Agriculture Reference
In-Depth Information
Unfortunately, farmers are faced with the law of diminishing returns. This law
simply states that with each additional unit of an input, the resulting additional
output (or yield) decreases. This is controlled by nature. The biology of the crop or
animal dictates this response. In the case shown in Figure 10.26, the first 18 kg of
fertilizer applied to 1 ha gives a yield increase of 246 kg of soybeans per hectare.
The next 18 kg of fertilizer applied to the same 1 ha field gives an additional 345 kg
of soybeans. The next 18 kg of fertilizer applied to the same hectare gives an additional
394 kg of soybeans. At this point each additional amount of fertilizer gives ever-
increasing amounts of soybeans. In other words the rate of increase is positive.
However, the next (fourth) 18-kg addition of fertilizer only gives an additional
246 kg of soybeans. The fifth addition of 18 kg of fertilizer only increases total yield
by 148 kg of soybeans. The sixth and seventh 18-kg additions of fertilizer actually
decrease rather than increase yield. The highest yield occurs with the fifth addition
of fertilizer, or 88 kg/ha.
Does this mean the farmer should apply 88 kg of fertilizer per hectare? Probably
not. The fifth addition of fertilizer only increased yield by 148 kg per hectare. If the
fertilizer cost US$5.50 each kilogram and the value of soybeans was only US$6.00
per kilogram, we would advise the farmer not to apply this last increment. The extra
income of US$0.50 per hectare would not be enough to pay for the cost of application.
A more conservative strategy would be to apply only 70 kg fertilizer per hectare. This
still gives a profit with enough “cushion” to protect the farmer from bad weather,
disease, or last minute changes in market prices.
This does not mean that we are forever doomed to stay below the maximum
yield point for our crops. This example only describes the response to fertilizer. By
changing the variety, using a different planting date, treating seed with fungicide,
and other factors, the farmer will be able to reach the optimum production level for
other inputs. There are easily 20 to 25 inputs that a farmer can vary to change
Figure
10.26.
Diminishing rate of return on fertilizer applied to soybeans.
