Improved profitability with 5% rule

CHAMPAIGN, Ill. — Among the ways to improve profitability during times of lower prices and high input costs is to implement the 5% rule.

The concept was developed by Danny Klinefelter, who was a professor and economist with Texas AgriLife Extension at Texas A&M University and the longtime director of The Executive Program for Agricultural Producers.

Klinefelter’s rule features 5% increase in price received, a 5% decrease in costs and a 5% increase in yield will often produce more than a 100% increase in net returns. The effect is cumulative, multiplicative and compounding.

“I preach Danny Klinefelter’s 5% rule heavily to my customer base,” Kelly Robertson, owner and lead agronomist at Precision Crop Services in Benton, said at the recent Illinois Soybean Association’s Field Advisor Forum panel discussion.

“There’s 5% cost that we can cut somewhere and we’re looking at cutting the cost out of all the extra junk we’re throwing in the additives, the stickers, the micronutrients into our fungicide applications and our weed control programs.

“We’re looking at trying to do a better job getting a yield increase of 5% by looking at proper product placement and populations on hybrids and making sure that we nail that down right in accordance with the seed companies we’re growing with because I believe there’s a chance for a 5% yield increase there.

“And then if you can get a 5% increase in your price. If you can do all of those things in those three areas, it goes to over 100% return. So, we can go from a negative return per acre to a very positive return very quickly.”

Several questions related to cost-cutting were addressed by Robertson and fellow panelists Karen Corrigan, of McGillicuddy Corrigan Agronomics in Goodfield in central Illinois, and Kyle Stull, of Stull Agronomy in Waukesha in southeastern Wisconsin.

Evaluating Add-Ons

“If we’re doing our job as crop consultants, they’re already at the bare minimum of what they’re going to put in,” Stull said.

“Other than cutting from some crop fertilizer budgets, we are making some changes with some of our pre-emergence on soybeans and the University of Wisconsin’s recommendation is to draw out some of our residual on our post. Other than that, the biggest place to cut is to make sure you’re evaluating extra products, a lot of the add-on stuff that you’re spending a lot of your money.

“I told my clients yesterday that we figured about $100 an acre of farm income this year — which Wisconsin is different; we pay $150 an acre cash rent, not $350. We also get 75 bushels of corn less than you guys in Illinois do. But if you’re going to go out and gamble on something, you’re gambling with 30% of your family’s net income by buying a $30 per acre product that you might not need.”

“People always look to fertilizer first, but you can’t know what to cut unless you know where you are. One of the best things you can look at is doing the soil test so you can see where you are and maybe you need to spend more on one farm for fertility and less on another based on what those levels show,” Corrigan said.

“The other thing is that we put a lot of stuff in our tank mixes and if it doesn’t cheese we assume it’s working, but there can be some chemical incompatibilities that you can’t see and you notice until the products don’t work like you expect them to.

“Just remember, surfactants are simple. There’s no magic about them. They haven’t changed in decades. You don’t have to buy some super-expensive surfactant. It’s a proprietary one. It’s still a surfactant.”

Stephanie Porter, ISA outreach agronomist and panel moderator, noted increased focus on integrated pest management and requests for field scouting help to determine pest thresholds.

The spread of herbicide-resistant weeds, including confirmation of weeds with multiple resistance, is making more difficult to keep fields clean and increasing costs.

“If you’ve already used several passes for weed control, you’re probably at a point where you don’t need to spend money spraying, you need to look at other non-chemical controls and we have a lot of fields with a lot of resistance that chemicals just are not going to be the answer any more,” Corrigan said. “So, stop flinging the money out at them.”

Plant-Available

Soils contain many nutrients that are not plant-available. Panelists were asked how that nutrient potential in the soil bank can be mined.

The first step is to make sure the pH is where it needs to be.

“After that, phosphorus in southern Illinois is not really an issue. We sample in 25 counties, 70,000 to 100,000 acres of soil sampling a year and 70% of the fields we sample the phosphate levels are above the optimum. It’s not uncommon for us to find field averages of 70, 80, 100 on a P test,” Robertson said.

“So, I’m always amazed of the thought that we need phosphorus availability products. Do those products work and make it available? That’s the next question.

“Most of the times the Haney test, and I’m speaking specifically to the soil health test, is pulled and evaluated in our area as a way to sell something and there’s usually not any soil test or anything with it.

“The other side of that is where’s the calibration data? There is none, so when Billy Bob shows up and pulls a Haney test on somebody and tells them they need X, Y and Z, we can argue all day long about the calibration data that the land-grant universities have on soil fertility, but that is well researched data and it’s published.

“There’s nothing as far as benchmarks or calibration data for various soil types or management practices or crop rotations with soil health.”

Stull added that there are a lot of assumptions with the Haney test.

“Some of these biological products break down residue faster. Great, that’s fine. Maybe that first year you’ll see more availability, but the problem is we take a soil sample in the fall and we take one in the spring to show that it worked. We’d see the same thing almost in a regular field. It might be a little exaggerated where you treated some of your residue, but it’s not going to make a huge difference,” he said.

“Then, at the end of the day, you’re breaking down residue faster so you’re basically taking out a home equity loan on the fertilizer that you had in that residue that slowly would have been available over four or five years and you’re taking it all at once without putting it back which is what they’re recommending.

“They’re recommending you don’t need fertilizer. You’re just going to put this on, you’re going to get residue to break down, you get all the nutrients and then you don’t have to apply fertilizer. Four or five years later, those guys who sell those products are calling me and telling me their soil test levels are atrocious, they’re losing yield and can’t believe they started using those products four years ago.”

Nutrients in the soil can be mined for a little while, but the bottom will drop out “and you will never be able to afford to get that back up where it was with today’s prices,” Corrigan said.

Regarding any mechanisms that would help access nutrients in the soil profile, Corrigan said the key is to solve the big problems first.

“It’s hard to make a blanket statement knowing something will work for 80% of you. You have to look at your most yield limiting factor and that’s what you have to attack first,” she said.

“People will sell you micronutrients, but if your problem is potassium, micronutrients aren’t going to help that much. You really have to know for your own operation what the problem is.”