11. A Risk Analysis of Converting CRP Acres to a Wheat-Sorghum-Fallow Rotation in Western Kansas

Summary This study examines the economic potential of producing a wheat-grain sorghum-fallow rotation with three different tillage strategies (conventional, reduced, and no-tillage) compared to the Conservation Reserve Program (CRP) in western Kansas. Yields, input rates, and field operations from an experimental field at Tribune, KS are used to calculate net returns for each tillage strategy and the preferred management strategies are determined for various risk preferences. Although net returns to crop production using reduced tillage and no-tillage strategies with average crop prices for 2007- 2008 are higher than CRP payments, risk analysis indicates CRP would be the preferred strategy for more risk-averse managers. When average crop prices for 2006-2008 are used, CRP payments are higher than returns from crop production. Based on this analysis, only those individuals who are risk- neutral or slightly risk-averse would prefer crop production to continue CRP enrollment in this region unless commodity prices reach the historically high levels of late 2007 and early 2008 and remain there.