Economics of Utilizing Poultry Litter from Northwest Arkansas for Eastern Arkansas Crops. K.B. Young, R.I. Carreira, H.L. Goodwin, E.J.

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1 Economics of Utilizing Poultry Litter from Northwest Arkansas for Eastern Arkansas Crops K.B. Young, R.I. Carreira, H.L. Goodwin, E.J. Wailes Abstract According to a GAMS optimization model, the cost of supplying essential nutrients to eastern Arkansas crops could be reduced by substituting poultry litter for part of the chemical fertilizer needed to meet the nutrient requirements of crops such as corn grain, corn silage, rice, sorghum, and cotton. By shipping poultry litter in plastic-wrapped bales, better trucking rates can be obtained because of backhaul opportunities. If truck backhauls are not available, it still would be cost efficient to use raw poultry litter by transporting it using a combination of truck and barge, as barge rates are quite competitive over long distances. Introduction Northwest Arkansas does not have enough agricultural land where litter can be applied, such that the nutrient removal rate prevents long-term phosphorus accumulation in the soil. There is a strong interest in transporting excess poultry litter, a nutrient-rich product, produced in northwest Arkansas to the eastern part of the state, where it can be used to fertilize crops. Compressing and packaging poultry litter into plastic-wrapped bales is a new technology that is being developed and that could allow litter to be transported in truck trailer types that allow more backhaul opportunities; baling litter also precludes the need to clean the trailers after transport. Increased energy costs over the past year, have fueled a hike in chemical fertilizer prices, which improve the economics of utilizing poultry litter as a crop nutrient source. Although transportation costs also have increased as a result of increased energy costs, shipping the litter to

2 be used in eastern Arkansas crops could still be a cost efficient alternative to chemical fertilization, especially when taking advantage of truck backhaul opportunities or when transporting raw litter in barges along the Arkansas and Mississippi rivers. Previous research has not focused on the economic effects of baling poultry litter and/or using barges to transport it. An optimization study was conducted in 2004 to evaluate the economic aspects of using poultry litter and chemical fertilizer to supply nutrients to eastern Arkansas crops as an alternative to only using chemical fertilization (Young et al., 2005). The study included baled litter and truck-barge transport as alternatives to conventional practices in which loose raw litter is transported by truck to potential markets. The purpose of this paper is to briefly summarize the main conclusions of the analysis. The study was done assuming December 2004 chemical fertilizer prices. Materials and Methods The objective of the analysis was to minimize the cost of supplying nutrients to crops in eastern Arkansas. The major crops considered in the study were rice, corn grain and silage, wheat, cotton, soybeans, and grain sorghum. Nutrient requirements could be met either by using only chemical fertilization or by jointly using poultry litter and chemical fertilizer. The crop production counties in eastern Arkansas that were assessed were Lonoke, Arkansas, Monroe, Jackson, Poinsett, and Mississippi. The transport of litter to these markets could be implemented by either using only truck or combining truck and barge, which takes advantage of the commercial waterway along the Arkansas and the Mississippi rivers. Litter could be transported as loose raw litter or in plastic-wrapped bales that weigh about 3,000 lbs each. Litter sources were broiler and turkey litter from Benton and Washington counties produced within the Eucha- 2

3 Spavinaw and the Illinois River watersheds. The model was constrained such that a minimum level of litter was exported from each watershed: at least 67,500 tons for the Illinois River Watershed and about half of the litter produced in the Eucha-Spavinaw Watershed, about 60,000 tons. A partial summary of the cost components used in the study can be found in Table 1. Raw litter was assumed to be delivered to storage in eastern Arkansas prior to farm delivery; the additional handling, transport and storage increased cost of litter by $10 per ton. Field spreading increased cost by $7 per ton for raw litter and $8 per ton for baled litter. Field incorporation after spreading litter was $6 per ton, regardless of whether the litter was transported loosely or in bales (Table 1). The cost to bale litter included the cost to transport and handle raw litter at the baler site ($6 per ton) plus baling ($5 per ton). Bales were assumed to be delivered and stored in farm fields prior to spreading. Litter was assumed to be applied at a fixed rate of one ton per acre. At this level, depending on the crop, additional application of chemical fertilizer may be needed to meet total crop nutrient requirements. Chemical fertilizer prices in Stuttgart on December 2004 were $280 per ton for urea, $302 per ton for super phosphate and $250 per ton for potash fertilizer. Chemical fertilizer spreading costs were assumed to be $100 per ton or $0.05 per pound with no field incorporation costs required (Table 1). Nitrogen availability to crops was assumed to be 75 percent from litter and 100 percent from urea. Regarding trucking, raw litter was assumed to be transported in a specialized trailer (such as a walking floor or an end dump trailer); baled litter could be transported on a typical flatbed trailer, a walking floor trailer, or other trailer types. Long distance trucking costs with a 22-ton trailer load were quoted in 2004 at $2.50 per loaded mile for deadhead hauls and $1.50 per 3

4 loaded mile with backhauls. For simplicity, no backhauls were assumed for raw litter transport because of the specialized trailer and sanitary and biosecurity concerns (it might be possible to backhaul bedding material or grain without having to clean the trailer, but it is rather difficult to identify such opportunities). Short trucking haul costs were set at $3 per loaded mile with a $100 minimum. Barge freight rates were $4 per ton from Fort Smith to Pine Bluff or Little Rock; $9 per ton to the Mississippi County port near Blytheville. One dollar more per ton should be added to these rates if litter was shipped from the Port of Catoosa in Oklahoma. Handling for barge transport was $2.50 per ton at both the loading and offloading port (Table 1). The scenarios for the sensitivity analysis of the results were: a 50 percent decline in chemical fertilizer cost, a reduction in nitrogen availability from litter from 75 to 50 percent, no litter bales, and no truck backhaul opportunities. Results and Discussion With the standard baseline model costs and assumptions, the results of the GAMS model optimization indicated that using chemical fertilizer and poultry litter to fertilizer crops in eastern Arkansas was more cost efficient than using just chemical fertilizer. Given the study assumptions and constraints, it was optimal to export the maximum amount of litter available in the two watersheds (Table 2) because supplying nutrients from litter was cheaper than from chemical fertilizer. Cost minimization occurred when baled litter was transported by truck and backhaul opportunities were available. The average cost of transporting, spreading and field incorporating litter transported in bales was $42.77 per ton of litter (Table 2). Without baling as an option or when the $1.50 per loaded mile backhaul trucking rate was not available to transport baled litter, it was still cost effective to transport all the surplus 4

5 loose raw litter via truck and barge to use as crop fertilizer in eastern Arkansas (table 1). The average cost of transporting, spreading and field incorporating the loose raw litter was $46.45 per ton of litter. Even with 50 percent nitrogen availability from litter rather than 75 percent, both broiler and turkey litter were still cheaper fertilizer sources than chemical fertilizer (Table 2). When chemical fertilizer prices were set at half the level assumed in the baseline model, the minimum level of litter export constraint was binding, indicating that, overall, poultry litter was not as cost efficient as chemical fertilizer (Table 2). However, a closer look at the solution revealed that turkey litter was still a cost efficient nutrient source compared to chemical fertilizer. Turkey litter contains on average more nutrients than broiler litter but it is less abundant. In this case, a small subsidy would be required to export broiler litter. Total crop acreage in the six eastern Arkansas counties is 2.1 million acres (Table 2). Litter use assuming a one ton per acre application rate supplies only 127,212 to 311,906 acres, which corresponds to about 7 to 15 percent of the total acreage in the six counties considered. In the baseline solution, total litter supply cost was $13.3 million and total chemical fertilizer supply cost was $125.9 million, with an average total nutrient supply cost per acre of about $66.30 assuming that the total cost of litter and chemical fertilizer was divided by total crop acreage. Shipping baled litter rather than loose raw litter could save about $1.2 million annually of the litter supply cost (Table 2). A reduction in the nitrogen availability from litter from 75 percent to 50 percent increased the chemical fertilizer supply cost by nearly $2 million because additional nitrogen fertilizer should be applied to meet the crop nutrient requirements. In all the models considered, it was cost efficient to use poultry litter to fertilize rice, cotton, grain sorghum, corn grain, and corn silage. It was not optimal to fertilize wheat or 5

6 soybeans with poultry litter, as these crops do not need as many nutrients and nutrient requirements can be met cost efficiently with chemical fertilizers. Significance of Findings This analysis shows that the transport and utilization of poultry litter from northwest Arkansas to fertilize crops such as corn grain, corn silage, rice, grain sorghum, and cotton in six eastern Arkansas counties could be a cost efficient practice given current high chemical fertilizer prices. Even with a 50 percent decline in chemical fertilizer prices, the supply cost for poultry litter overall was still near break-even with chemical fertilizer supply costs. Although the cost of shipping raw poultry litter is higher than that of baled litter because of the deadhead trucking costs of $2.50 per loaded mile, shipping raw litter by truck and barge is still a cost efficient practice, reducing the transport cost of raw litter by over $10 per ton compared with direct trucking at the deadhead rate. Plastic-wrapping litter into bales should allow more truck backhaul opportunities because of the ability to use a flatbed trailer or other less specialized trailers and by eliminating sanitation and biosecurity concerns, thus a cheaper truck backhaul rate could be obtained. The bales can be delivered and stored outside in a farmer s field, which saves on storage costs and avoids double handling the litter when storing it at the crop market areas. Use of baled rather than loose raw litter can potentially save about $1.2 million annually, if 312,000 tons of poultry litter are supplied from northwest Arkansas to fertilization eastern Arkansas crops. Literature Cited Young, K.B., R.I. Carreira, H.L. Goodwin, E.J. Wailes Economics of Transporting Poultry Litter from Northwest Arkansas to Eastern Arkansas Croplands. Paper 6

7 presented at the 2005 Southern Agricultural Economics Association Annual Meeting. Little Rock, AR, February 5-9, Acknowledgements Funding for the poultry litter transportation study was provided by the Arkansas Soil and Water Conservation Commission. 7

8 Table 1. Summary of Cost Data for Utilizing Poultry Litter and Chemical Fertilizer Litter Chemical Cost Item Raw Bales Fertilizer Long distance trucking ($/loaded mile) a $2.50 $1.50 Short distance trucking ($/loaded mile) b $3.00 $3.00 Assemble raw litter and bale ($/ton) c $11.00 Barge loading/unloading ($/ton) $2.50 $2.50 Barge freight ($/ton) $4.00-$9.00 $4.00-$9.00 Litter storage/extra handling ($/ton) d $10.00 Field spreading ($/ton)e $7.00 $8.00 $ Field incorporation($/ton) $6.00 $6.00 a Direct long distance trucking from poultry house to storage in eastern Arkansas for raw litter and from baler site to farmer s field in eastern Arkansas for baled litter. b Short distance trucking to haul raw litter or litter bales to and from river ports. c Includes $6 per ton to handle and transport raw litter to baler and $5 per ton for baling. d Includes $3 per ton for raw litter storage and $7 per ton for raw litter handling and transport from storage to a farmer s field for spreading. e Requires front end loader cutter attachment to remove plastic from bales. Field spreading of chemical fertilizer is usually less than 100 pounds per acre or about $0.05 per pound. 8

9 Table 2. Summary of GAMS Optimization Model Solutions of Using Northwest Arkansas Poultry Litter and Chemical Fertilizer to Supply Nutrients to Eastern Arkansas Crops Baseline No Reduced Reduced N Activity Model Bales a Fertilizer Cost b Available c Litter Use (tons) 311, , , ,906 Litter Form (raw/bales) bales raw bales bales Transport Method (truck or truck/barge) truck truck/barge truck truck Litter Supply Cost ($/ton) $42.77 $46.45 $41.59 $42.77 Total Litter Cost ($ million) $13.30 $14.50 $5.30 $13.30 Total Chemical Fertilizer Cost ($ million) d $ $ $87.20 $ Total Acres Fertilized (million) Crops Fertilized Corn Silage Rice Cotton Sorghum Corn Silage Rice Cotton Sorghum Corn Silage Rice Cotton Sorghum Corn Silage Rice Cotton Sorghum a The same solution was obtained when we assumed no backhaul opportunities were available and a dead head trucking cost of $2.50 per loaded mile was used for hauling bales. b Chemical fertilizer prices reduced from $280 to $140 per ton for urea, $302 per ton to $151 per ton for phosphate fertilizer and $250 per ton to $125 per ton for potash fertilizer. c Nitrogen availability from poultry litter reduced from 75 percent to 50 percent. d Estimated total chemical fertilizer cost to meet crop nutrient requirements on 2.1 million crop acres in Lonoke, Arkansas, Monroe, Jackson, Poinsett and Mississippi counties in combination with use of poultry litter. 9