The Economics of Using Improved Red Clover Varieties

Agricultural Economics - Extension No. 2005-05
Kenneth H. Burdine, Ray Smith, and Richard Trimble
May 2005

Red clover is a common hay and pasture crop in Kentucky. It has been found to be easily established and well adapted to most Kentucky soils, according to UK Agronomists Taylor, Henning, and Lacefield. Agricultural Economics publication AEC 2005-04, "The Economics of Renovating Pastures with Clover", discusses the economic benefits of clover as a companion to fescue in pastures for the cow-calf operation. The purpose of this publication is to examine the economic benefit of using improved red clover varieties in hay production. This, of course, also has implications for the cow-calf producer who produces hay.

Examples of improved red clover varieties include Kenland, Freedom!, and Cinnamon. These, and many other improved varieties, are available at most farm supply outlets. Certified clover seed is considerably more expensive than common or uncertified seed. So, it is not surprising that the majority of red clover seed purchased in Kentucky is of common varieties. The primary disadvantage of purchasing common red clover varieties is that their yield and persistence are typically lower and are very difficult to predict.

University of Kentucky agronomists conduct red clover variety trials on a regular basis. A 2002-2004 trial compared Kenland, an improved variety, to eighteen different common varieties purchased from a wide range of seed suppliers. The three year total yield from Kenland (baseline improved variety) was found to be 11.12 tons per acre. Only 3 of the 18 common varieties showed yields statistically similar to Kenland; the other 15 were statistically lower. Common variety yields over the three year trial ranged from 11.33 tons per acre to 4.7 tons per acre. The hay producer who purchases common seed varieties is taking a risk; yield and persistence are clearly much more variable (Olson et al, PR 508).

So, the question that producers face each year is whether the additional cost for certified clover seed is worthwhile. A partial budget framework was used to analyze this question. In a partial budget framework, it is assumed that a change is being considered which will affect the operation in four possible ways: (1) increased revenues, (2) decreased costs, (3) increased costs, and / or (4) decreased revenues. Clearly, increased revenues and decreased costs have a positive effect on the hay producer's bottom line while increased costs and decreased revenues have a negative effect on the bottom line. The decision rule is quite simple; if the value of the positive impacts are greater than the value of the negative impacts, then the practice is worthwhile. On the other hand, if the negative impacts outweigh the positive impacts, it would not be in the best interest of the producer to implement the change in question.

Increased revenues

In the case of using improved red clover varieties, increased revenues will be expressed in the value of increased yields per acre. For the hay producer, this means increased hay sales per acre. Even if hay is not being sold, the additional hay has a value as a feed.

In the trial discussed earlier, the three year total yield of certified Kenland was 11.12 tons per acre. The average three year total yield of the 18 common varieties was 7.16 tons per acre. The increased revenue associated with using certified seed is the value of this increased yield of 3.96 tons. For the purposes of this analysis, a value of $70 will be assumed per ton of hay. This would suggest increased revenue of $277.20 per acre over the three year period.

Decreased costs

Producers who sell hay are not likely to see direct decreased costs. In the situation of a hay producer who buys hay, increased hay production per acre could be considered cost decreasing in the sense that less hay is actually purchased. The value of the increased yields will be expressed either as increased revenue or as a decreased cost.

Increased costs

The primary increased cost associated with this decision is the price differential between certified seed and common seed. Prices are quite variable across the state, but for the purposes of this study, common red clover seed was assumed to cost $1.75 per pound when purchased by the bag, while certified seed was presumed to cost $2.50. So the expected costs difference is $0.75 per lb. We will also assume that the seeding rate for a pure clover stand is 10 pounds per acre. Based on these assumptions, increased costs per acre were $7.50. All other costs are assumed to be the same, regardless of the type of seed that is sewn.

Decreased revenues

In the case of using improved red clover varieties, no decreased revenues are expected. All negatives are expressed in increased costs associated with more expensive seed.

The previously described assumptions can be placed on a typical partial budget grid as the one described below.

Table 1. Partial Budget: Analysis of an Improved Red Clover Variety

Increased Revenues

  • -Additional yield 3.96 tons / acre @ $70 per ton
$277.20

Decreased Revenues

  • -none considered
$0

Decreased Expenses

  • -none considered
$0

Increased Expenses

  • -Additional cost of improved variety - $0.75 per pound @ 10 pounds per acre
$7.50
Positive Impact:$277.20
Negative Impact:($7.50)
Net Effect:$269.70

Clearly, little discussion is needed about the preceding partial budget framework. Based on the assumptions of this analysis, the hay producer would have been much better off by selecting an improved red clover variety over the average common variety. No sensitivity analysis is included as the slightly higher costs of seed would be easily off-set by even small increases in yield per acre.

The yield estimates used in this analysis were from field trials conducted at the University of Kentucky. Some producers may have purchased common seed in the past and seen better yields than the ones described above. It is true that common seed may occasionally perform quite well. In the field trial described above, 3 of the 18 common varieties yielded hay tonnage similar to the baseline improved variety. However, the yields of the remaining 15 common varieties were statistically less than the certified seed. Further, 5 of the 18 common varieties saw three year yields more than 50% less than the certified variety (Olsen et al PR-508). The question that the hay producer must answer is whether he or she wants to take this risk in order to save a small amount of money on seed costs per acre.

This publication is not intended to endorse any specific brands or companies that produce red clover seed. The take-home message for this discussion is that very little is known about the common red clover seed that is usually purchased at local farm supply stores. The producer who purchases common red clover seed is taking a risk, as its performance is very uncertain. A certified or improved variety is one that has been tested and performed well in yield trials. While yields may still be somewhat variable, they are likely to be much less variable than common varieties. Producers are strongly encouraged to consider this risk, and weigh it against the additional cost per pound, as they choose red clover varieties for hay production. See the Kentucky forage website at www.uky.edu/ag/forage for a complete list of forage management publications.

For More Information

For additional information, please contact, Kenny Burdine or Richard Trimble.

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