RT Dissertation/Thesis
T1 Economic evaluation of nitrogen application in the North China Plain
A1 Barning,Roland
WP 2008/07/01
AB Today, China had solved its long-standing problem of inadequate grain production, but there are two new targets for rural China. Firstly, one goal is rural development towards an improved income generation of rural households in order to slow down the increasing income disparity in China, especially between rural and urban residents. Secondly, decades of inefficient utilisation of resources and high consumption of materials led to overexploitation of water and land resources. Over-fertilisation and low nitrogen use efficiency are representative for the production system in the North China Plain, which is characterised by small-scale farm households who traditionally cultivate winter wheat and summer maize.
This thesis is embedded in the Sino-German Research Training Group "Modeling Material Flows and Production Systems for Sustainable Resource Use in Intensified Crop Production in the North China Plain", a cooperation of the University of Hohenheim in Stuttgart and the Chinese Agricultural University in Beijing. The overall hypothesis of this project is that substantial changes in farming systems and management practices can reduce environmental pollution and at the same time stabilise or increase income of farmers. As a subproject, this thesis focuses on the identification and evaluation of applicable instruments for this goal. The final target of this thesis is the simulation of scenarios in order to estimate the impact of identified instruments on the nitrogen balance as well as on the net income of farm households.
The literature review indicates that nitrogen application in the cultivation of wheat and maize in the North China Plain shows a broad variation. A considerable high share of farm households applies nitrogen input levels far beyond the crop demand. This situation raises the question, what do over-fertilising farm households have in common or in another way, which factors lead to nitrogen overuse. This question is the basis of the discussion on applicable instruments to reduce the described nitrogen overuse and finally the intended simulation approach.
The analysis of impact factors on the nitrogen application level requires a broad analysis of the cultivation system, the farm household characteristics, and the income sources of the farm households. The descriptive results of the farm survey on 340 farm households in the North China Plain conducted in 2005 are presented in chapter 5. The farming system at the survey sites is characterised by farm households, who cultivate the wheat and maize rotation system. In most cases, it is extended by cash crops such as cotton or peanuts. The farm size is on average 0.5 ha of allocated farmland per farm household. About two thirds of the farm households have some kind of additional off-farm income source, which usually exceeds the income share from farming. Farm households without off-farm income sources generate only half of the average farm household income. The average farm household income reaches 10 150 ¥ (1 015 ?) per year, but there is a broad variation within the survey sites as well as between the surveyed townships. As mentioned already, over-fertilisation is prevalent for farming in the North China Plain. On average 360 kg of nitrogen per ha are applied in wheat and 220 kg in maize, while CHEN (2003) recommends 180 kg per ha for wheat and maize. Further, fertilizer costs are the major share of variable costs at all cultivated crops. The major nitrogen fertilizers are urea and ammonium carbonate. Nearly 80 per cent of the applied nitrogen originates from these fertilizers. Manure is only applied in wheat and it plays only a minor role as nitrogen source. About one third of the farm households cultivates wheat exclusively for own consumption and these farm households apply more nitrogen in wheat cultivation than the remaining farm households. The average yield of 5.7 t per ha in wheat and of 6.4 tons in maize enables gross margins of about 4 000 ¥ (400 ?) per ha, while in cotton and cultivation of peanuts the average gross margin is twice this amount.
In chapter 6 the efficiency of the agricultural system is analysed. This analysis includes an impact analysis on nitrogen input and yield as well as an economic and ecologic optimum analysis of the nitrogen input. Nitrogen application rates show a broad variation at all cultivated crops. The impact analysis on nitrogen input does not show any clear and unique influence from the income structure of the farm household. Hence, additional cash income and less available family work force for farm work have no impact on the nitrogen application level. The analysis of the fertilizer costs instead of the amount of applied nitrogen confirms this statement. The nitrogen input analysis provides the nitrogen price as major impact factor. Higher nitrogen input levels are connected with lower nitrogen prices. Differences in nitrogen price result from the composition of the applied fertilizer, which differs in the ratio between fertilizer price and nitrogen content. The yield of wheat and maize indicates a high variation within the survey sites, but especially between the surveyed townships. A multifactorial regression analysis identified the location as the only significant influencing factor on yield. From the agronomic point of view, nitrogen is a major yield factor, but the survey data do not indicate a clear impact of nitrogen input on yield. The estimated relationship between nitrogen input and wheat yield provides a constant-shaped yield function. This result allows the assumption that due to the long term high nitrogen inputs the crop demand for nitrogen is fulfilled in the short term and additional nitrogen input is without impact on the yield. The quadratic regression models of nitrogen input and yield in wheat and maize fail to provide applicable economic optima of nitrogen input. For this reason, the concept of KRAYL (1993) is considered to estimate an applicable production function for wheat and maize. This concept is based on a location independent production function, which can be transferred into a location specific production function by the consideration of a location specific optimum nitrogen input and the corresponding yield. In this case the recommendations of ZHEN et al. (2005) are considered, which recommend for wheat a nitrogen input of 220 kg per ha in order to harvest 5.3 t per ha. The economic optimum nitrogen input levels are higher than the nitrogen recommendations of ZHEN et al. (2005), but still lower than the average nitrogen application rates. Hence, the present nitrogen price does not support the implementation of the recommended nitrogen application rates. The estimation of the economic optimum nitrogen input considers a production function based on the concept of KRAYL (1993) which is enlarged by factor and product prices. These are the crop prices and the costs of the other variable inputs, which are the variable costs excluding fertilizer costs. In this way, the gross margin can be described as a function of nitrogen input including the uniform factor crop price and the constant "other fertilizer costs". The calculated maximum gross margin in wheat of 4 057 ¥ per ha is achieved at a nitrogen input of 272 kg per ha. This level of nitrogen input is lower than the present average nitrogen input, but higher than the recommendations presented by ZHEN et al. (2005). Similar to the gross margin, the nitrogen balance is described as a function of nitrogen input, which considers the nitrogen input from fertilizer and straw left on the field from the previous cultivation as nitrogen inflow and the nitrogen content of the harvested crops as nitrogen outflow. Natural inflows and outflows are not taken into account. A nitrogen input of 205 kg per ha would result in the maximum accepted nitrogen surplus of 50 kg per ha and a gross margin of 3 365 ¥ per ha.
Chapter 7 focuses on the estimation of the nitrogen balance and the analysis of relevant impact factors. The estimated nitrogen balances show at all crops, but especially in wheat cultivation a high level of nitrogen surplus, which is on average 200 kg of nitrogen per ha. The corresponding figures for maize, peanuts, and cotton are less than 100 kg of nitrogen per ha. Similar to nitrogen input, the nitrogen balance is indicated by a broad variation. This variation allows a classification of farm households into three nitrogen balance types: "equalized nitrogen balance", "slight nitrogen surplus", and "heavy nitrogen surplus". The farming system of "heavy nitrogen surplus" farm households can be characterized by low yields, high nitrogen input, and low calculated gross margin. These farm households have a share of 32 per cent of all farm households and cultivate about one third of the wheat of all surveyed farms, but their cumulated nitrogen input amounts to 50 per cent. Furthermore, this group of farm households accounts for 67 per cent of the cumulated nitrogen surplus. This situation leads to the question, which factors lead to that kind of nitrogen overuse. A binary logistic regression model is used to analyse the impact of pre-selected factors on the probability of a group membership interval, in this case to the "equalized nitrogen balance" as well as the "heavy nitrogen surplus" group. The covariates "family size", "education", "farmland", and "off-farm activities" do not show any significant influence. Similar to the nitrogen input analysis, a low nitrogen price and the application of manure increases the probability of a farm households of membership of the "heavy nitrogen surplus" group. Also, a low village average wheat yield and a high village average nitrogen input in wheat increases the probability. In order to identify parallel impacts of farm household characteristics on the nitrogen balance the group of farm households of "heavy nitrogen surplus" and "equalized nitrogen balance" are clustered. The farm households of the major cluster of the "heavy nitrogen surplus" group are characterized by less farmland and low farm households income without off-farm activities. Farm households of these characteristics are found at a minor cluster of the "equalized nitrogen balance" group, as well. A low income does not automatically lead to nitrogen application rates beyond the crop demand. Indeed, the combination of low income and high nitrogen input shows a higher probability than the combination of high income and high nitrogen input. Without doubt, the assumption that a lower income leads to a lower nitrogen input must be rejected. The nitrogen price might be a clear indicator for classification of farm households, but this criterion requires the analysis of the cultivation system of the considered farm household. For this reason, easy observable dichotomous variables are pre-selected and analysed whether a certain pattern can be used as criterion for identification as a part of a target group specific instrument. This approach does not provide applicable results.
Chapter 8 deals with the simulation of scenarios of the nitrogen surplus reduction and the estimated impact on the net income of farm households. In the first step, the instrument independent potential nitrogen surplus reduction is estimated. The cumulated nitrogen surplus of wheat cultivation of all surveyed farm households can be reduced by more than 60 per cent, if all farm household would follow the nitrogen input recommendations and harvest the target yield of ZHEN et al. (2005). This scenario shows no changes in net income. However, the approach that all farmers would modify their present nitrogen application level to the recommended application rates might be too ambitious. Hence, it might be more realistic to consider a theoretical shift of half of the farm households belonging to the "heavy nitrogen surplus" group to the "slight nitrogen surplus" group. The nitrogen surplus reduction in wheat would be 18 per cent. The affected group of farm households represents 17 per cent of the wheat cultivation area, but accounts initially for 32 per cent of the total nitrogen surplus in wheat. This hypothetical shift considers the modification of the share of farm households belonging to a certain nitrogen balance type. The average nitrogen surplus and gross margin in combination with the share of farm households of nitrogen balance type is taken to estimate the overall nitrogen surplus and net income from farming of the considered nitrogen balance type. A change in the share of farm households modifies the overall nitrogen surplus and net income from farming of each nitrogen balance type and these modified values are considered as the impact of the evaluated instrument, which originate that change of share. The individual gross margin multiplied by the individual cultivation area of all farm households is summed up and it is considered as net income from farming. In the following step, the impact of an instrument on the nitrogen balance and the net income is simulated. The variable nitrogen price shows a highly significant influence towards the classification of nitrogen balance type. For this reason, a modification of the nitrogen price is selected as considered instrument. A higher nitrogen price reduces the probability of "heavy nitrogen surplus" and this difference in probability can be regarded as the share of farm households, which convert form "heavy nitrogen surplus" to "slight nitrogen surplus". In addition, a theoretical shift of "slight nitrogen surplus" farm households into "equalised nitrogen balance" farm households is considered. As instruments, a percental increase of the nitrogen price by 10 per cent is simulated. An increased nitrogen price by 10 per cent results in a reduction of the total nitrogen surplus of 4.9 per cent. The estimation of the impact on the net income from farming considers the described theoretical shift of farm households to another nitrogen balance type and a multiple regression model of the gross margin. The latter model considers all farm households and indicates a negative impact of the nitrogen price on the gross margin. A combination of both models results in a marginal reduction of net income from farming by 0.6 per cent, in case of a 10 per cent nitrogen price increase. In addition, a target simulation focuses on a more noticeable nitrogen surplus reduction. The average nitrogen price increase by 159 per cent to obtain a nitrogen surplus reduction of 50 per cent, but the net income from farming shows a reduction by 15.3 per cent. Summarized, the considered instrument "nitrogen price modification" fulfils the demand partly. It allows a nitrogen surplus reduction without a strong impact on the net income, but there are two major disadvantages. Firstly, huge nitrogen price modifications are required to gain a noticeable impact on nitrogen surplus reduction. Secondly, a nitrogen price modification affects all farmers, but there is a broad variation of the nitrogen balance and a high share of farm households actually has an equalized nitrogen balance.
The discussion about the reasons for nitrogen overuse in the wheat and maize farming system in the North China Plain leads to the following results. This thesis cannot provide a comprehensive answer on the question, what the core reasons for the described surplus at the nitrogen balance are. The described high variation in nitrogen input and the reported low rate of farm households, which follow the recommended nitrogen application rates, leads to the assumption that an insufficient knowledge transfer system is the key reason for the inadequate use of the traditional cultivation system in terms of fertilizer application in the North China Plain. Lack of knowledge might be an explanation that low income farm households without off-farm activities do not have less fertilizer costs, but even have a higher probability to apply above average nitrogen rates than farm households, which have additional income from off-farm activities. The discussion about applicable instruments focuses on nitrogen tax, implementation of new agricultural technologies, and improvements in education and agricultural skills. The modification of the nitrogen price by a nitrogen tax is considered as an economically applicable instrument, but there are the described disadvantages. Furthermore, an economic instrument might not be suitable, if a noticeable share of the target group seems not to consider their farm level economic optimum as criterion in their determination of the applied nitrogen. In addition, a low nitrogen price is a suitable indicator for nitrogen overuse, but not its explanation. The nitrogen price represents the composition of the used fertilizer. An unfavourable composition can be regarded as an insufficient use of the cultivation system, which results in the described nitrogen overuse. Hence, an improvement in application of the cultivation technology might be more successful than an economic instrument. The discussion about new technologies focuses on their implementation. Only a minority of farm households follows the presently recommended nitrogen application rates and at a noticeable share of farm households the traditional cultivation system is not free of cultivation mistakes, especially in terms of nitrogen application. This raises the question, how successful a new agricultural technology can be implemented. The correct application present of the cultivation system and a proper working knowledge transfer system are the preconditions for the implementation of new technologies. For this reason, improvement in education and agricultural skills are the base instruments as well as the basis for all advanced instruments, because a sustainable cultivation system requires a sustainable implementation of its correct use.
K1 Stickstoffdüngung
K1 China
PP Hohenheim
PB Kommunikations-, Informations- und Medienzentrum der Universität Hohenheim
UL http://opus.uni-hohenheim.de/volltexte/2008/279