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Adaptive Optimization of Crop Production and Nitrogen Leaching Abatement Under Yield Uncertainty
Kari Hyytiäinen, Jarkko K. Niemi, Kauko Koikkalainen, Taru Palosuo, Tapio Salo

This study develops a crop management model that internalizes the social cost of nitrate pollution, accounts for stochastic weather, and characterizes sequential fertilizer applications. The model is employed to determine whether a crop producer can benefit from applying fertilizer several times during the growing season rather than a single time, at sowing. The model is parameterized for cultivation of spring malting barley (Hordeum vulgare L.) in southern Finland. The results indicate that it is rational for a crop producer to adjust fertilizer applications to crop needs instead of applying a fixed amount each year; without a pollution tax, however, it remains optimal to apply nitrogen fertilizer once at sowing and to gauge that amount to meet the needs of the entire growing season. The benefits from split application increase significantly if the costs of negative externalities from nitrogen leaching are internalized in the landowner’s decision problem through a pollution tax. With a tax, nitrogen fertilizer is applied later in the growing season, and adjusted more carefully to match the particular needs of the crop plant. In comparison to a policy employing a single application of fertilizer at sowing, split fertilization improves yields, increases the total amount of fertilizer and reduces nitrogen leaching.