Effects of input management and crop diversity on economic returns and riskiness of cropping systems in the semi-arid Canadian Prairie

Abstract Producers in the semi-arid Dark Brown Chernozemic (Typic Boroll) soil zone of the Canadian Prairie are contemplating changes to land-use practices, moving away from conventional high-input production systems that specialize in one or two annual grain crops to more diversified and extended cropping systems that use reduced-input and organic management practices. This study examined the economic merits of nine cropping systems, consisting of a factorial combination of three input management methods and three levels of cropping diversity. It was conducted over the 1996–2007 period on a loam soil at Scott, Saskatchewan. The input treatments were: (1) high input (HIGH), which used conventional tillage and full recommended rates of fertilizers and pesticides ‘as required’; (2) reduced input (RED), which used conservation tillage and integrated weed and nutrient management practices in an effort to lower requirements for fuel, fertilizers and pesticides; and (3) organic input (ORG), which used tillage, non-chemical pest control, higher seeding rates, delayed seeding and legume crops to replenish soil nutrients. The crop diversity treatments included: (1) a fallow-based rotation with low crop diversity (LOW); (2) a diversified annual rotation of cereal, oilseed and pulse grains (DAG); and (3) a diversified rotation using annual grains and perennial forages (DAP). All crop rotations were 6 years in length. At the 2007 input costs and prices, average net returns and 12-year net present values were higher for organic than for non-organic treatments, with the ORG input/LOW crop diversity system being the most profitable (net returns=$234 ha−1 yr−1 and net present value=$1953 ha−1). Net returns averaged about 10% less for ORG/DAG compared to the most profitable system, and about 22% less for HIGH/DAG and RED/DAG (the best non-organic systems). The DAP treatments that included forage were not economically competitive with the other treatments, often producing economic losses. The relative profitability of the organic treatments was highly dependent on the existence of organic price premiums. When price premiums for organic crops were reduced to less than 70% of the 2007 levels, the organic treatments were less profitable than the comparable non-organic treatments. The organic treatments also experienced significantly lower (and often negative) net returns compared to the non-organic treatments during completion of the 3-year organic certification period. We estimated that it required 5–7 years after completion of certification for the organic treatments to break even with the comparable non-organic treatments. Thereafter the organic treatments produced consistently higher net earnings. Production costs averaged 16% lower with ORG management compared to the HIGH-input treatments, but we found little difference in total costs between the respective HIGH- and RED-input treatments. The organic treatments also displayed lower income variability than the non-organic treatments, with the ORG/LOW system being preferred by risk-averse producers, who do not subscribe to all-risk crop insurance, and with the ORG/LOW and ORG/DAG systems preferred by low and medium risk-averse producers when having the added financial protection from the Canada/Saskatchewan all-risk crop insurance program.