should also quantify costs associated with cover crop seed, additional field operations and more extensive management.

This hairy vetch cost-return budget can help to estimate related costs. The budget highlights several cost considerations for hairy vetch growers. Primarily, those include the seed itself, inoculant, glyphosate and machinery operations. For best nitrogen fixation, note that seed should have the correct inoculant.

When assessing crop profitability, producers are accustomed to comparing annual production costs with revenues. Gauging return on investment for cover crops may be more challenging because they provide long-term benefits that ultimately impact yield, but these same long-term benefits are more difficult to evaluate annually. The next two sections outline direct and long-term benefits that may be captured from a hairy vetch cover crop. This information can help producers to weigh hairy vetch costs and benefits.

Direct Impacts of Planting Hairy Vetch

Hairy vetch does well in cover crop mixes. Possible mixes include those with small grains, field peas, bell beans, crimson clover or buckwheat. After planting, hairy vetch establishes itself slowly. As a result, planting a nurse crop could be helpful. Oats and rye tend to perform well as nurse crops. Because hairy vetch may be susceptible to kill when temperatures drop below 5 degrees F and the crop lacks a snow cover, mixing it with a hardier grain like rye could preserve spring cover if the hairy vetch were to die during the winter.

In blends with grasses, hairy vetch benefits because those grass species can absorb water and minimize nutrient leaching. Mixes can also influence weed control effectiveness. Residues will persist longer when hairy vetch is mixed with rye, wheat, oats or other winter cereal grains, and as such, they may be better positioned to deter weeds. Similarly, mixing hairy vetch with crimson clover can prolong the cover’s ability to manage weeds. As another benefit associated with mixes, rye in a hairy vetch stand may give the hairy vetch support as it vines and climbs.

As a legume, hairy vetch represents a nitrogen source for crops that follow it. Crops can readily use mineralized nitrogen provided by hairy vetch. Following hairy vetch termination, nitrogen tends to release quickly. Incorporating hairy vetch boosts soil nitrogen levels, but without tillage, hairy vetch still can contribute nitrogen to the soil. Depending on the hairy vetch growing season length and subsequent cash crop’s nitrogen demands, the hairy vetch cover may supply all or at least a portion of the nitrogen required. When full hairy vetch growth commences in the spring, the cover crop may increase its nitrogen credit by two pounds to three pounds for each sunny day that it grows. Killing the cover too early would limit nitrogen fixation potential. As a baseline average, assume that hairy vetch will contribute 100 pounds of nitrogen per acre.

Moisture levels may be supported by hairy vetch growth. Hairy vetch residues that cover the soil can conserve moisture and benefit cash crops that follow. The hairy vetch itself also requires little moisture.

Through grazing or haying, hairy vetch could provide some forage value. High crude protein levels found in hairy vetch may create value for it as a livestock feed.

Longer Term Benefits Associated with Hairy Vetch Use

Growing hairy vetch also generates several longer term benefits for agricultural acreage. Long-term benefits associated with cover crop adoption refer to those realized for more than a single planting season, and they include diminished nutrient leaching, reduced soil erosion, decreased soil compaction and improved soil organic matter levels. The following list emphasizes long-term benefits specific to hairy vetch.

• Nutrient management: As indicated earlier, hairy vetch supplies nitrogen to the growing area. However, its nutrient management role also extends to other soil nutrients. Specifically, hairy vetch has been recognized for scavenging phosphorus.
• Weed control: In the spring following planting, hairy vetch quickly produces vegetative cover. The vine-like plants can outcompete spring weeds as the hairy vetch shades the soil. Electing to let residues accumulate on the soil surface promotes weed control. For best results, kill hairy vetch using a technique that keeps the stalks whole because they provide better shade and longer cover. As hairy vetch residues decompose, the weed suppression benefit weakens. Ideally, the following crop will develop its own canopy as the hairy vetch residues thin and their weed suppression potential declines. Hairy vetch residues register some allelopathic properties. However, they’re relatively weak. Hairy vetch itself may trigger weed issues as some seed can germinate in seasons after the vegetation grew. Seed from hairy vetch could also contaminate winter grain meant for harvesting.
• Soil conditioner: As a soil conditioner, hairy vetch positively influences topsoil tilth. After growing hairy vetch, the soil has a friable, loose structure. As another way to condition soil, hairy vetch promotes water penetration into the soil profile. Additionally, residues covering the soil can offer protection to the soil surface. Erosion control benefits would concentrate during the winter and spring seasons.
• Insect support: Hairy vetch residues allowed to accumulate on the soil surface offer a habitat to insects. Some insects may have beneficial effects, but others could pose a challenge. Hairy vetch can support some pollinators, too. As an example, bumble bees may frequent hairy vetch stands.
• Disease resistance: In some cases, growing hairy vetch and utilizing its residues may enable main crops to resist diseases.

As indicated earlier, such long-term variables are difficult to discern on an annual basis, but they all eventually impact crop yields. According to the 2014/2015 SARE/CTIC Cover Crop Survey, raising cover crops can have a measurable effect on yield. The survey data suggested that cover crops preceding corn and soybean production nationally increased yields by 3.7 bushels per acre and 2.2 bushels per acre, respectively, on average. Nationally, corn yields averaged 176.2 bushels per acre when produced with cover crops relative to 172.5 bushels per acre in scenarios without covers. Soybeans with cover crops yielded 53.6 bushels per acre nationally on average compared with 51.4 bushels per acre in fields without covers. These estimates were based on corn yields reported by 401 operations and soybean yields shared by 362 operations.

Financial Assistance Programs

Growers who add cover crops to their operations may consider several financial programs that can offer assistance. Two USDA programs – the Conservation Stewardship Program and Environmental Quality Incentives Program – and some state efforts have assistance available to eligible applicants. The Conservation Stewardship Program offers five-year contracts to producers who pursue various conservation endeavors, such as growing cover crops. The contracts may dictate annual payments for adding or maintaining conservation practices, or they may provide supplemental payments for projects focused on resource-conserving crop rotations. Depending on the conservation program adopted, operations could receive Conservation Stewardship Program payments that ranged from $1,500 to $40,000 in 2016. Within this range, higher conservation performance yields higher payments. The industry anticipates an overhaul for Conservation Stewardship Program parameters in 2017. For more information about applying, contact a USDA Service Center.

The Environmental Quality Incentives Program from USDA offers financial and technical assistance to eligible applicants. It specifically supports conservation efforts that address soil, water, plants, animals, air and other natural resources. Financial assistance opportunities can be used to adopt permitted conservation activities or form a Conservation Activity Plan. For Missouri growers, the EQIP program in 2016 included financial assistance opportunities for growing cover crops that were winter kill species or chemical or mechanical kill species. The payment rate varied between the two. The program continuously accepts applications, but states may impose some application period deadlines. Producers interested in learning more about the Environmental Quality Incentives Program may contact a local USDA Service Center.

At the state level, other assistance programs may be available. For example, Missouri announced the Cover Crops for Soil Health and Water Quality project in March 2016 using Regional Conservation Partnership Program funding. This project provides that 20,000 acres in Missouri could annually grow cover crops. To be eligible, acreage would need to have the highly erodible designation, or it would need to have organic matter levels lower than 2 percent.

Sources

Bjorkman, T. and J.W. Shail. 2010. Cornell cover crop guide for hairy vetch. Cornell University. Ithaca, NY 14850.

Charney, Alyssa and Ferd Hoefner. 2016. USDA Announces Conservation Stewardship Program Sign-up for 2016. National Sustainable Agriculture Coalition. Washington, DC 20002.

Conservation Technology Information Center, North Central Sustainable Agriculture Research & Education and American Seed Trade Association. 2015. 2014-2015 Annual Report Cover Crop Survey. Conservation Technology Information Center. West Lafayette, IN 47906.

Duiker, Sjoerd W., William S. Curran and Robert S. Gallagher. 2010. Hairy Vetch as a Crop Cover . Penn State Extension. University Park, PA 16802.

Missouri Department of Agriculture. 2016. Missouri Agriculture Awarded $2.4 Million to Expand Cover Crops on Farmland . Missouri Department of Agriculture. Jefferson City, MO 65102.

National Agricultural Statistics Service. 2014. 2012 Census of Agriculture Highlights: Conservation . USDA National Agricultural Statistics Service. Washington, DC 20250.

National Soil Dynamics Laboratory. Hairy Vetch. USDA Agricultural Research Service. Auburn, AL 36832.

Natural Resources Conservation Service. Conservation Stewardship Program. USDA Natural Resources Conservation Service. Washington, DC 20250.

Natural Resources Conservation Service. Environmental Quality Incentives Program. USDA Natural Resources Conservation Service. Washington, DC 20250.

Natural Resources Conservation Service. MO 2016 EQIP. USDA Natural Resources Conservation Service. Washington, DC 20250.

Sustainable Agriculture Research & Education. 2007. Hairy Vetch . Managing Cover Crops Profitably, 3rd Edition. College Park, MD 20742.

Farm Financial Assessment

Farm financial performance and records are important to consider when evaluating a new alternative crop. Past financial performance, current financial condition and the capacity to take on risk influence alternative crop adoption viability. If you need external financing to kick start your entry into alternative crop production, then your lender will likely want to see a good business plan and, if available, financial and production histories.

Financial recordkeeping systems are important for tracking financial performance and making decisions. You can keep records manually through a written system or electronically through a computerized system such as Quicken or Quickbooks. For you to make sound decisions, financial records need to be kept current and accurate.

Information from financial statements and income tax records can measure a farm’s financial position and performance. The balance sheet, statement of cash flows and income statement are three important financial statements. Balance sheets communicate the financial condition of a farming business on a specific day, such as the beginning or end of the year. They share detailed information about a farm’s assets, liabilities and equity. The statement of cash flows (cash in, cash out) shows cash receipts and cash expenditures during a certain time period. The income statement reports the revenue, expenses and profit during a given time period. Historical balance sheets, statements of cash flows and income statements demonstrate how the business has performed. Additionally, these statements can be used to project the business’ future performance. IRS Schedule F and 4797 tax forms are important to existing producers for accurately conducting accrual-adjusted financial analysis.

Key financial measures also help to evaluate a farm’s financial condition. Numerous financial measures can help with evaluating a farm. Usually, these measures tend to look at the profitability, financial efficiency, liquidity and solvency of the business. Examples include return on assets, the operating expense ratio and the debt-to-asset ratio. Lenders typically use a set of key measures when they evaluate loan applicants. Key financial measures can also help with benchmarking your farm relative to other operations. Benchmarking data can be obtained through developing good relationships with other local farmers who are willing to share some of their key financial measures. Alternatively, you may try contacting state recordkeeping business associations, universities or extension services.

Many tools and spreadsheets available online may assist producers in developing financial statements, keeping records and conducting financial analysis. Additionally, accountants, bankers and other business specialists are good resources who may assist with assessing farm financial performance.

For More Information

Measuring and Analyzing Farm Financial Performance (Purdue)

Worksheets for Measuring and Analyzing Farm Financial Performance (Purdue)

Farm Finance Scorecard (Minnesota)

Establishing and Using a Farm Financial Record-Keeping System (eXtension)

Farm Analysis Solutions Tools (FAST) (Illinois)