Special Publication-08-08
Northwestern Nevada Two Row Malt Barley Production Costs and Returns, 2008 Kynda R. Curtis, Agriculture Marketing Specialist, University of Nevada Cooperative Extension; and Assistant Professor, Department of Resource Economics, College of Agriculture, Biotechnology and Natural Resources, University of Nevada, Reno Carol Bishop, Research Assistant, Department of Resource Economics, College of Agriculture, Biotechnology and Natural Resources, University of Nevada, Reno
to every situation. The “Your Farm” column in Tables 1 & 2 is provided for your use.
INTRODUCTION Sample costs and returns to establish and produce two row malt barley under center pivot irrigation in Northwestern 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
ASSUMPTIONS The following assumptions refer to Tables 1- 3 and reflect the typical costs and returns to establish and produce two row malt barley under center pivot irrigation in Northwestern Nevada. The practices described are not the recommendations of the University of Nevada, 1
Planting. In early April, two row malt barley seed is planted by drilling at 100 lbs. per acre at a cost of $18.00 per acre and then rolled with a culti-packer to ensure firm contact with the soil.
Reno, but rather the production practices and materials considered typical of a well-managed farm in the region, as determined by available literature in April 2008. 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 322 acres of land, on which 240 acres is cultivated for two row malt barley production and 82 acres are used for owner housing, machine shop, roads, and pivot corners. During the growing season the enterprise will produce one cutting with total production at 33,600 bushels of grain or 140 bushels per acre. The minimum land market value in 2008 was approximately $11,500.00 per acre for agricultural land in northwestern Nevada with water rights.
Production Cultural Practices and Material Inputs
Land Preparation. Two row malt barley is frequently grown on fields where alfalfa, wheat or oats have been grown previously. One advantage of barley is that it is more tolerant to saline soils than other small grains. In the fall, the residue from the previous crop is incorporated into soil by heavy disking. In the spring, the field is lightly disked and fertilizer is applied by broadcast spreader. Fields to be planted for two row malt barley should be tested for residual nitrogen in the soil, as this will determine the amount to be applied. An application of 50 lbs. of nitrogen using 100 lbs. of urea (46-0-0* at $585/ton) and 20 lbs. of phosphorus using 45 lbs. of Triple Super* (0-45-0* at $685/ton) results in a per acre cost of $44.66. After the fertilizer is spread, the field is disked to incorporate it and land planed to remove small high and low spots. The fields are then irrigated, because two row malt barley is most successful when planted in a moist seedbed.
Irrigation. Irrigation begins immediately after planting to establish the seedlings. Two inches of water is applied to fields via low energy precision application (LEPA) center pivot irrigation and continues through July. Field tests show that 95 percent to 98 percent of water pumped gets delivered to the crop with LEPA and provides maximum application with minimum pressure. Irrigation costs shown in Table 1 represent power costs associated with the center pivot irrigation system. Average estimated irrigation power is $.08 per kilowatt per hour and at current utility rates from Sierra Pacific, incurs a cost of $56.00 per acre on an annual basis. Irrigation System. The farm has two wells and two pivots. Pivot life is approximately 25 years depending on management practices and maintenance required. Maintenance for both pivots is estimated at $8.00 per acre annually. Fertilization. At first tillering, usually in early May, fluid fertilizers are spread through the center pivot system. Commercial fertilizer with a nitrogen content of 32-0-0, UN32* is normally applied. Costs per acre are $71.55 for a 300 lb per acre application. Application of additional nitrogen should be used with caution, as nitrogen 2
http://econdev.nevadapower.com/sppc/county/lyo n/utilities.htm and http://www.swgas.com/tariffs/nvtariff/rates/rates_ nnv.pdf Base utility costs of $350 per month for the household were combined with costs of $7 per acre per year to allow for utilities for outbuildings and shops.
increases the possibility of lodging, as well as increasing protein content which is not desirable for malt varieties.
Yield. The 240 acre farm yields 33,600 bushels or 140 forty-eight pound bushels per acre of two row malt barley from one annual combining. Returns. Returns are based on 2008 market prices for premium quality levels. An average estimated price of $9.00 per bushel for contracted malt barley was used to calculate returns. Returns will vary during the growing season due to market conditions and according to the moisture content, protein levels and kernel plumpness of the barley.
Pest Management. A variety of pest management methods are used depending on pest population cycles. Pest treatment will normally begin in May.
Overhead and Capital Recovery Costs Weeds. Herbicide can not only reduce weed populations, it can substantially reduce spring barley populations as well. For this reason, preventative measures and early planting to outcompete weeds are the preferred measures.
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 2.
Insects. Aphids are the primary insect threat to two row malt barley production. Several species of aphids exist and need different treatment. Therefore, identification is an important aspect of control. Other insect threats include beetles, thrips, wireworms, mealy bugs, cutworms and armyworms, grasshoppers and Mormon crickets. Typical treatments are Bronate*, Puma*, and Harmony Extra* at a combined per acre cost of $32.83.
Interest on Operating Capital. Total operating capital is calculated based on 80 percent of total operating (variable) costs. The interest on operating capital is calculated at a rate of 6.5 percent for six months. Property Taxes. Property taxes in Nevada differ across counties. For the purposes of this publication, investment property taxes are calculated at 1 percent of the average asset value of the property.
Harvest. Harvest is by combining in early August with adjustments for skinning and breaking. Labor. The owner/operator wage is based on an allowance to the owner/operator of $75.00 per acre.
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 insurance covers accidents on the farm at an
Utilities. Current utilities rates calculated using information from 3
annual cost of $1,749.00. Insurance information provided by Kevin Ogan of Beauchamp & McSpadden, Inc.
REFERENCES Davison, Jay, Brad Schultz, and Alan Widaman (2001). Malting Barley in Nevada. University of Nevada Cooperative Extension Fact Sheet #FS-01-47. http://www.landandfarm.com (2008). Current pricing for agricultural properties with water rights in northwestern Nevada. New, Leon and Guy Fipps. (2000). Center Pivot Irrigation. Texas Agricultural Extension Service Bulletin #6096. Texas A&M University. Robertson, Larry D. and Jeffrey C. Stark (2002). Idaho Spring Barley Production Guide. College of Agricultural and Life Sciences Bulletin #742. University of Idaho. Smathers, Robert (2007). The Costs of Owning and Operating Farm Machinery in the Pacific Northwest 2005. A Pacific Northwest Publication #346. University of Idaho, Washington State University, and Oregon State University.
Fuel and Lube. The fuel and lube for each piece of equipment is calculated at 8 percent of the purchase price. Investment Repairs. Annual repairs on all farm investments or capital recovery items that require maintenance are calculated at 2 percent of the purchase price for buildings, improvements and equipment and 7 percent 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.
NOTES 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 http://www.unce.unr.edu/pubs.html. 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.
Salvage Value. Salvage value is 10 percent 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.
This project was funded by a grant under Public Law 109-103, Section 208(a), through the U.S. Bureau of Reclamation (Cooperative Agreement 06FC204044). Copyright © 2008, University of Nevada Cooperative Extension.
Average Asset Value Computation
(
Purchase Price + Salvage Value ) 2
Straight Line Depreciation Computation
(
Purchase Price - Salvage Value ) Useful Life
*
The information given herein is supplied with the understanding that no discrimination is intended and no endorsement by Cooperative Extension is implied.
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Table 1: Northwestern Nevada Two Row Malt Barley Production Costs & Returns, 240 acres, 2008 Price/Cost Per Unit
Total Cost/Value
Total Cost/Value Per Acre
9.00
$ 302,400.00
$
1,260.00 ________
$ 302,400.00
$
1,260.00
$ $ $ $ $ $ $ $ $ $ $ $
7,879.20 27,890.40 4,320.00 15,360.00 18,000.00 2,000.00 29,233.60 32,588.40 5,880.00 1,200.00 3,753.14
$ $ $ $ $ $ $ $ $ $ $ $
32.83 116.21 18.00 64.00 75.00 8.33 121.81 135.79 24.50 5.00 15.64
TOTAL OPERATING COSTS INCOME ABOVE OPERATING COSTS
$ 148,104.74 $ 154,295.26
$ $
617.10 642.90
OWNERSHIP COSTS CASH OVERHEAD COSTS Liability Insurance Office & Travel Annual Investment Insurance Annual Investment Taxes
$ 1,749.00 $ 3,000.00 $ 3,221.63 $ 41,867.29
$ $ $ $
7.29 12.50 13.42 174.45
TOTAL CASH OVERHEAD COSTS
$ 49,837.92
$
207.66
NONCASH OVERHEAD COSTS (Capital Recovery) Buildings, Improvements, & Equipment Machinery & Vehicles
$ 7,443.00 $ 25,750.20
$ $
31.01 ________ 107.29 ________
TOTAL NONCASH OVERHEAD COSTS
$ 33,193.20
$
138.31
TOTAL OWNERSHIP COSTS
$ 83,031.12
$
345.96
TOTAL COSTS
$ 231,135.86
$
963.07
NET PROJECTED RETURNS
$ 71,264.14
$
296.93
Total Units GROSS INCOME Two Row Malt Barley
140.00
Unit
Bushels
$
TOTAL GROSS INCOME OPERATING COSTS Insecticide Herbicide Fertilizer Seed Irrigation Operator Labor Accounting & Legal Fuel & Lube Maintenance Utilities Miscellaneous Operating Capital Interest
240.00 240.00 240.00 240.00 240.00 240.00 1.00 1.00 1.00 1.00 240.00 $ 115,481.28
Acre Acre Acre Acre Acre Acre Annual Annual Annual Annual Acre $
$ 32.83 $ $ 116.21 $ 18.00 $ 64.00 $ 75.00 $ 2,000.00 $ 29,233.60 $ 32,588.40 $ 5,880.00 $ 5.00 $ 0.065
5
Your Farm
________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________
Table 2: Investment Summary
Description
Purchase Price
Useful Life (Yrs)
Annual Capital Recovery
Salvage Value
Annual Insurance
Annual Taxes
Annual Repairs
Annual Fuel & Lube
Buildings, Improvements, and Equipment Owner House
$
200,000.00
50.00
$
200,000.00
$
-
$
Land
$ 3,703,000.00
150.00
$
3,703,000.00
$
-
$
1,332.00 -
Shop (30X40) & Tools
$
42,000.00
25.00
$
4,200.00
$
1,512.00
$
Metal Shed
$
24,000.00
25.00
$
2,400.00
$
864.00
$
Implements
$
84,450.00
15.00
$
8,445.00
$
Center Pivot System (2)
$
390,000.00
25.00
$
39,000.00
Sub Total
$ 4,443,450.00
NA
$
$
2,000.00
$
$ 37,030.00
$
4,000.00 -
153.85
$
231.00
$
840.00
87.91
$
132.00
$
480.00
5,067.00
$
309.34
$
464.48
$
1,689.00
$ 14,040.00
$
1,428.57
$
2,145.00
$
7,800.00
3,957,045.00
$
7,443.00
$
1,883.10
$ 39,857.48
$
7,009.00
Machinery and Vehicles 150 HP Tractor
$
123,965.00
15.00
$
12,396.50
$
7,437.90
$
454.08
$
681.81
$
8,677.55
$
9,917.20
Combine
$
181,455.00
15.00
$
18,145.50
$ 10,887.30
$
664.67
$
998.00
$ 12,701.85
$
14,516.40
Polaris Sportman ATV
$
10,000.00
5.00
$
1,000.00
$
1,800.00
$
36.63
$
55.00
$
700.00
$
800.00
1 Ton Pickup
$
50,000.00
8.00
$
5,000.00
$
5,625.00
$
183.15
$
275.00
$
3,500.00
$
4,000.00
Sub Total
$
365,420.00
NA
$
36,542.00
$ 25,750.20
$
1,338.53
$
2,009.81
$ 25,579.40
$
29,233.60
Total
$ 4,808,870.00
NA
$
3,993,587.00
$ 33,193.20
$
3,221.63
$ 41,867.29
$ 32,588.40
$
29,233.60
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Table 3: Monthly Cash Flow
Description
January
February
March
April
May
June
July
August
September
October
November
December
Total
Production: Two Row Malt Barley Total Income
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$ 302,400.00
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
-
$
-
$
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$ 302,400.00
$
-
$
-
$
-
$
-
$ 302,400.00
-
$ 302,400.00 -
Operating Inputs: Insecticide
$
-
$
-
$
-
$
Herbicide
$
-
$
-
$
-
$
-
$
Fertilizer
$
-
$
-
$
$
-
$
10,718.40
1,969.80
$
1,969.80 17,172.00 -
$
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
$
1,969.80
-
$
$
1,969.80
-
7,879.20 27,890.40
Seed
$
-
$
-
$
-
$
4,320.00
$
$
-
$
-
$
-
$
-
$
-
$
4,320.00
Irrigation
$
-
$
-
$
-
$
3,840.00
$
3,840.00
$
3,840.00
$
3,840.00
$
-
$
-
$
-
$
-
$
-
$
15,360.00
Operator Labor
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
1,500.00
$
18,000.00
Accounting & Legal
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
166.67
$
2,000.00
Fuel & Lube
$
1,538.61
$
1,538.61
$
3,077.22
$
3,077.22
$
3,077.22
$
3,077.22
$
3,077.22
$
3,077.22
$
3,077.22
$
1,538.61
$
1,538.61
$
1,538.61
$
29,233.60
Maintenance
$
1,715.18
$
1,715.18
$
3,430.36
$
3,430.36
$
3,430.36
$
3,430.36
$
3,430.36
$
3,430.36
$
3,430.36
$
1,715.18
$
1,715.18
$
1,715.18
$
32,588.40
Utilities
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
490.00
$
5,880.00
Miscellaneous
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
100.00
$
1,200.00
Interest OC
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
312.76
$
3,753.14
Total Operating Costs
$
5,823.22
$
5,823.22
$
19,795.41
$
19,206.81
$
32,058.81
$
14,886.81
$
14,886.81
$
9,077.01
$
9,077.01
$
5,823.22
$
5,823.22
$
5,823.22 $ 148,104.74
Net Returns
$ (5,823.22) $ (5,823.22) $ (19,795.41) $ (19,206.81) $ (32,058.81) $ (14,886.81) $ (14,886.81) $ 293,322.99
$
(5,823.22) $
(5,823.22) $ 154,295.26
(9,077.01) $ (5,823.22) $
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