Advances in Agricultural Science 07 (2019), 01: 01-10
Economic analysis and sustainability of systems with agricultural rotations in rain-fed and irrigated by pivot
Marcos Osvaldo Beltramelli Gula 1*, Richard
Alberto Rodriguez Padrón 1 and Pancracio Eduardo Cánepa Granero 1
1 Water Department, North Littoral Regional University Center, Universidad de la República, Uruguay.
Irrigation is an investment, where the value is included as a cost in the profitability analysis. The aim of this study is to evaluate and compare the economic profitability of four agricultural rotations, rain-fed and irrigated. Crops for agricultural rotations were: corn, soybean, wheat, and as a green rye grass bridge. The experimental design was randomized blocks, with three repetitions, in a factorial scheme. Irrigation was applied by central pivot and the reference of evapotranspiration was calculated based on Penman-Monteith/FAO methodology. The expenditures were analyzed with the average annual costs per hectare, where the fixed costs, variable costs, were discriminated, calculating the prices of inputs, services and land value. The following financial indicators were determined: net present value, internal rate of return, benefit / cost ratio, investment recovery period, annual equivalent cost and the equilibrium point, estimated in 4, 8, 12, 16 and 20 years. The agricultural rotation of corn and rye grass in rain-fed was the one that showed the most economically unfavorable scenario since it did not provide security to invest in it. The agricultural rotation that presented the most favorable scenario was corn, wheat, soybeans, rye grass, showing more profitable financial indicators in both conditions, short periods of recovery of investment and low points of equilibrium.
How to Cite: Beltramelli Gula, M., Rodríguez Padrón, R., & Cánepa Granero, P. (2018). Economic analysis and sustainability of systems with agricultural rotations in rain-fed and irrigated by pivot. Advances in Agricultural Science, 7(1), 01-10.
Historically, Uruguay has been, within the agricultural sector, a cereal-winter producer. In 2000 there were 123 thousand hectares designated to wheat production and in 2016 there were 330 thousand hectares. In 2000 the rain-fed agricultural production in summer destined 38% of that area to 42.5 thousand hectares of corn and 8.6 thousand hectares for soybean. In 2016, the area sown with corn was 88 thousand hectares and soybean with 1160 thousand hectares, representing 94% of the agricultural area in summer (MGAP-DIEA, 2018).
The inclusion of irrigation by pivot in Uruguay has gained ground. From 2000 to 2004 only 10 were imported into the country, for the year 2016 the count totaled 463 equipment installed in different regions, concentrating mainly in the departments of Rio Negro, Soriano and Florida (MGAP-OPYPA, 2018).
Irrigation improves the yields of corn and soybean crops, reaching values of 13 ton/ha and 6 ton/ha, respectively. Researchers with a track record in this field, such as Luis Gimenez, Álvaro Otero, Osvaldo Perez and others, have experimentally verified what the Uruguayan varieties are capable of, not only in yields, but also in adaptability to climatic conditions (Perez, 2017).
We were interested in analyzing and understanding this trend at the commercial level, based on experimental tests carried out by our work team, through the study of financial indicators. It is important to have a clear stance regarding the implementation of irrigation, whether as an investment, insurance and/or technological package (Piedrabuena et al., 2014). In this study, irrigation is an investment. We include its value as a cost in the analysis, considering the flow of future funds updated to be able to estimate the time of amortization of the investment and as well as to evaluate the profitability. In this way we manage to make comparisons between the results we reached for each treatment in rain-fed and with irrigation.
Currently, the development of irrigation techniques and strategies in Uruguay is increasing, for this reason the importance of providing the producer and researcher with discussion tools based on the profitability of agricultural rotation and crops under irrigation. The test of agricultural rotations of crops with pastures developed by INIA La Estanzuela began in 1963 and continues today, which has been proven in research the importance of alternating crops with pastures and the production of biomass in relation to the content of organic matter in the soil (Morón et al., 1994). When irrigates with a pivot, it must be considered that the area that is destined for agricultural production will always be the same, on the other hand rice in Uruguay is irrigated by flood and long breaks alternating with pastures, it is not feasible to make extensive breaks in the productive area under a pivot, for that reason the agricultural rotations of crops with pastures makes it an important tool for the sustainability of the economy system and the soil resource. In this context, the aim of this study is to evaluate and compare the economic profitability of agricultural rotations of corn, soybean, wheat, and green rye grass bridge, under rain-fed conditions and with irrigation by pivot.
Materials and methods
The trial was made in 2014, 2015 and 2016 in the experimental area of the Faculty of Agronomy (EEFAS), located on National Route 31, km 21, next to San Antonio´s town, Department of Salto in Uruguay, in the coordinates geographical latitude 31º22’31,4 “S, longitude 57º43’3,2” W, altitude 90 m.s.n.m. The climate in the region is classified as humid subtropical, denominated (Cfa), according to the Köppen system of classification (1928). The average annual values of the parameters: precipitation, average temperature and relative humidity are 1322mm, 18.1 and 72%, respectively.
The predominant soil in the area is typical Brunosoleutrico, according to the classification proposed by the Soils and Fertilizers Direction of the MGAP (1976) for the soils of Uruguay.
The treatments consisted in four agricultural rotations, with corn, soybean, wheat, and as a green rye grass bridge, the combinations are described in (Table 1), applying irrigation by pivot and rain-fed. The experimental design was randomized blocks, with three repetitions, in a factorial scheme. The experimental plots with irrigation were of 1050 m2 and in rain-fed of 770 m2, the complete area were 3.28 ha, where 1.89 ha were destined under irrigation by pivot and rain-fed of 1.39 ha.
Irrigation was applied by central pivot during the summer period, with the following characteristics, length 86 m and flow 5.99 l/s. The reference evapotranspiration was calculated based on the Penman-Monteith / FAO methodology (Allen et al., 2006). The climatic data was obtained with daily frequency in the automatic climatological station of the National Agricultural Research Institute of Salto Grande (INIASG). The values of the coefficients
Table 1. Crop Rotation Treatments.
Table 2. Production costs per treatment.
Table 3. Financial indicators of agricultural rotation of corn and rye grass, in rain-fed and irrigated areas.
used for the crops were in corn (Kcini=0.3, Kcmed=0.2, Kcfin=0.6) and for soy (Kcini=0.4, Kcmed=1.15, Kcfin=1.50), (Allen et al., 2006).
The corn varieties were full-cycle P2069YR and short-cycle 38A57HR variety, which are tolerant to glufosinate-ammonium and glyphosate, and glyphosate, respectively. Planting dates for the study period were carried outin September the variety P2069YR and in October the variety 38A57HR, with a time interval greater than 15 days. Planting density was the same for both varieties, in the order of 4-6 seeds per linear meter, under direct sowing with plates with lines spacing of 70 cm and depth of 3 cm.
The variety of soybean was intacta belongs to maturity group 6.5, the first soybean planting was carried out between the second half of October and the first half of November, while the second soybean was planted within the first fortnight of the month of December, with density of 18-22 seeds per linear meter, under direct sowing with plates, with distance between lines of 45 cm and depth of 3 cm, these conditions did not change during the study period.
The variety wheat was Baguette 101, it was sown in May with planting density of 95 Kg/ha, under direct sowing to the distance between lines of 17 cm and depth of 1.5 cm.
The variety of the rye grass crop was La Estanzuela 284, it was sown with a density of 30 Kg/ha, under direct sowing, placing the seed in a linear form at 17 cm between lines on the surface of the soil.The fertilizer was applied for all rotations, in the seeding with ammonium phosphate (18-46/46-0), according to the demand of each crop and the results of soil analysis,refertilizations with urea in corn, wheats and rye grasses , within the phenological stage V6, Z22 and tillering, respectively.
The applications of herbicides carried out were mainly between post-harvest and pre-sowing in each crop (chemical fallow), with some extra application with glyphosate to placate weeds during the implementation period of summer crops. To avoid possible attacks of diseases that could affect the normal development of corn, soybean and wheat crops we did an strategic applications of insecticides and preventive dosages with fungicides. The harvest was carried out in mechanized form by plots of bagging in sacks, from which weight and yield were obtained for each experimental unit. The income generated from the industrialization of the production is the averaged over the three years under study, stipulating for corn 207 USD/ton, soybean 395 USD/ton and wheat 208 USD/ton.
For the expenditures, we discriminated the fixed costs of the variable costs, we obtained the annual average costs per hectare. The fixed costs were added to them in the case of rain-fed rotations, the value of the land lease (92 USD/ha); and to variable costs the price of all seeds (351 USD/ha), fertilizers (174 USD/ha); herbicides, insecticides and fungicides (22 USD/ha), services include labor and fuel consumption of the machinery used, for sowing (145 USD/ha), fertilizations (13 USD/ha), spraying (9 USD/ha) and harvests (253 USD/ha) and agronomic supervision (2080 USD/ha). In the agricultural rotations under irrigation, fixed costs were considered: the same price of the land lease, the initial investment in the pivot equipment (2000 USD/ha) and the energy consumption associated with the application of irrigation, calculated according to the sheet applied for irrigation. Each crop cycle, estimated the value of 1mm to 0.70 USD, (252 USD/ha), considering the operation of the pivot and water pumping system. The variable costs are the same calculated for rain-fed rotations. Also included is the cost of annual maintenance of the center (10 USD /ha).
The costs of each agricultural rotation are shown in Table 2. They were classified as a single cost, but separated in supplies, services and harvest. What is sought is to focus on the differences between the treatments and for rain-fed and irrigated by pivot. As a result, we can see what would be the percentage distribution of costs with respect to the total required.
The analysis was carried out from the financial and commercial point of view for the results obtained in rain-fed and irrigated land. To establish the profitability of agricultural rotations and the irrigation system we determined the following financial indicators: net present value (NPV, Eq. 1), internal rate of return (IRR, Eq. 2), benefit / cost ratio
recovery period of the investment (PR, Eq. 3), annual equivalent cost (CAE, Eq. 4) and equilibrium point
estimated for 4, 8, 12, 16 and 20 years, assuming an annual inflation rate of 6.55%.
– the time of the cash flow.
– the discount rate, i.e. the return that could be earned per unit of time on an investment with similar risk.
– the net cash flow i.e. cash inflow – cash outflow, at time t.
– the investment.
Given the (period, cash flow) pairs ( where N is the total number of periods.
– the net cash inflow during the period t.
– the discount rate.
– the number of time periods.
– the total initial investment cost.
– the year before the immediate recovery of the investment.
– the initial investment.
– the sum of previous cash flows.
– the effective net flows for the year that the investment is satisfied.
– the interest rate.
– the number of periods to be evaluated.
The financial indicators for the agricultural rotation of corn and rye grass (T1), in rain-fed and with irrigation, are shown in Table 3. In T1, rain-fed is the one that resulted the most adverse scenario among all the cases studied. The net present value (NPV) is negative for all the years evaluated, indicating that the investment is not viable in this conditions. The profitability (IRR) increases with the years, with very little significant values (27%). The same happens with the other indicators. The benefit-cost ratio showed no profitability in the analysis per dollar invested, the periods for the recovery of the investment are very extensive and it is also necessary to sell 90% of the production in each crop cycle to generate 10% of free income. The investment in irrigation in this rotation significantly changes the values of the indicators, making the rotation viable and profitable. The periods of recovery of the investment are reduced and the equilibrium point is approximately 40%, this change is due to the increase in yield in the cultivation of corn under irrigation. This treatment does not include the direct or indirect gains that the green bridge of rye grass could generate which could increase the profitability of agricultural rotation or improve soil properties.
Financial indicators for the agricultural rotation of corn, wheat, soybean, rye grass, soybean, wheat, maize and rye grass (T2) in rain-fed and irrigated areas are shown in (Table 4). This agricultural rotation is the best scenario among all the cases studied, since the financial indicators reach the highest values in both modalities, showing short periods of recovery of the investment and low equilibrium points. The particularity is that the
Table 4. Financial indicators of agricultural rotation corn, wheat, soybean and rye grass, in rain-fed and irrigated.
Table 5. Financial indicators of the agricultural rotation of soybean and wheat, in rain-fed and irrigated areas.
Table 6. Financial indicators of agricultural rotation of soybean and ryegrass, in rain-fed and irrigated.
defining results were better in rain-fed than with irrigation, where the parameters were notoriously higher in viability, profitability and in the perceived benefit for each dollar invested, which means that the increase in corn and soybean yields favored by the inclusion of irrigation, did not affect the final result of the indicators. The benefit cost ratio, in rain-fed condition buying with irrigation, showing a difference greater than 1.6 in 4 years, and 2.68 in 20 years.
The financial indicators for agricultural rotation of soybean and wheat (T3), in rain-fed and irrigated, are shown in Table 5. This rotation is the most intensive in time, where no green bridge is included and therefore there are two annual revenues, product of each crop. In both conditions (rain-fed, irrigated) they are profitable, but the application of irrigation caused a change in the indicators, which reflect an increase of soybean yield. Analyzing each parameter the improvement is notorious in almost all the results by the application of irrigation. The PRI is slightly more extensive given the investment in the systematization, but the IRR until the eighth year in rain-fed, is 77% more profitable, but then this value decreases abruptly, giving in the last year the difference of 13% between both conditions. What happens with this indicator is that it decreases with time, rain-fed from the eighth year to the last low on average 49%, while irrigation from the fourth to the eighth year increases 5% and then gradually decreases on average 4% until the last year. In this case the trend makes irrigation treatment more profitable. Even under irrigated conditions, the equilibrium point is lower than in rain-fed areas with a difference of 12%, and the cost benefit ratio increases with irrigation and in the rain-fed season it remains the same in all the years evaluated.
The financial indicators for the agricultural rotation of soybean and ryegrass (T4), in rain-fed and with irrigation are shown in Table 6. Comparing all the rotations in irrigation condition, this rotation is the most adverse scenario, showing lower indicators for all years, with respect to the others. Analyzing the eighth year where all the cases studied under irrigation reach the highest peak, we can see that the values farther from the average, being 30% less viable, 11% less profitable and generating a profit for every dollar invested 12% lower than the average of all treatments. When the comparison is made in rain-fed and irrigated land, it is similar to that described for T3, where the values of the indicators are higher with irrigation. The IRR also acts in a similar way, where it starts being higher in rain-fed areas with a wide difference and then the same trend leads to higher profitability in the irrigation condition in the last year. For these reasons, this rotation is favored by irrigation, given that the yields obtained by the soybean crop are shown in the financial indicators mentioned before.
Therefore, by carrying out a comparative analysis between treatments, T1 emerges, in rain-fed conditions, which was the most economically adverse scenario, with no viability, with a very low profitability and indicators that do not provide security when investing in this agricultural rotation. On the other hand, the best scenarios were given by T2 in irrigation and rain-fed land, but standing out the latter since the values were more attractive.
Irrigation production systems increase profitability in the cultivation of corn and soybean, without agricultural rotation. In this context the application of irrigation on monoculture corn and soybean monoculture is essential to be profitable, which we corroborate with the results of T1 and T4. The agricultural rotation of wheat and soybean, shows favorable economic indicators. In addition, irrigation has shown profitability in other crops (Wesley et al., 1994; Dos Santos et al., 1996). An economic analysis in paprika, said that despite the frequent rainfall in the study area, the investment in irrigation is justified from the economic point of view, as a tool of complementary production and necessary to obtain a profit in the performance (Rodríguez et al., 2016).
However, other factors inherent to irrigation must be considered. According to a study carried out in Pergamino-Argentina, the irrigation can generate environmental costs in the medium or long term associated with the loss of the productive capacity of the soil due to the use of low quality water (Cataldo et al., 2014). These costs, such as those caused by erosion and soil degradation caused by resource management, by the degree of intensity of rotations, were not incorporated in this study, even though it is important to consider them for a complete economic evaluation of the incorporation of the Irrigation in agricultural systems. This economic – environmental analysis is proposed as a continuation of the present study.
Also, the systems of continuous cultivation, or in rotations of crops and pastures with direct seeding, can achieve the sustainability of the soil resource but for this it is necessary: 1) that the sequences of crops are harvested only for grains, leaving all their stubble on the ground and 2) that these crops leave stubble quantitatively important and qualitatively determining moderate to slow decomposition speed (García, 2004). But it also adds that if the systems of continuous crops have a high proportion of soybean, the above is not fulfilled and therefore the sustainability of the soil resource could be committed in the long term, even without tillage.
In addition to soil cover and soybean monoculture in this context, the use of cover crops had no positive effect on the densification of the soil, and even from the depth of 10-15 cm, there was an increase, although they improved the structural stability of the soil (Gudelj et al., 2018). It also concludes that without the presence of groundwater, cover crops had a negative impact on the yield of soybean, when rainfall in the summer months was scarce. The years with influence of ground water seem to show a better result of the treatments with coverage with respect to those without coverage. Although cover crops can contribute significantly in the use and management of the soil, it is necessary to define their use based on long-term climate forecasts.
The agricultural rotation that showed the most favorable scenario were corn, wheat, soybean, rye grass, showing more profitable financial indicators in both conditions, short periods of recovery of investment and low points of equilibrium. The effect of irrigation on the yields achieved by corn and soybean crops within each rotation does not always have an impact on financial indicators. This is why it is relevant, when investing in irrigation by pivot, to consider in which agricultural rotation work, taking into account the particularities of the crops that make it up, as well as studying what are the responses to irrigation and how they have evolved in recent years regarding the price of the products obtained from them. This preliminary study leads to continue making technical analysis of agricultural rotations, with the objective of environmental, agricultural and economic profitability. From the agricultural point of view the producers, should have preferential duty, to encourage the production.
Conflict of Interest
The authors have not declared any conflict of interest.
To the engineer Felipe Lecueder of the Corporación de Maquinaria (Valley), for information support. To the Agricultural Technology Promotion Fund (FPTA-296), for financial support. To the staff of the experimental station of Faculty of Agronomy in Salto, for the support.
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