Mid-season Nitrogen Management for Winter Wheat under Price and Weather Uncertainty

Authors: CHEN, XIANGJIE - University Of Maryland; CHAMBERS, ROBERT - University Of Maryland; Bandaru, Varaprasad; JONES, CURTIS DINNEEN - University Of Maryland; OCHSNER, TYSON - Oklahoma State University; ROHIT NANDAN - Oak Ridge Institute For Science And Education (ORISE); BHARATH, IRIGIREDDY - Oak Ridge Institute For Science And Education (ORISE); ROMULO P. LOLLATO - Kansas State University; Witt, Travis; CHARLES W. RICE - Kansas State University

Submitted to: Field Crops Research
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 7/11/2024
Publication Date: 7/17/2024
Citation: Chen, X., Chambers, R.G., Bandaru, V., Jones, C., Ochsner, T., Witt, T.W. 2024. Mid-season Nitrogen Management for Winter Wheat under Price and Weather Uncertainty. Field Crops Research. 316. Article 109509. https://doi.org/10.1016/j.fcr.2024.109509.
DOI: https://doi.org/10.1016/j.fcr.2024.109509

Interpretive Summary: Weather and prices are two primary sources of risk for in-season nitrogen decisions for winter wheat producers. Accounting for this risk is crucial in developing reliable in-season nitrogen management tools. We examined the nitrogen decision-making process for farmers in a framework that accommodates both price and weather uncertainty. We combined crop modeling and economic analysis with data on long-term field trials on winter wheat in Oklahoma and Kansas and assessed how the economic returns to fertilization vary over sites, years, and differing risk attitudes of farmers. Our results indicated that by lowering the nitrogen rate, farmers can significantly reduce return risk while incurring only a minor return loss. The analysis also demonstrated the potential co-benefit of enhancing agriculture's climate and market resilience while lowering nitrogen losses.

Technical Abstract: In-season nitrogen (N) management tools are essential to optimize N application rates and maximize farmers’ economic returns while minimizing adverse environmental impacts. However, the primary limitation to developing such tools is the risk associated with uncertainties in weather forecasts and crop price projections required to estimate yields and returns for different N rates. Therefore, characterizing the risk associated with these uncertainties is crucial for determining optimum N rates in-season. This study investigated the N application decision-making process for farmers, accounting for risks associated with weather and crop price uncertainties through crop modeling and economic analysis. We used field trial data for winter wheat in Kansas to examine how optimal nitrogen rates and economic returns vary over sites, years, and differing farmers’ risk attitudes. First, the Environmental Policy Integrated Climate (EPIC) agroecosystem model was used to simulate the distribution of final yields under different N applications during early spring. Then, an autoregressive moving average (ARMA) model estimated the wheat price distribution at harvest based on historical prices. Finally, optimal N application rates for farmers with different risk appetites were estimated using two risk decision models: the constant-absolute-risk-averse (CARA) expected utility model, which treats upside and downside deviations equally, and the invariant-preference, generalized-deviation (IPGD) model, which focuses on downside risk. We found that optimal N rates vary greatly between sites and years, as well as across farmers with different risk preferences. Due to the positive skewness of return distribution, farmers tend to apply lower N rates when considering downside risk. On average, the optimal N rate for farmers with a CARA coefficient of 0.002 is 77 kg ha-1 in the CARA model and is 67 kg ha-1 in the IPGD model. Compared to the outcome of risk-neutral N usage, risk-averse N usage for a farmer with a CARA coefficient of 0.008 could reduce the uncertainty (standard deviation) of return by 6.2%, on average, while the expected return decreased by only 1.2%. By lowering the N rate, risk-averse farmers would reduce the uncertainty of returns and incur a minor return loss, suggesting the possibility of improving agricultural resilience while also improving N use efficiency. Also, our analysis underscores the importance of yearly site-specific N management, given the substantial variation in optimal rates across years and locations. This study provides the foundation for an N application decision framework that considers both weather and price uncertainty. The analysis also demonstrates the potential co-benefit of enhancing agriculture’s climate and market resilience while potentially lowering N losses.