The parameters of yield response functions can vary by year. Past studies usually assume yield functions are nonstochastic or "limited" stochastic. In this study, we estimate rye-ryegrass yield functions where all parameters are random. Optimal nitrogen recommendations are calculated for two yield response functions: linear response plateau and Spillman-Mitscherlich. Nonstochastic models are rejected in favor of stochastic parameter models. However, the economic benefits of using fully stochastic models are small since optimal nitrogen rates do not differ greatly between stochastic and nonstochastic models. Previous work on crop response to nitrogen fertilizer has usually used either limiting nutrient response functions or polynomial models. Plateau functional forms tend to best fit data from field studies (Heady and Pesek 1954, Lanzer and Paris 1981, Grimm, Paris, and Williams 1987. Past studies have often assumed that the parameters of the yield function are nonstochastic or "limited" stochastic (some parameters are considered stochastic and others are not), and that all model errors are independent. This assumption often leads to estimating the parameter values of the assumed yield function by ordinary least squares. Research suggests, however, that parameters of yield response functions can vary by year.3 Random parameter models have been suggested by Berck and Helfand (1990), Paris (1992), Wallach (2002), andTembo et al (2008). Berck and Helfand (1990), and Paris (1992) consider linear response plateau models where the intercept and plateau parameters are random, but without random effects. Tembo et al (2008) adds uncorrelated random effects to the intercept and plateau, but not to the slope. Of these studies, only Makowski and Wallach (2002) treat all of the model parameters as random. Makowski and Wallach (2002) consider a linear-plus-plateau function in which wheat yield response is related to N uptake, and nitrogen uptake is related to applied nitrogen.We consider three crop response functions: the linear response plateau (LRP), the Spillman-Mitscherlich, and the quadratic; and we make all model parameters random. Our random parameter model lets parameters vary stochastically by year. The data used are annual rye-ryegrass forage data collected from a long-term nitrogen fertilization experiment in southcentral Oklahoma. We conduct nested likelihood ratio tests to choose between nonstochastic and stochastic models (Greene, 2008), and evaluate the economic value of using the alternative models by comparing expected profit. The ultimate goal is to make optimal nitrogen rate recommendations for cool season cereal rye (S.cereale)-ryegrass (Lolium multiflorum Lam)forage producers in southern Oklahoma.
Determining the Profit Maximizing Level of Nitrogen FertilizerConsider a risk-neutral forage producer whose objective is to maximize expected net returns from winter cereal rye-ryegrass forage. The producer seeks to maximize expected net return above nitrogen cost:(1)where is the producer"s net return a...