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.

To access a sample radish cost-return budget, click here. This budget assumes that producers would primarily incur expenses for oilseed radish seed and machinery operations. Compared with cover crop alternatives, radish seed is somewhat expensive. As a result, producers may choose to control costs by blending radish seed with seed of complementary cover crops.

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 radish cover crop. This information can help producers to weigh radish costs and benefits.

Direct Impacts of Planting Radish

Oilseed radish plantings can capture nutrients and address leaching issues. They’re particularly good at scavenging nitrogen. Considering that oilseed radish roots can grow quite deep – the taproot can extend to 6-foot depths – they can reach and absorb nitrogen that would otherwise be inaccessible to crops with more shallow roots. By drawing nitrogen from deep soil levels, oilseed radishes discourage the nutrient from leaching and contaminating ground water supplies. Radish stands may catch 100 pounds to 150 pounds of nitrogen per acre.

After oilseed radishes capture nitrogen, they hold it until the plant matter decomposes. For the following crop to benefit, it must absorb nitrogen before the oilseed radish fully degrades and its nitrogen stores leach from the soil. Establishing oilseed radishes in a cover crop blend may address this issue. Producers may select to mix oilseed radish with rye because the rye is not susceptible to winter kill and may hold nitrogen for a longer time. As another option, producers may choose to grow oilseed radishes alongside a legume that can fix nitrogen.

After growing an oilseed radish cover crop, soils would be well-prepared for spring planting. Degrading radish roots create open spaces throughout the soil. As a result, soil may warm more quickly during the spring because air exchange occurs more readily. Plus, given that radish vegetation quickly degrades, spring machinery operations won’t likely be inhibited by persisting biomass. Cash crops may also root better if they follow oilseed radishes.

Producers may choose to use oilseed radish as a forage for livestock. During both early and late grazing seasons, oilseed radish can supply highly digestible forage to livestock diets. However, to avoid livestock experiencing bloat or other problematic symptoms, producers may seed grasses with the oilseed radish or also provide hay to the animals. Note that grazing can damage oilseed radish plants.

At some point, harvesting oilseed radish seed could provide a direct benefit for oilseed radish growers. The seeds contain high oil levels, and according to research conducted in Brazil, the oil could have use as a biodiesel feedstock. If oilseed radish were to produce mature seed, however, the species could possibly create a weed concern.

Longer Term Benefits Associated with Radish Use

Growing radish 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 radish.

• Compaction relief: Radish root structure enables the crop to mitigate soil compaction. A radish root’s top 12 inches to 20 inches can achieve a two-inch diameter, and when the plant dies and the root degrades, it creates a sizeable, deep hole. Such holes support water and air movement into the soil, and cash crop roots can more easily push through soil with less compaction. To maximize the compaction relief benefit, consider adjusting the oilseed radish planting rate. Planting less seed per acre enables taproots to grow larger and further address compaction. In a no-till model, growing oilseed radishes can mimic deep tilling or mechanical ripping.
• Soil structural improvement: In addition to resolving soil compaction, the oilseed radish root system produces other soil structural improvements. For example, numerous lateral roots extend from an oilseed radish’s taproot. Such lateral roots promote an environment with loose, well-aerated soil.
• Nutrient management: With their deep roots, radish cover crops can catch nutrients. As mentioned previously, oilseed radish can scavenge nitrogen. However, radish plantings can also absorb phosphorus and potassium. After a manure application, growing oilseed radishes can reduce the extent to which nutrients would leach and contaminate water resources. The same is true when oilseed radishes follow sludge or fertilizer applications.
• Water infiltration: When oilseed radishes decompose and leave open spaces in the soil, water can more easily penetrate into the soil, and the soil tends to have improved drainage capabilities.
• Erosion minimization: Oilseed radish vegetation grows quickly. While oilseed radish residues cover the soil, they can curtail erosion. When mixed with other cover crops such as cereal rye, annual ryegrass or oats, oilseed radish and its companion covers can discourage erosion. By addressing compaction and water infiltration, oilseed radishes may also reduce runoff issues.
• Weed control: The significant biomass that radish cover crops produce can smother weeds that attempt to grow. Producers may forgo spraying herbicide in the fall if an oilseed radish stand has sufficiently controlled weeds. As mentioned earlier, the oilseed radish itself may present a weed challenge if it has the opportunity to seed. Seed viability can extend for several seasons after the initial one that uses radish as a cover crop.
• Pest suppression: As a brassica crop, radishes emit biotoxins during their decomposition process, and those compounds can stifle pests and soil-borne pathogens. Otherwise known as glucosinolates, these chemicals can affect nematodes and soil-borne diseases, and their degradation yields soil fumigant-like properties. Planting rates may influence oilseed radish’s pest suppression potential. At high planting rates, the crop would provide more root surface area and may support better pest management. Although oilseed radish covers have such a pest suppression effect, they should complement an integrated pest management system, not supplant one.

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

Cavigelli, Michel A., Todd E. Martin and Dale R. Mutch. 2010. Oilseed Radish. Michigan State University. Centreville, MI 49032.

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.

Gruver, Joel, Ray R. Weil, Charles White and Yvonne Lawley. 2013. Radishes – A New Cover Crop for Organic Farming Systems . Midwest Organic & Sustainable Education Service. Spring Valley, WI 54767.

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. Cover Crop Costs. USDA Agricultural Research Service. Auburn, AL 36832.

National Soil Dynamics Laboratory. Radish. 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.

Natural Resources Conservation Service. 2012. Oilseed Radish. USDA Natural Resources Conservation Service. Booneville, AR 72927-9214.

Sundermeier, Alan. 2008. Oilseed Radish Cover Crop. Ohio State University Extension. Columbus, OH 43210.

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)