Skip to main content
ARS Home » Research » Publications at this Location » Publication #221911
Title: An economic and stochastic efficiency comparison of tillage systems in corn and soybean under risk

Author
item Fathelrahman, Eihab
item Ascough Ii, James
item HOAG, DANA - COLORADO STATE UNIVERSITY
item Malone, Robert - Rob
item Heilman, Philip - Phil
item Wiles, Lori
item KANWAR, RAMESH - IOWA STATE UNIVERSITY

Submitted to: Experimental Agriculture
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 10/23/2010
Publication Date: 1/26/2011
Citation: Fathelrahman, E.M., Ascough II, J.C., Hoag, D.L., Malone, R.W., Heilman, P., Wiles, L., Kanwar, R.S. 2011. An economic and stochastic efficiency comparison of tillage systems in corn and soybean under risk. Experimental Agriculture. 47(1):111-136.

Interpretive Summary: This study evaluates the efficacy of the stochastic efficiency with respect to a function (SERF) methodology for conventional and conservation tillage systems using 14 years (1990-2003) of economic budget data collected from 36 plots at the Iowa State University Northeast Research Station near Nashua, IA. We use the SERF approach examine which of four different tillage systems (chisel plow, moldboard plow, no-till, and ridge-till) on continuous corn and corn/soybean cropping systems are the most risk-efficient in terms of maximizing economic profitability (gross margin and net return) across a range of risk aversion preferences. In addition to the SERF analysis, we conduct an economic analysis of the tillage system alternatives using simple statistical measures such as mean, standard deviation, and skewness for ranking purposes. The Stop Light approach for analyzing and visually displaying probabilistic information contained in the tillage system cumulative density functions (CDFs) is also demonstrated. Statistical analysis of the economic measures alone provided contradictive and non-conclusive rankings. SERF analysis results were dependent on the crop (corn or soybean), economic outcome of interest (gross margin or net return), and the level of risk aversion. The moldboard plow tillage system was preferred across the entire range of risk aversion for the corn gross margin analysis, and the no-till (soybean gross margin), ridge-till (corn net return), and moldboard plow (soybean net return) tillage systems were preferred at lower levels of risk aversion but not at higher levels. For the Stop Light analysis, the moldboard plow tillage system was preferred regardless of decision maker objective to minimize risk or maximize gross margin or net return.

Technical Abstract: Recently, a new method of stochastic dominance called stochastic efficiency with respect to a function (SERF) has been developed. Unlike traditional stochastic dominance approaches, SERF uses the concept of certainty equivalents to rank a set of risk-efficient alternatives instead of finding a subset of dominated alternatives. This study evaluates the efficacy of the SERF methodology for conventional and conservation tillage systems using 14 years (1990-2003) of economic budget data collected from 36 plots at the Iowa State University Northeast Research Station near Nashua, IA. Specifically, the SERF approach is used to examine which of four different tillage systems (chisel plow, moldboard plow, no-till, and ridge-till) on continuous corn and corn/soybean rotation cropping systems are the most risk-efficient in terms of maximizing economic profitability (i.e., gross margin and net return) by crop across a range of risk aversion preferences. In addition to the SERF analysis, we conduct an economic analysis of the tillage system alternatives using simple statistical measures such as mean, standard deviation, and skewness for ranking purposes. Finally, we demonstrate the use of a complementary method, the Stop Light approach, for analyzing and visually displaying the probabilistic information contained in the tillage system cumulative density functions (CDFs). Statistical analysis of the economic measures alone provided contradictive and non-conclusive rankings (e.g., examination of the gross margin and net return means for corn and soybean showed that each of the tillage system alternatives was the highest ranked depending on the crop). SERF analysis results were also dependent on the crop (corn or soybean), economic outcome of interest (gross margin or net return), and the level of risk aversion. The moldboard plow tillage system was preferred across the entire range of risk aversion for the corn gross margin analysis. For the other SERF analyses, the no-till (soybean gross margin), ridge-till (corn net return), and moldboard plow (soybean net return) tillage systems were preferred at lower levels of risk aversion but not at higher levels. For the Stop Light analysis, the moldboard plow tillage system was preferred regardless of whether the objective of the decision maker is to minimize risk or maximize gross margin or net return.