Dealing with Uncertainty in Manure – Insurance Nitrogen (Just a little bit extra?)

There is uncertainty in every decision we make; all we can do is try to make the best decision we can based on what we know. When it comes to using manure as a fertilizer there are five main sources of uncertainty, these are:

• Nitrogen need of the crop (due to every growing season being different)
• Nutrient content of the manure
• Availability of the manure nutrients to the crop 
• Nitrogen volatilization during application
• Application variability and rate uncertainty

How do we deal with this uncertainty? What we really want to do is try to minimize each of these sources, in some cases this may be practical, in others it might be impossible. For example, manure sampling gives us a good indication of the nutrient content of the manure, but as we all know manure isn’t always consistent, so it isn’t a perfect indicator. One way we often hear people handling this is by adding a little extra nitrogen, some insurance nitrogen, but is that really the best approach?

I was wondering about this a little while back, and started to do some calculations to find out how this uncertainty impacted our manure decision making and this lead me down a trail called the ‘value of information.’ Essentially, it asks if you can now make a better decision because of something you learned from it, how much extra value does that add. So I did that for manure sampling (http://themanurescoop.blogspot.com/2014/10/economic-value-of-manure-sampling-and.html) and was pretty happy, but then someone said, even if I sample I may be more confident about what’s in the manure, but there is still some error in that so maybe I should still be putting on a little insurance nitrogen. So I took some time to think on this.

Some background, this is based off higher nitrogen and corn prices than we currently sit at, something like 2013 corn prices but luckily I scaled then so actual profit isn’t shown and as long as the nitrogen to corn price ratio didn’t change the results should be relatively similar.

What I did was use the Maximum Return to Nitrogen calculator (http://cnrc.agron.iastate.edu/) to estimate what my profit would be per acre after field activities and subtracting the value of the nitrogen applied to the crop above the MRTN rate (because that was nitrogen you could have used elsewhere). What I found is that uncertainly in how much nitrogen always lowered our profit as compared to if we had perfect knowledge. Probably because there was always a chance of putting on too much nitrogen or too little nitrogen, where if we really knew the perfect amount we could hit the nail on the head. However, the interesting thing I saw was that if we did have uncertainty, the ideal nitrogen rate was just a little lower than when we had perfect knowledge. There were a few other things I saw though, the chance the manure might have higher nitrogen content worked to our advantage at low application rates, because there was potential that in the area where corn yield was really sensitive to nitrogen application rate that we actually put a bit more on than we were trying to. However, once we got towards that maximum profit zone we didn’t peak quite as high, because the uncertainty meant we were never quite hitting that nail on the head as we always might be a little short or wasting a little.

Figure 1. How does uncertainty change how we should think about nitrogen application? Comparison between perfect and uncertain nitrogen concentration in manure in a corn-soybean rotation (as a note 23% uncertain is what I say using the industry average for your manure is)

Figure 2. How does uncertainty change how we should think about nitrogen application? Comparison between perfect and uncertain nitrogen concentration in manure in a continuous corn rotation.

So what’s the takeaway from all this? The more we know the more accurate we can be in hitting the nail on the head and maximizing our profit – but you already knew that (I mean we say hindsight is 20/20 for a reason), so no surprise there.

The more interesting part was looking at how putting on that insurance N (just a little extra) impacted our maximum profit. Essentially what I saw was that a little extra just doesn’t help us handle that uncertainty. Extra N actually hurts us as we are at a spot on the yield response curve that is relatively flat and the risk of wasting extra nitrogen hurts our profit more than the risk supplying that extra N.