Juab County Crop Production Costs and Returns, 2011

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1 June 2012 Applied Economics/201207pr Juab County Crop Production Costs and Returns, 2011 Jeffrey Banks, Extension Associate Professor, Juab County Kynda Curtis, Associate Professor and Extension Specialist, Department of Applied Economics Rob Lee, Research Associate, Department of Applied Economics Don Snyder, Professor and Experiment Station Assistant Director, Department of Applied Economics Introduction Sample costs and returns to establish and produce alfalfa hay, barley, corn (grain and silage), and oats (hay) under wheel line irrigation, and dryland wheat in Juab County, Utah are presented in this publication. This publication is intended to be a guide used to make production decisions, determine potential returns and prepare business and marketing plans. The practices described are not the recommendations of Utah State University, but rather the production practices and materials considered typical of a wellmanaged farm in the region, as determined by producer survey results from Costs, materials, and practices are not applicable to all situations as management and cultural practices vary among growers within the region. The Your Farm column in all tables is provided for your use. Farm. The representative farm consists of 2000 acres of land on which 60 acres are cultivated for alfalfa production, 10 acres for barley production, 10 acres for oat hay production, 10 acres for corn production, 10 acres for corn silage production, 1000 acres for dryland wheat production, and 900 acres for grazing. The market value in 2011 in Juab County was $10,000 per acre for agricultural land with water rights and $750 per acre without. Crop Pricing. Fiveyear average pricing ( ) for alfalfa hay is $125/ton, barley $3.48/bu, corn $4.43/bu, corn (silage) $34.60/ton, oat hay $104/ton, and wheat $6.90/bu (UDAF, 2011). Owner Labor. The owner is provided $30,000 annually for the 1100 acres under production, or $75/acre for the 100 irrigated acres and $22.50/acre for 1000 non irrigated acres. Hired Labor. Hired labor is paid $10/at a total cost of $22,000 annually for the 1100 acre farm or $20/acre. Irrigation System. Wheel line system estimated at $13,000 for a new ¼ mile with maximum of 40 acre coverage (Valley Irrigation Company, March 2011). Cash Overhead. Cash overhead consists of various cash expenses paid out during the year. These costs include property taxes, interest, office expenses, liability and property insurance, accounting/legal costs, as well as investment/machinery repairs. 1

2 Property Taxes. Property taxes in Utah differ across counties. For the purposes of this publication, property taxes on buildings are calculated at 1 percent of the average asset value of the property. Property taxes on land should be taken into consideration, but are not included here. Insurance. Insurance on farm investments vary, depending on the assets included and the amount of coverage. Property insurance provides coverage for property loss at.666 percent of the average asset value. Liability and crop insurance covers accidents and crop loss on the farm at an annual cost of $2,200. Fuel and Lube. The fuel and lube for machinery and vehicles is calculated at 8 percent of the average asset value. Investment Repairs. repairs on all farm investments or capital recovery items that require maintenance are calculated at 2 percent of the average asset value for buildings, improvements, and equipment and 7 percent of the average asset value for machinery and vehicles. Office & Travel. Office and travel costs are estimated at $500 for an average year for the farm. These expenses include office supplies, telephone service, Internet service, and travel expenses to educational seminars. Accounting & Legal. accounting and legal costs are estimated at $4,400 for an average year for the farm. Capital Recovery. Capital recovery costs are the annual depreciation (opportunity cost) of all farm investments. Capital recovery costs are calculated using straight line depreciation. All equipment listed is new unless otherwise noted. For used machinery the price is calculated as onehalf of the new purchase price and useful life is twothirds that of new machinery (Painter, 2011) Salvage Value. Salvage value is 10 percent of the purchase price, which is an estimate of the remaining value of an investment at the end of its useful life. The salvage value for land is the purchase price, as land does not normally depreciate. Average Asset Value Computation Purchase Price + Salvage Value ( ) 2 Straight Line Depreciation Computation Purchase Price Salvage Value ( ) Useful Life References Painter, Kathleen (2011). The Costs of Owning and Operating Farm Machinery in the Pacific Northwest A Pacific Northwest Publication #346. University of Idaho, Washington State University, and Oregon State University. Utah Department of Agriculture and Food (2011) Utah Agriculture Statistics and Utah Department of Agriculture and Food Report.. Utah State University is committed to providing an environment free from harassment and other forms of illegal discrimination based on race, color, religion, sex, national origin, age (40 and older), disability, and veteran s status. USU s policy also prohibits discrimination on the basis of sexual orientation in employment and academic related practices and decisions. Utah State University employees and students cannot, because of race, color, religion, sex, national origin, age, disability, or veteran s status, refuse to hire; discharge; promote; demote; terminate; discriminate in compensation; or discriminate regarding terms, privileges, or conditions of employment, against any person otherwise qualified. Employees and students also cannot discriminate in the classroom, residence halls, or in on/off campus, USUsponsored events and activities. This publication is issued in furtherance of Cooperative Extension work, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Noelle E. Cockett, Vice President for Extension and Agriculture, Utah State University. 2

3 Table 1: Juab County Alfalfa Hay Establishment Costs, 60 acres, Units Unit Price/Cost Per Unit Per Acre Your Farm OPERATING COSTS Insecticide Acre $ $ 1, $ Herbicide Acre $ $ 1, $ Fertilizer Acre $ $ 3, $ Custom Chemical App Acre $ $ $ Custom Seed Bed Prep Acre $ $ 3, $ Testing (Soil & Forage) Acre $ 1.00 $ $ 1.00 Irrigation 1.00 $ 5, $ 5, $ Alfalfa Seed Acre $ $ 2, $ Labor Acre $ $ 1, $ Operator Labor Acre $ $ 4, $ Fuel & Lube 1.00 $ 3, $ 3, $ Maintenance 1.00 $ 3, $ 3, $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 31, $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ 5.05 Investment Taxes $ $ 1.08 TOTAL CASH OVERHEAD COSTS $ 1, $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ 1, $ Machinery & Vehicles $ 5, $ TOTAL NONCASH OVERHEAD COSTS $ 6, $ TOTAL OWNERSHIP COSTS $ 7, $ TOTAL COSTS $ 38, $ YEAR ONE INCOME Alfalfa Hay 4.50 Tons $ $ 33, $ TOTAL GROSS INCOME $ 33, $ TOTAL ESTABLISHMENT INVESTMENT $ 4, $

4 Table 2: Juab County Alfalfa Hay Production Costs and Returns, 60 acres, Units Unit Price/Cost Per Unit Per Acre Your Farm GROSS INCOME Alfalfa Hay 5.00 Tons $ $ 37, $ TOTAL GROSS INCOME $ 37, $ OPERATING COSTS Insecticide Acre $ $ 1, $ Herbicide Acre $ $ 1, $ Fertilizer Acre $ $ 3, $ Custom Chemical App Acre $ $ $ Testing (Soil & Forage) Acre $ 1.00 $ $ 1.00 Irrigation 1.00 $ 5, $ 5, $ Labor Acre $ $ 1, $ Operator Labor Acre $ $ 4, $ Fuel & Lube 1.00 $ 3, $ 3, $ Maintenance 1.00 $ 3, $ 3, $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 25, $ INCOME ABOVE OPERATING COSTS $ 11, $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ 5.05 Investment Taxes $ $ 1.08 TOTAL CASH OVERHEAD COSTS $ 1, $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ 1, $ Machinery & Vehicles $ 5, $ TOTAL NONCASH OVERHEAD COSTS $ 6, $ TOTAL OWNERSHIP COSTS $ 7, $ TOTAL COSTS $ 33, $ NET PROJECTED RETURNS $ 3, $

5 Table 3: Alfalfa Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 1,000, % $ 600, $ 600, $ $ TBD $ $ Shop (40X80) & Tools $ 35, % $ 1, $ $ $ 6.41 $ 9.63 $ $ Hay Barn (50X40) $ 10, % $ 10, $ 1, $ $ $ $ $ Irrigation System (Wheel Line) $ 26, % $ 26, $ 2, $ $ $ $ $ Implements $ 25, % $ 1, $ $ $ 4.58 $ $ $ Alfalfa Establishment $ 4, % $ 4, $ $ $ $ $ $ Sub PreEstablishment $ 1,096, $ 639, $ 603, $ 1, $ $ $ $ Sub PostEstablishment $ 1,100, $ 643, $ 603, $ 1, $ $ $ $ Machinery and Vehicles 95 HP Tractor (used) $ 30, % $ 18, $ 1, $ 1, $ $ $ 1, $ 1, Swather (used) $ 35, % $ 21, $ 2, $ 2, $ $ $ 1, $ 1, Baler (32X34) (used) $ 35, % $ 1, $ $ $ 6.41 $ $ $ (2) 4Wheeler $ 20, % $ 1, $ $ $ 3.66 $ $ $ /4 Ton Pickup $ 40, % $ 2, $ $ $ 7.33 $ $ $ Sub $ 43, $ 4, $ 5, $ $ $ 3, $ 3, $ 687, $ 608, $ 6, $ $ $ 3, $ 3,

6 Table 4: Juab County Barley Production Costs and Returns, 10 acres, Units Unit Price/Cost Per bu. Per Acre Your Farm GROSS INCOME Barley Bushels $ 3.48 $ 3, $ TOTAL GROSS INCOME $ 3, $ OPERATING COSTS Herbicide Acre $ $ $ Fertilizer Acre $ $ $ Custom Chemical App Acre $ $ $ Custom Combine Acre $ $ $ Testing (Soil) Acre $ 1.00 $ $ 1.00 Seed Acre $ $ $ Irrigation Acre $ $ $ Labor Acre $ $ $ Operator Labor Acre $ $ $ Fuel & Lube 1.00 $ $ $ Maintenance 1.00 $ $ $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 2, $ INCOME ABOVE OPERATING COSTS $ $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ 2.73 Investment Taxes $ 1.93 $ 0.19 TOTAL CASH OVERHEAD COSTS $ $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ $ Machinery & Vehicles $ $ TOTAL NONCASH OVERHEAD COSTS $ $ TOTAL OWNERSHIP COSTS $ $ TOTAL COSTS $ 3, $ NET PROJECTED RETURNS $ (54.44) $ (5.44) 6

7 Table 5: Barley Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 1,000, % $ 100, $ 100, $ $ TBD $ $ Shop (30X80) & Tools $ 35, % $ $ $ 7.88 $ 1.28 $ 1.93 $ 3.85 $ Implements $ 25, % $ $ $ $ 0.92 $ $ 2.75 $ Irrigation System (Wheel Line) $ 13, % $ 3, $ $ $ $ $ $ Sub $ 103, NA $ 100, $ $ $ 1.93 $ $ Machinery and Vehicles 95 HP Tractor (used) $ 30, % $ 3, $ $ $ $ $ $ (2) 4Wheeler $ 20, % $ $ $ $ 0.73 $ $ 7.70 $ /4 Ton Pickup $ 40, % $ $ $ $ 1.47 $ $ $ Sub $ 3, NA $ $ $ $ $ $ $ 107, NA $ 100, $ $ $ 1.93 $ $

8 Table 6: Juab County Corn (Grain) Production Costs and Returns, 10 acres, Units Unit Price/Cost Per bu. Per Acre Your Farm GROSS INCOME Corn Grain bu. $ 4.43 $ 6, $ TOTAL GROSS INCOME $ 6, $ OPERATING COSTS Herbicide Acre $ $ $ Insecticide Acre $ 8.00 $ $ 8.00 Fertilizer Acre $ $ 1, $ Seed Acre $ $ $ Custom Chemical App Acre $ $ $ Irrigation Acre $ $ $ Labor Acre $ $ $ Operator Labor Acre $ $ $ Custom Combine Acre $ $ 1, $ Testing Acre $ $ $ Fuel & Lube 1.00 $ $ $ Maintenance 1.00 $ $ $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 5, $ INCOME ABOVE OPERATING COSTS $ 1, $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ 4.06 Investment Taxes $ $ 2.19 TOTAL CASH OVERHEAD COSTS $ $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ $ Machinery & Vehicles $ $ TOTAL NONCASH OVERHEAD COSTS $ $ TOTAL OWNERSHIP COSTS $ $ TOTAL COSTS $ 6, $ NET PROJECTED RETURNS $ $

9 Table 7: Corn (Grain) Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 1,000, % $ 100, $ 100, $ $ TBD $ $ Bin (2000 bu.) $ 2, % $ 2, $ 2, $ $ $ $ $ Shop (40X80) & Tools $ 35, % $ $ $ 7.88 $ 1.28 $ 1.93 $ 3.85 $ Implements $ 25, % $ $ $ $ 0.92 $ $ 2.75 $ Irrigation System (Wheel Line) $ 13, % $ 3, $ $ $ $ $ $ Sub $ 105, NA $ 102, $ $ $ $ $ Machinery and Vehicles 95 HP Tractor (used) $ 30, % $ 3, $ $ $ $ $ $ (2) 4Wheeler $ 20, % $ $ $ $ 0.73 $ $ 7.70 $ /4 Ton Pickup $ 40, % $ $ $ $ 1.47 $ $ $ Sub $ 3, $ $ $ $ $ $ $ 109, NA $ 102, $ $ $ $ $

10 Table 8: Juab County Corn (Silage under Flood) Production Costs and Returns, 10 acres, Units Unit Price/Cost Per bu. Per Acre Your Farm GROSS INCOME Corn Silage Tons $ $ 8, $ TOTAL GROSS INCOME $ 8, $ OPERATING COSTS Insecticide Acre $ 8.00 $ $ 8.00 Herbicide Acre $ $ $ Fertilizer Acre $ $ 1, $ Custom Chemical App Acre $ $ $ Custom Chop Acre $ $ 2, $ Testing (Soil) Acre $ 1.00 $ $ 1.00 Seed Acre $ $ $ Irrigation 1.00 $ $ $ Labor Acre $ $ $ Operator Labor Acre $ $ $ Fuel & Lube 1.00 $ $ $ Maintenance 1.00 $ $ $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 7, $ INCOME ABOVE OPERATING COSTS $ $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ Investment Taxes $ 1.93 $ 0.19 TOTAL CASH OVERHEAD COSTS $ $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ $ Machinery & Vehicles $ $ TOTAL NONCASH OVERHEAD COSTS $ 1, $ TOTAL OWNERSHIP COSTS $ 1, $ TOTAL COSTS $ 9, $ NET PROJECTED RETURNS $ (434.73) $ (43.47) 10

11 Table 9: Corn (Silage) Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 1,000, % $ 200, $ 200, $ $ TBD $ $ Shop (30X80) & Tools $ 35, % $ $ $ 7.88 $ 1.28 $ 1.93 $ 7.00 $ Silage Pit $ 35, % $ 35, $ $ $ $ $ $ Implements $ 25, % $ $ $ $ 0.92 $ $ 5.00 $ Sub $ 35, NA $ $ $ $ 1.93 $ $ Machinery and Vehicles 95 HP Tractor (used) $ 30, % $ 3, $ $ $ $ $ $ (2) 4Wheeler $ 20, % $ $ $ $ 0.73 $ $ $ /4 Ton Pickup $ 40, % $ $ $ $ 1.47 $ $ $ Sub $ 3, NA $ $ $ $ $ $ $ 39, NA $ $ 1, $ $ 1.93 $ $

12 Table 10: Juab County Oat Hay Production Costs and Returns, 10 acres, Units Unit Price/Cost Per bu. Per Acre Your Farm GROSS INCOME Oat Hay 4.00 Ton $ $ 4, $ TOTAL GROSS INCOME $ 4, $ OPERATING COSTS Herbicide Acre $ $ $ Fertilizer Acre $ $ $ Seed Acre $ $ $ Custom Chemical App Acre $ $ $ Irrigation Acre $ $ $ Labor Acre $ $ $ Operator Labor Acre $ $ $ Fuel & Lube 1.00 $ $ $ Maintenance 1.00 $ $ $ Miscellaneous Acre $ 5.00 $ $ 5.00 TOTAL OPERATING COSTS $ 3, $ INCOME ABOVE OPERATING COSTS $ $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ $ 2.00 Accounting & Legal $ $ 4.00 Office & Travel $ $ 5.00 Investment Insurance $ $ 5.24 Investment Taxes $ $ 1.84 TOTAL CASH OVERHEAD COSTS $ $ NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ $ Machinery & Vehicles $ $ TOTAL NONCASH OVERHEAD COSTS $ 1, $ TOTAL OWNERSHIP COSTS $ 1, $ TOTAL COSTS $ 4, $ NET PROJECTED RETURNS $ (299.03) $ (29.90) 12

13 Table 11: Oat Hay Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 1,000, % $ 100, $ 100, $ $ TBD $ $ Shop (30X80) & Tools $ 35, % $ $ $ 7.88 $ 1.28 $ 1.93 $ 3.85 $ Hay Barn $ 3, % $ 3, $ $ $ $ $ $ Implements $ 25, % $ $ $ $ 0.92 $ $ 2.75 $ Irrigation System (Wheel Line) $ 13, % $ 3, $ $ $ $ $ $ Sub $ 106, NA $ 100, $ $ $ $ $ Machinery and Vehicles 95 HP Tractor (used) $ 30, % $ 3, $ $ $ $ $ $ Swather (used) $ 35, % $ 3, $ $ $ $ $ $ Baler (32X34) (used) $ 35, % $ $ $ $ 1.28 $ $ $ (2) 4Wheeler $ 20, % $ $ $ $ 0.73 $ $ 7.70 $ /4 Ton Pickup $ 40, % $ $ $ $ 1.47 $ $ $ Sub $ 7, NA $ $ $ $ $ $ $ 114, NA $ 101, $ 1, $ $ $ $

14 Table 12: Juab County Wheat (Dryland) Production Costs and Returns, 1000 acres, Units Unit Price/Cost Per bu. Per Acre Your Farm GROSS INCOME Wheat Bushels $ 6.90 $ 172, $ TOTAL GROSS INCOME $ 172, $ OPERATING COSTS Herbicide 1000 Acre $ $ 12, $ Fertilizer 1000 Acre $ 8.00 $ 8, $ 8.00 Seed 1000 Acre $ $ 12, $ Custom Chemical App 1000 Acre $ $ 11, $ Labor 1000 Acre $ $ 20, $ Operator Labor 1000 Acre $ $ 22, $ Fuel & Lube 1 $ 18, $ 18, $ Maintenance 1 $ 17, $ 17, $ Miscellaneous 1000 Acre $ 5.00 $ 5, $ 5.00 TOTAL OPERATING COSTS $ 126, $ INCOME ABOVE OPERATING COSTS $ 46, $ OWNERSHIP COSTS CASH OVERHEAD COSTS Liability/Crop Insurance $ 2, $ 2.00 Accounting & Legal $ 4, $ 4.00 Office & Travel $ $ 0.50 Investment Insurance $ 1, $ 1.07 Investment Taxes $ $ 0.21 TOTAL CASH OVERHEAD COSTS $ 7, $ 7.77 NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment $ 2, $ 2.19 Machinery & Vehicles $ 25, $ TOTAL NONCASH OVERHEAD COSTS $ 27, $ TOTAL OWNERSHIP COSTS $ 35, $ TOTAL COSTS $ 162, $ NET PROJECTED RETURNS $ 10, $

15 Table 13: Wheat (Dryland) Production Investment Summary. Description Purchase Price Percentage Use Purchase Price Useful Life (Yrs) Salvage Value Capital Recovery Insurance Taxes Repairs Fuel & Lube Buildings, Improvements, and Equipment Land $ 825, % $ 742, $ 742, $ $ TBD $ $ Shop (40X80) & Tools $ 35, % $ 31, $ 3, $ $ $ $ $ Grain Bin (12,000 bu.) $ 6, % $ 6, $ $ $ $ $ $ Implements $ 25, % $ 22, $ 2, $ 1, $ $ $ Sub $ 802, NA $ 748, $ 2, $ $ $ 1, $ Machinery and Vehicles Combine (used) $ 125, % $ 125, $ 12, $ 11, $ $ $ 8, $ 10, HP Tractor (used) $ 146, % $ 146, $ 14, $ 13, $ $ $ 10, $ 11, HP Tractor (used) $ 95, % $ 85, $ 8, $ 7, $ $ $ 5, $ 6, Baler (used) $ 35, % $ 31, $ 3, $ 4, $ $ $ 2, $ 2, (2) 2 Ton Flatbed (used) $ 30, % $ 30, $ 3, $ 2, $ $ $ 2, $ 2, Dumptruck (used) $ 30, % $ 30, $ 3, $ 2, $ $ $ 2, $ 2, (2) 4Wheeler $ 20, % $ 18, $ 1, $ 3, $ $ $ 1, $ 1, /4 Ton Pickup $ 40, % $ 36, $ 3, $ 5, $ $ $ 2, $ 2, Sub $ 231, NA $ 23, $ 25, $ $ $ 16, $ 18, $ 1,033, NA $ 771, $ 27, $ 1, $ $ 17, $ 18,