INTRODUCTION

Sample costs and returns to establish and produce alfalfa and grass hay under center pivot irrigation in Eureka County, Nevada, 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. Practices described are based on the production practices considered typical for this crop and region, but may not apply to every situation. A “Your Farm” column in Table 1 is provided for your use.

ASSUMPTIONS

The following assumptions refer to Table 1 and reflect the typical costs and returns to establish and produce alfalfa and grass hay stands under center pivot irrigation in Eureka County, Nevada. The practices described are not the recommendations of the University of Nevada, Reno, but rather the production practices and materials considered typical of a well-managed farm in the region, as determined by a producer panel in November 2006. Costs, materials, and practices are not applicable to all situations, as establishment and cultural practices vary among growers within the region.

Farm

The representative farm consists of 640 acres of land, on which 250 acres is cultivated for alfalfa production, 250 acres is cultivated for grass production, and 140 acres are used for owner/employee housing, machine shop, roads, and pivot corners. During the growing season the enterprise will produce three cuttings of alfalfa at 5 tons per acre, and two cuttings of grass hay at 4 tons per acre. The land market value for 2006 was approximately $800 per acre.

Stand Establishment

The establishment year for alfalfa or grass hay follows one 5-year cycle of the alternate crop. The establishment year consists of 18 months. The stand life in Eureka County is five years. Establishment year costs are provided in Table 1.

Land Preparation

The ground is ripped to break up the soil to improve water infiltration and fertilizer penetration. The field is then disced to break up the soil and establish the seed bed.

Planting

In late August, alfalfa and grass seed is drilled at 18 pounds per acre.

Fertilization

Prior to planting, fertilizers are spread and incorporated by discing. The common fertilizer used is 11-52-0*. Additionally, sulfur and zinc in a liquid or dry form is normally applied.

Irrigation

Irrigation begins immediately after planting to establish the seedlings prior to winter. The main irrigation system consists of four pivots on four wells.

Pest Management

Insecticide and herbicide may be used during the establishment year, but is less likely due to the application of Roundup* prior to establishment. The insecticides most commonly used are Supercide* and Lorsban*, at an annual per-acre cost of $50.00 and $10.00, respectively. Herbicide use during the establishment year has an average cost of $15.50 per acre and may include a combination of V Rapter* and/or Persuit*.

Harvest

Harvest will begin in June of the establishment year and continue through September (14th month).

Yield

The 500-acre farm in its establishment year yields 5.0 tons of alfalfa hay and 4.0 tons of grass hay per acre.

Establishment Investment

The alfalfa and grass hay establishment investment cost is placed into the investment summary (Table 3) and is depreciated across the 5-year stand life.

Production Cultural Practices and Material Inputs

Irrigation

Irrigation begins in May and continues through the last cutting in early September. Irrigation costs shown in Table 2 represent power costs associated with the center pivot irrigation system. Average estimated irrigation power is $.08 per kilowatt per hour and $90.00 per acre on an annual basis.

Irrigation System

The farm has four wells and four pivots. Pivot life is approximately 25 years depending on management practices and maintenance required. Maintenance for all four pivots is estimated at $16.00 per acre annually.

Fertilization

Both dry and liquid fertilizers are used. 11-52-0, plus sulfur and zinc are most commonly used and represent a per-acre annual cost of $45.00 for alfalfa and $150.00 for grass.

Pest Management

A variety of pest management methods are used depending on pest population cycles. Pest treatment will normally begin in April and continue for the six-month production cycle.

Weeds

Herbicides commonly used are V Rapter* and Persuit*. A combination of two or more is common at an annual per-acre cost of $15.50.

Insects

Several species of insects are problematic for alfalfa and grass hay production in Eureka County. The insecticides most commonly used are Supercide* and Lorsban*.

Vertebrates

Gophers are the common vertebrate problem in alfalfa stands. Rodenticide and/or trapping are common treatments, at an annual cost of $5.00 per acre.

Harvest

Harvest equipment owned by the farm and operated by the owner/operator or hired help consists of a rotary mower, a set of rakes, three balers pulled by tractors, and a harrowbed to haul the hay off the field and stack it.

Labor

The owner/operator wage is based on an annual salary of $24,000.00. There is one additional full-time employee and two seasonal employees for four months. Employees are paid at a rate of $1,834.00 a month. All employee benefits, payroll taxes, and worker’s compensation insurance are included in labor costs. Employee housing and associated utilities are included in the farm investment costs.

Yield

The 500-acre farm yields 6.0 tons of alfalfa hay per acre and 5.0 tons of grass hay per acre.

Returns

Returns are based on 2006 market prices across a range of hay quality levels. An estimated price of $100.00 per ton of alfalfa hay and $200.00 per ton of grass hay was used to calculate returns. Returns will vary during the growing season due to market conditions.

Overhead and Capital Recovery Costs

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, as well as investment/machinery repairs. A complete listing of farm investments and associated costs can be found in Table 3.

Interest on Operating Capital

Total operating capital is calculated based on 80% of total operating (variable) costs. The interest on operating capital is calculated at a rate of 6.5% for the six month production cycle.

Property Taxes

Property taxes in Nevada differ across counties. For the purposes of this publication, investment property taxes are calculated as 1% of the average asset value of the property.

Insurance

Insurance costs for farm investments vary, depending on the assets included and the amount of coverage. Property insurance provides coverage for property loss at .666% of the average asset value. Liability insurance covers accidents on the farm at an annual cost of $1,749.00.

Fuel and Lube

The fuel and lube for each piece of equipment is calculated at 8% of the purchase price. Fuel and lube in the establishment year is 125% of that in a normal production year due to increased machinery use.

Investment Repairs

Annual repairs on all farm investments or capital recovery items that require maintenance are calculated at 2% of the purchase price for buildings, improvements, and equipment and 7% of the purchase price for machinery and vehicles.

Office & Travel

Office and travel costs are estimated at $3,000.00 for an average year. These expenses include office supplies, telephone service, Internet service, and travel expenses to educational seminars.

Capital Recovery

Capital recovery costs are the annual depreciation (opportunity cost) of all farm investments. Capital recovery costs are calculated using straight line depreciation. Farm equipment may be purchased new or used, depending on producer panel preferences.

Salvage Value

Salvage value is 10% of the new 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 divided by 2)

Straight Line Depreciation Computation

(Purchase Price - Salvage Value divided Useful Life)

References

• Orloff, Steve B., Karen M. Klonsky, and Richard L. De Moura (2001). Sample Costs to Establish and Produce Alfalfa Hay, Intermountain Region, Siskiyou County, Center Pivot Irrigation. Publication AF-IR-01-2, University of California Cooperative Extension.
• Smathers, Robert (2001). The Costs of Owning and Operating Farm Machinery in the Pacific Northwest 2000. A Pacific Northwest Publication #346. University of Idaho, Washington State University, and Oregon State University.

*The information given herein is supplied with the understanding that no discrimination is intended and no endorsement by Cooperative Extension is implied.

Published by: Riggs, W. and Curtis, K., 2006, Eureka County Forage Establishment, Production Costs & Returns, Extension | University of Nevada, Reno, FS-07-09

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