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Title: Using the Response Surface Method (RSM) for Economic and Environmental Tradeoffs Between Economics and Environment at the Farm Level

Author
item Ascough Ii, James
item Fathelrahman, Eihab
item HOAG, DANA - COLORADO STATE UNIVERSITY

Submitted to: Symposium Proceedings
Publication Type: Proceedings
Publication Acceptance Date: 10/17/2007
Publication Date: 10/27/2007
Citation: Ascough Ii, J.C., Fathelrahman, E.M., Hoag, D.L. 2007. Using the Response Surface Method (RSM) for Economic and Environmental Tradeoffs Between Economics and Environment at the Farm Level. Farming Systems Design 2007 Conference, Catania, Sicily, Italy. September 10-12, 2007. Symposium Proceedings p.164-165.

Interpretive Summary: Farm inputs such as nitrogen are essential for maintaining crop yields, however, farmers commonly apply excessive nitrogen inputs as an insurance policy. U.S. farmers typically spend over $10 billion annually on commercial fertilizer with nitrogen fertilizer consumption increasing from 3 million tons in 1961 to over 12 million tons in 2004. The goal of this research is to use response surface methodology (RSM) to develop an integrated farm-level economic and environment analysis framework for tradeoff analysis between farm profitability and environmental impacts created by high levels of on-farm nitrogen application. The main idea of RSM is to use carefully designed empirical data sets to obtain an optimal response. We used field data from treatments carried out at the Northeast Iowa -Nashua Agricultural Research and Demonstration Farm at Nashua, IA, USA. The Constrained Response Surface Method (CRSM) was then applied to find the surface optimum regions of corn and soybean profitability subject to two constraints representing environment externalities - nitrogen measured in the tile drainage line of each plot and total nitrogen measured in the soil profile. Our research results indicate that the tradeoff between farm profit and nitrogen consumption (and consequently nitrogen environmental impacts) varies significantly. The variations depend on the year, choice of crop planted, crop rotation, tillage system, amount of nitrogen applied, planting density, soil water content, and soil effective porosity. Well-designed and implemented response surface experiments accompanied by detailed economic, biophysical, and environmental data were found to be useful and necessary for analyzing complex problems of this nature.

Technical Abstract: Excessive nitrogen use has been associated with the impairment of streams, lakes, and aquifers. The U.S. Geological Survey concluded that large amounts of nitrogen fertilizer applied to croplands is responsible for more than 48% of all nitrogen loads to surface water in areas where nitrogen runoff per unit of land area is high, i.e., greater than 1,000 kg/km2 annually. Response surface methodology (RSM) explores the relationships between several explanatory variables and one or more response variables. RSM is a useful alternative to classical optimization and mathematical programming techniques in the presence of experimental design data and the need for an econometric model describing economic systems. In the last five decades RSM methodology has evolved to cover a large number and a wide range of applications, especially as computational capabilities have advanced. The goal of this research is to use a specific type of RSM to develop an integrated farm-level economic and environment analysis framework for tradeoff analysis between farm profitability and environment externalities created by high levels of on-farm nitrogen application. We used field data from treatments carried out on 36 0.4-hectare plots at the Northeast Iowa -Nashua Agricultural Research and Demonstration Farm at Nashua, IA, USA. The Constrained Response Surface Method (CRSM), including optimization algorithms (i.e., the steepest descent and ascent), was then applied to find the surface optimum regions of corn and soybean profitability subject to two constraints representing environment externalities - nitrogen measured in the tile drainage line of each plot and total nitrogen measured in the soil profile. Our tradeoff analyses compared corn and soybean yields (and gross margins) on one hand, and the relevant nitrogen amounts in tile drainage line and the soil profile on the other. Study results showed that the tradeoffs between economics and the environment for corn are significant and complex. For example, a reduction of nitrogen in tile drainage for corn plots from 55 kg/ha to 20 kg/ha (64%) required a much lower reduction in gross margin from $451 per hectare (the maximum possible corn gross margin) to $308 per hectare ($143 per hectare difference or 32%). This reduction in gross margin was accompanied by approximately a 50% reduction in soil profile nitrogen (from 114 kg/ha to 55 kg/ha). An important lesson learned from this study is that there is no singular point of optimal tradeoff between economics and the environment (even for a single crop). Assessing economic and environment tradeoffs is a complex issue and involves a large number of factors that influence on-farm decision-making. Well-designed and implemented response surface experiments accompanied by detailed economic, biophysical, and environmental data were found to be useful and necessary for analyzing complex problems of this nature.