Sample costs and returns to establish and produce alfalfa hay under flood irrigation in Churchill County, Nevada, are presented in this publication. This publication is intended to be a guid, 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 Tables 1 & 2 is provided for your use.
The following assumptions refer to Tables 1 through 4 and reflect the typical costs and returns to establish and produce alfalfa hay stands under flood irrigation in Churchill 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 2004. Costs, materials, and practices are not applicable to all situations, as establishment and cultural practices vary among growers within the region.
Table 1: Churchill County Alfalfa Hay Establishment Costs
Table 2: Churchill County Alfalfa Hay Production Costs and Returns
Table 3: Investment Summary
Table 4: Monthly Cash Flow
Farm. The representative farm consists of 202 acres of land, on which 200 acres is cultivated for alfalfa production and 2 acres are used for owner housing, machine shop, and roads. During the growing season the enterprise will produce four cuttings with total production at 7 tons per acre. The land market value in 2004 was approximately $4000.00 per acre.
The establishment year follows one or two years of winter wheat production. The establishment year consists of 18 months. The alfalfa stand life in Churchill County is six 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 disked and floated to remove small high and low spots, followed by a custom lazar, which will level the land. The borders will then be run to differentiate the plots. Five inches of water will then be applied to the fields.
Fertilization. Prior to planting, fertilizers are spread and incorporated by disking. Commercial fertilizer (12-15-15* at $17.50/acre) and dairy manure ($10.00/acre) are normally applied.
Irrigation. Irrigation begins immediately after planting to establish the alfalfa seedlings prior to winter. Five inches of water is applied to fields via flood irrigation.
Pest Management. Insecticide and herbicide may be used during the establishment year, but is less likely due the application of Roundup* prior to establishment. The insecticides most commonly used are Mustang* and Lorsban*, at an annual per acre cost of $4.50. Herbicide use during the establishment year has an average cost of $20.00 per acre and may include a combination of Select* and Persuit*.
Harvest. Harvest will begin in June of the establishment year and continue through September (14th month).
Establishment Investment. The alfalfa establishment investment cost is placed into the investment summary (Table 3) and is depreciated across the 6-year stand life.
Production Cultural Practices and Material Inputs
Irrigation. Irrigation begins in March and continues through the last cutting, usually in early September. Irrigation costs shown in Tables 1 and 2 cover the per acre cost of water at $33.90 per season, plus an administration fee of $50.00 per land parcel, which is assumed to be one parcel per every 50 acres, or four for the 200 acre farm. Maintenance costs on ditches, such as hauling dirt to fix wash-outs, broken head gates, and machinery costs to weed the ditches are $200.00 annually.
Fertilization. Both commercial fertilizers (12-15-15* at $17.50/acre) and diary manure ($10.00/acre) are applied in March.
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 Select* and Persuit*. A combination of two or more is common at an annual per-acre cost of $20.00.
Insects. Weevils and aphids are the primary insect threat to alfalfa hay. These insects are not an annual threat. Therefore, insecticide is applied once every three years by crop duster. The total price for crop dusting is $15 per acre, or $4.50 per acre annually.
Vertebrates. Gophers are the common vertebrate problem in alfalfa stands. Rodenticide and/or trapping are common treatments, at an annual per-acre rate of $1.00.
Harvest. Harvest equipment owned by the farm and operated by the owner/operator or hired help consists of a mower/swather, a set of rakes, a baler pulled by a tractor 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. 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 200 acre farm yields 7 tons of alfalfa hay per acre across four annual cuttings.
Returns. Returns are based on 2004 market prices across a range of hay quality levels. An estimated price of $95.00 per ton of 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 at 1% of the average asset value of the property.
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% 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 average asset value. 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 average asset value.
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 by Useful Life)
*The information given herein is supplied with the understanding that no discrimination is intended and no endorsement by Cooperative Extension is implied.
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.
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.
Sample production costs and returns publications for significant agricultural products in various regions of Nevada are available online at the University of Nevada Cooperative Extension Web site at UNCE. For additional information, contact the Department of Resource Economics at the University of Nevada, Reno at (775) 784-6701 or your local University of Nevada Cooperative Extension office.