Posts Tagged: cost studies

New UC studies outline costs of producing irrigated pasture in the Sierra Nevada foothills

Two new UC studies break out the costs and returns of producing irrigated pasture. During the irrigation season, beef cattle graze on the pasture. Photo by Dan Macon

Two new studies on the costs and returns of establishing and producing irrigated pasture in the Sierra Nevada Foothills have been released by UC Agriculture and Natural Resources' Agricultural Issues Center. Ranchers in Nevada, Placer and surrounding counties may find the cost estimates useful for planning.

Based on 40 acres of leased ground, the studies focus on establishment by tilling the soil, using conventional cultural practices and re-establishment of pasture using no-till cultural practices. The two separate studies, by Dan Macon, UCCE livestock and natural resources advisor, and Donald Stewart of the Agricultural Issues Center, estimate the cost of establishing or re-establishing a pasture and producing pasture over its 30-year life span.

There are two methods of establishing a pasture. One method uses conventional cultural practices, destroying the existing pasture and preparing the soil, or seed-bed, using conventional tillage practices.

The other no-till method of re-establishing the pasture uses high-intensity grazing and herbicides to destroy the existing pasture and plant new pasture using a no-till seed drill.

Their analysis reports the differences of machinery costs and methods. The reported prices for materials, equipment and custom services are based on January 2020 figures.

UC Cooperative Extension farm advisors, specialists, grower cooperators and other agricultural associates provided input and reviews. The authors describe the assumptions used to identify current costs for pasture establishment and production, material inputs, cash and non-cash overhead. A ranging analysis table shows profits over a range of prices and hay yields.

The new studies are “2020 - Sample Costs to Establish or Reestablish and Produce Irrigated Pasture in the Sierra Nevada Foothills, Flood Irrigated” and “2020 - Sample Costs to Produce Irrigated Pasture in the Sierra Nevada Foothills, Flood Irrigated.”

Both studies can be downloaded from the UC Davis Department of Agricultural and Resource Economics website at http://coststudies.ucdavis.edu. Sample cost-of-production studies for many other commodities are also available on the website.                                                                   

For additional information or an explanation of the calculations used in the studies, contact Donald Stewart at the Agricultural Issues Center at (530) 752-4651 or destewart@ucdavis.edu.

For information about irrigated pasture establishment and production in Placer, Nevada, Sutter and Yuba counties, contact UCCE livestock and natural resources advisor Dan Macon at dmacon@ucanr.edu.

A Treasury bond nets greater return than vineyard

The Stockton Record yesterday ran a story about the dismal economics associated with growing grapes in the San Joaquin Valley, based on a study co-authored by UC Cooperative Extension viticulture advisor in San Joaquin County Paul Verdegaal.

The story, written by veteran ag reporter Reed Fujii, opened with a telling quote from local farmer Brad Goehring, who helped with the cost study.

"At best, we're looking at about a 4 percent return on investment," he was quoted. "You could sell your land, liquidate everything, put your money into a Treasury bill and earn essentially the same return."

The UC cost-of-production study, based on a hypothetical vineyard, estimates that year-to-year operating profits of less than $1,000 an acre get eaten up by overhead costs, such as taxes, insurance and management expenses. The value of land, initial vineyard planting costs, farm buildings and equipment runs the accounting deep into the red, losing more than $2,000 an acre, the Record's story reported.

The sad conclusion was given in a quote from Verdegaal:

"In a true economic sense ... grape growing, or probably most of agriculture, from what we've seen the last few years anyway, doesn't pay."

The story ended with one ray of hope. It says the long down cycle in winegrape prices may be on the upswing. Growers and others have recently reported spot market prices of $500 to $550 a ton for cabernet sauvignon and $600 for chardonnay, Fujii wrote. That's much higher than the $393 per ton average for last year.

The cost study, Sample Costs to Establish and Produce Winegrapes (Cabernet Sauvignon), San Joaquin Valley North, was one of 12 released this month by the UC Davis Department of Agriculture and Resource Economics. For more, see this news release on the cost studies.

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