Long fallows maintain whole-farm profit and reduce risk in the Mallee

Take home messages

• Many of the farming system benefits of long fallow can only be quantified at the whole-farm level.
• A long fallow-wheat rotation was more profitable than continuous wheat production and a chickpea-wheat rotation when the price of chickpeas was below $800/t.
• If using fallow tactically, a good rule of thumb for the southern Mallee is to only sow wheat if mineral nitrogen (N) (kg/ha) + plant-available water (mm) at sowing is more than 100 units, and chickpeas if plant available water (PAW) is more than 50mm.

Background

Managing soil nitrogen (N) and water is a vital part of maximising wheat yields in the Mallee. Long fallowing — the practice of leaving a field out of production for an entire growing season — was traditionally used to accumulate soil water and N for future crop use, but declined in popularity during the 1980s as profitable break crops (including pulses and canola) were made available in the region. However, despite the additional income provided by break crops, whole-farm profits across the Mallee have stagnated in recent decades, due to rising input costs and declining growing season rainfall across southern Australia (van Rees et al. 2014).

Previous economic studies have suggested that the yield benefit provided by long fallow to following crops does not outweigh the missed income opportunity that break crops offer. However, these conclusions have been based on simplistic gross margin analyses, and ignore the whole-farm benefits provided by long fallows, such as increased timeliness of operations and reduced income variability. As wheat production in the Mallee now requires increasing investment to return the same profit as previous years, long fallowing may provide growers with an opportunity to decrease exposure to risk and income variability, without sacrificing profit.

This study aimed to use whole-farm economics to reassess the profitability of long fallow-based rotations in the Mallee compared to continuous wheat and wheat-break crop rotations. The project also attempted to calculate a threshold level of soil water or mineral N which, if not met at sowing, indicates a favourable opportunity to fallow.

Method

The Agricultural Production Systems sIMulator (APSIM) was used to simulate crop production at Jil Jil, near Birchip, over a 20-year period (1997 to 2016). A fallow-wheat (FW) rotation was compared to continuous wheat production (WW) and a chickpea-wheat (CW) rotation over a hypothetical farm area of 4000ha. Each rotation was managed as a farming system and therefore received a unique N fertiliser rate to achieve the most economical yield. Urea was applied at sowing (to the WW and CW rotation) and at stem elongation (to all rotations) to maximise the number of years in which wheat grain protein fell between 10.5% and 12.5%. A whole-farm environment was simulated through adjusting the sowing window of each rotation to reflect the proportion of 4000ha that was cropped (i.e. the FW rotation was sown in half the time of the WW and CW rotations). APSIM was used to measure annual yield, wheat grain protein and N fertiliser application.

Whole-farm income was calculated using five-year average (2012 to 2016) crop prices for Birchip (Australian Premium White (APW) = $260/t; chickpea = $620/t). Wheat grain proteins were used to determine the grain grade and therefore value of the wheat. Variable costs were calculated based on the 2016 PIRSA Farm Gross Margin Guide, with costs modified for each rotation. It was less expensive to grow wheat after long fallow or chickpeas, as the selective herbicide pyroxasulfone (Sakura®) was only applied to wheat grown after wheat ($40/ha). Weed control during the summer fallow was estimated at $20/ha, with a long fallow costing an additional $60/ha to maintain weed-free with herbicides. The same whole-farm costs (including machinery operating costs, labour and drawings) were applied to all rotations. An additional 6% was added to variable costs to account for interest and borrowing costs. Annual cash flow was calculated as gross income minus all variable, whole-farm and finance costs.

Annual cash flow of all three rotations was examined to determine if there was a common condition between unprofitable years in the WW and CW rotations. The aim was to devise a rule by which growers could know at sowing the likelihood of a crop failing to return a profit, and could elect to fallow. Once traits were identified for each rotation, ’opportunity sowing’ rotations were created, in which crops were replaced with fallows if conditions were not met.

Results and discussion

Yield results

Table 1. Mean plant-available water (PAW), N and yield results for all rotations averaged for the period 1997to 2016.

Wheat grown after long fallow yielded 1.5t/ha more than wheat grown after wheat (Table 1). Wheat in the long fallow rotation had access to significantly more PAW and mineral N at sowing compared to the other rotations. Wheat grown in continuous sequence required the most urea to achieve economical yield, whilst wheat grown after chickpeas had access to the least PAW.

While previous studies have shown an increase in the yield of wheat grown following a pulse crop such as chickpeas, this is largely due to legume N-fixation. As all rotations were supplied with sufficient N fertiliser to achieve economical yield, wheat grown following chickpeas did not yield higher than wheat after wheat, but did require less N fertiliser. While chickpeas do fix atmospheric N, the low level of mineral N at wheat sowing suggests that sufficient soil water is essential in mineralising N into plant-available forms.

The yield benefit provided by fallow is larger here than estimated in several other studies, due to the whole-farm nature of the research. Reducing the sowing window from 28 days (as seen in the WW rotation) to 14 days (FW rotation) improved wheat yield by 0.2t/ha by itself, while the unique fertiliser rules allowed wheat grown after fallow access to additional N through linking urea applications to soil moisture content.

Profitability and risk

The fallow-wheat rotation was also the most profitable system over the twenty-year period (Figure 1). During the first five years, when rainfall was high, the continuously cropped rotations performed best. However, during the Millennium drought (Years 6 to 13), both the WW and CW rotations made a net loss, while the FW rotation returned a series of small, but consistent profits. The value of long fallowing is therefore highest when in-crop rainfall is low.

Figure 1. The accumulation of cash flow over 20 years (1997to 2016) for all rotations.

The FW rotation not only returned more profit than other rotations, it also carried the least risk (Table 2). Long fallows reduce total costs and therefore a farm’s exposure to risk in years of low in-crop rainfall, depressed grain prices or high input prices. The low standard deviation of the FW rotation also indicates less variability in profit between years. While returns are lower than continuous cropping during good years, income was more reliable across the entire 20 years.

Table 2. Total farm costs, annual cash flow and cash flow variability for all rotations.

Price sensitivity

The profitability of all rotations was highly sensitive to changes in grain prices (Table 3). The FW rotation had the greatest advantage over the CW rotation when the price of wheat was high and chickpea prices were low. When the prices of both commodities were depressed, the FW rotation was also preferred. Once the price of chickpeas rose to $800/t, the opportunity cost of the FW rotation was too great to return a higher cash flow than the CW rotation.

Table 3. Difference in average annual cash flow ($ million) of FW and CW given a range of wheat and chickpea prices. Negative values represent a higher cash flow for CW than FW.

Opportunity sowing rotations

Continuous wheat production was profitable in 10 of 20 years (Fig. 1). In eight of 10 loss-returning years, the mineral N content of the soil (kg/ha) plus PAW (mm) at sowing equalled less than 100 units. The chickpea phase of the CW rotation was profitable in 11 of 20 years. In eight of the nine loss-returning years, the PAW content of the soil (mm) at sowing was less than 50mm. These two criteria were used to create ’opportunity sowing’ rotations. These rotations were the same as the WW and CW, except that paddocks were fallowed instead of sown if the PAW and N criteria were not met at the prescribed sowing dates.

Table 4. Average annual cash flow of set rotations and opportunity sown rotations.

Using these rules improved cash flow by $0.27 million and $0.14 million for the WW and CW rotations, respectively (Table 4). Cash flow for opportunity-sown rotations was higher than in the standard fallow-wheat rotation. These rules improve whole-farm finances by minimising losses in dry years, and maximising production when stored soil water is high.

Conclusions

When whole-farm finances are taken into consideration, long fallow-wheat rotations appear capable of lowering total farm costs and income variability, and maintaining whole-farm cash flow when compared to continuous wheat production and chickpea-wheat rotations. Incorporating a long fallow into a rotation reduces value-at-risk and inter-annual income variability, as well as reducing the sensitivity of the rotation to changes in crop or input prices. The value of long fallow to whole-farm finances is largest during dry seasons, when crop prices are low, and when the price of urea, fuel and other variable inputs are high. It is important that growers remain flexible and reserve the option to fallow land, particularly when stored soil water and N are low. Long fallows, therefore, continue to be a valuable tool available to grain growers in the Mallee for not only the accumulation of soil water and N for future crop use, but also the reduction of costs whilst maintaining profit margins.

Reference

van Rees, H, McClelland, T, Hochman, Z, Carberry, P, Hunt, J, Huth, N, Holzworth, D (2014). Leading farmers in South East Australia have closed the exploitable wheat yield gap: Prospects for further improvement. Field Crops Research 164, 1-11.

Acknowledgements

The scholarship for this work was provided through the GRDC and its support is gratefully acknowledged. We also thank Bill Malcolm for helpful discussions on this topic.

Contact details

David Cann
La Trobe University, Bundoora 3086
0433594093
djcann@students.latrobe.edu.au
@the_ag_lab