Thursday, October 9, 2014

What is the economic value of manure?



Thinking about selling your manure?

There are several versions of pricing for selling swine manure; they range from having to pay to get rid of the manure, getting reimbursed for the cost of hauling, on up to charging for the manure. The pricing method chosen is generally related to how in-demand the manure is, or alternatively, how hard it is to get surrounding farms to accept the manure and the amount of manure that is available. In general, over the last few years we’ve seen more farmers wanting to take the manure for use in their crop production systems due to higher costs for commercial nitrogen and phosphorus fertilizers.

One resource you may find useful is "Value of Manure Nutrients." This is available at http://www.extension.iastate.edu/agdm/livestock/html/b1-65.html and is part of the Ag Decision Maker tool. Although this article was written in 2007, many of the pricing factors remain similar. This tool provides a spreadsheet  that can be used to estimate a price for the manure for swine operations.

I’d suggest that the most common  method of valuing swine manure as a fertilizer is using component pricing. The manure is sampled and tested to determine the nutrient content and the nutrient content is then used to determine the value of manure based on commercial fertilizer prices. For example, a typical swine manure might test around 50-35-25 pounds of N, P2O5, and K2O per 1000 gallons (typical is always a challenging word as there can be large variation between farms and even from year-to-year on a single farm due to differences in diets, barn management practices, water wastage, and other factors). Assuming a corn soybean rotation a common application rate of the manure might be around 3,000 gallons an acre (I’d estimate that to supply 147 lbs of N per acre at this nitrogen content, which is very close to the maximum return to nitrogen - http://extension.agron.iastate.edu/soilfertility/nrate.aspx).

At the current time I have anhydrous ammonia priced at $726.14 per ton, Potash (red) at 476.75 per ton, and MAP at 605.25 per ton. Based on this I have nitrogen selling for $0.44 per pound, phosphorus (P2O5) for about $0.49 per pound, and potassium (K2O) at $0.40 per pound. Based on the example I’ve been using the manure would have a component value of about 50 lb N/1000 gallons*$0.44/lb N  + 35 lb P2O5/1000 gallons*$0.49/lb P2O5 + 25 lb K2O/1000 gallons*$0.40/lb K2O = $49 per 1000 gallons of manure.

Depending on who is covering the cost of land application you’ll either want to sell if for this price (if you are covering the cost of land application) or this price less the cost of land application (about $0.02 per gallon or $20 per 1000 gallon, so about $30 per 1000 gallons) if the person buying the manure is covering the cost of land application.

There are a few caveats to this analysis, the first being that as you mentioned sometimes we see an extra yield bump when we use manure. This may be due to the sulfur, iron, organic matter, or even other factors such as increased microbial activity or the additon of other trace nutrients. This pricing method wouldn’t put value to this extra yield benefit, which is probably fair since it is hard to quantify and predict. A second caveat is that manure comes as a package fertilizer, that is we get both the nitrogen, phosphorus, and potassium all together. However, the person buying the manure might not really want or need the potassium or phosphorus, this would make these components less valuable to the person buying the manure, i.e., they might be worth less than current market price. This depends on the specific cropping situation and current soil test levels in the field that will be receiving the manure (unless the soils P and K levels are already in the high or very high range, the component pricing method is probably close to fair).
The final issue is that there is some extra hassle when dealing with manure, such as the odor of land application (may or may not be an issue depending on field location compared to houses in the neighborhood and the person buying the manures perception of the odor level), the potential variability in manure nutrient content, compaction issues that could be caused by the manure application equipment, or challenges with timing the manure application. These factors can slightly lower the value of the manure as it sometimes makes some farmers less willing to utilize the manure.

In the end, I think the component pricing method less the application costs provides a pretty good starting point for any negotiation on what manure is worth, but some adjustments are probably required to offset some of the other challenges (odor concerns, not have N:P levels balanced to crop need, variability in nutrient content) to provide some incentive for choosing manure as compared to commercially available fertilizers. In the end, manure is like any other bulk commodity, its market price will be depend on the supply in demand. This means that perceptions in your neighborhood about manure and the willingness of neighboring farms to accept (or even desire) the manure along with how much manure is available are important in setting the price.