Economic Analysis of Optimal Nitrogen Application in Corn Production

Abstract

Identifying the fertilizer-output relationship for a crop would be an important tool for determining optimal rate of fertilization and hence maximum profit. Proper nutrient management also minimizes environmental degradation. The model described in this paper is useful to forecast the production and productivity for corn based on optimal nitrogen application. An empirical production function was estimated using SAS GLM model that best describes the data. The economically optimal level of nitrogen fertilization was obtained by maximizing the profit function. It was observed that the current level of corn production in U.S. Corn Belt is slightly below the optimal. It is suggested to increase the present level of nitrogen use from 143.22 lb to 153.35 lb per acre to obtain maximum possible profit. The net revenue is estimated to be $316.47 from each acre of corn with the optimal rate of nitrogen fertilization at the current price structure. Both the net revenue and the incremental profit are expected to be much larger if the price structure remains as in earlier years.