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Potential Cost Savings of Multiple Inlet Rice Irrigation

Potential Cost Savings of Multiple Inlet Rice Irrigation

Irrigation water can be one of the largest expenses associated with rice production, particularly when energy prices are high as in the current production season. Multiple inlet rice irrigation (MIRI) has potential to reduce the cost of applying irrigation water to rice. MIRI uses poly pipe to distribute irrigation water to all rice paddies simultaneously. This differs from conventional cascade flood in which water is applied to the first paddy at the top of the field and then flows over spills to lower paddies until the entire field is flooded. Fields are flooded much faster with MIRI. Based on examples in Arkansas, applied water savings of up to 25 percent are achievable with MIRI relative to cascade flood. Other potential benefits of MIRI relative to cascade flood include reduced irrigation labor and higher rice grain yields. Labor is reduced with MIRI due to less adjustment of levee gates and better management of water depth during the growing season. Yields can be 3 to 5 percent higher under MIRI due to a reduced “cold water” effect at the top of the field (more cold water concentrated at top of field with cascade flood) and improved nitrogen efficiency due to faster flooding of the field. 

Figure 1 presents rice irrigation variable costs per acre for both cascade flood and MIRI. Irrigation variable costs include energy, repairs and maintenance, irrigation labor, and for MIRI, the additional cost of poly pipe pick-up and removal. Rice irrigation variable costs are presented for three total dynamic head (TDH) levels (80 ft, 100 ft; 120 ft), and assume 32 acre-inches of water are applied under cascade flood and 24 acre-inches of water are applied under MIRI during the growing season. Both applied water amounts are typical water amounts for cascade flood and MIRI as reported in the Arkansas Rice Production Handbook. 

Irrigation variable costs are presented for both diesel and electric power. Irrigation energy costs were calculated based on diesel and electric energy consumption data from McDougal (2015). A diesel price of $3.94/gallon and an electric price of $0.138/kWh were used in the energy cost calculations. The diesel price comes from 2022 Arkansas field crop enterprise budgets, while the electric price represents a median price estimated from electric rate schedules for irrigation from various electric cooperatives located throughout eastern Arkansas. Irrigation labor is charged at $11.33/hour, also from 2022 Arkansas field crop enterprise budgets. 

Irrigation variable costs are much lower for electric power than for diesel power (Figure 1). Farmers have switched many of their diesel irrigation motors to electric motors because the cost of electricity has been lower and less variable over time relative to the cost of diesel. Irrigation variable costs are lower for MIRI than for cascade flood at all TDH levels. Lower costs are associated with less applied water and lower irrigation labor under MIRI. Monetary savings from MIRI are greater for diesel power than for electric power because applied water costs are much greater under diesel power than under electric power. Applied water cost for diesel power ranged from $5.35/acre-inch at 80 ft TDH to $8.02/acre-inch at 120 ft TDH. In contrast, applied water cost for electric power ranged from $2.10/acre-inch at 80 ft TDH to $3.15/acre-inch at 120 TDH. Diesel irrigation motors could potentially receive larger monetary payoffs from MIRI than electric irrigation motors on farms. Nonetheless, rice fields supplied with irrigation water by both diesel and electric motors could potentially benefit monetarily from MIRI relative to conventional cascade flood irrigation.

References and Resources

McDougall, W. M. (2015). A Pump Monitoring Approach to Irrigation Pumping Plant Performance Testing. Graduate Theses and Dissertations Retrieved from https://scholarworks.uark.edu/etd/1146

University of Arkansas System Division of Agriculture, Cooperative Extension Service. 2022. Arkansas Field Crop Enterprise Budgets. https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

University of Arkansas System Division of Agriculture, Cooperative Extension Service. 2021. Arkansas Rice Production Handbook. https://www.uaex.uada.edu/farm-ranch/crops-commercial-horticulture/rice/

Wilkins, Brad. “Potential Cost Savings of Multiple Inlet Rice Irrigation“. Southern Ag Today 2(21.3). May 18, 2022. Permalink

Prospects for Retained Ownership in a High Input Cost Environment

Prospects for Retained Ownership in a High Input Cost Environment

Retaining ownership of calves beyond weaning is a value-added process that provides cow-calf enterprises access to a greater share of the retail dollar. There are costs and benefits to selling at weaning as well as costs and benefits when retaining ownership, each of which must be evaluated on an annual basis. Estimating expected returns is challenging in a normal year, and has been complicated in 2022 by drought, widespread culling, high feed costs, and increasing calf prices. Below is an analysis of the retained ownership decision using today’s market expectations.   

We can roughly estimate the expected revenue generated from the sale of a weaned calf today.  The average price of a 7-8 weight steer in Joplin, MO the last week of April ran $1.63 per pound, meaning a 750-pound steer calf brought $1,224.38.  So the question of retained ownership is how much additional revenue (value-added) over $1,224 can I expect from selling a fed calf, and what is the additional cost associated with the added value.

If we assume a current calf weight of 750 pounds for a 2021 spring-born calf, and an average daily gain (ADG) of 3.5 pounds, we can assume a target harvest date of mid-October at approximately 1,350 pounds. The board price for an October delivery fed steer last week averaged approximately $1.43 per pound. If we locked that price in today, a 1,350-pound steer would generate $1,930.50 in revenue.  Compared to selling today at $1,224, retaining ownership would generate an additional $706/head.  Now let’s look at the cost of achieving that additional $706. 

Cost of Gain (COG) is a function of days on feed, cost of feed, and pounds of feed per pound of gain. It is commonly estimated using corn price, so it is significantly higher this year than in recent years. The increased cost of corn has cost of gain in the neighborhood of $1.20 per pound to $1.50 per pound depending on the feeding location, including an approximate 33% markup for yardage fees, overhead, and miscellaneous expenses. Subtracting COG from the expected value-added ($706.12) leaves the bottom-line Expected Net Revenue change from making the retained ownership decision.  The table below shows the expected net revenue impact of retained ownership for various COG estimates ranging from $1.20 to $1.50 per pound of gain. 

Given the current COG and relative calf values retaining ownership through the feed yard seems to be a relatively less profitable choice against selling a weaned calf.  The market appears to value an additional 600 pounds of gain at a little over $700/hd while the cost of that gain could range from $720 to $900.

Benavidez, Justin. “Prospects for Retained Ownership in a High Input Cost Environment“. Southern Ag Today 2(20.3). May 11, 2022. Permalink

The Value of Proper Soil pH

The Value of Proper Soil pH

The increased cost of fertilizers has many users asking where fertility costs can be reduced.  Soil testing has long been recommended for farmers, ranchers, and homeowners to identify fertility levels and enable them to only purchase/apply that which is needed.  In addition to replacing the right amount of nutrients, it’s important to consider the conditions which make the most efficient use of existing and applied nutrients.  One component of a fertility program (and soil testing) that should not be overlooked is identifying and correcting low pH through the application of agricultural lime.  Agricultural lime is an investment that will leverage  high-cost fertilization by providing improved nutrient utilization in row crops, forages, and most other agricultural crops we grow in the S.E. United States. . 

Figure 1. How Soil pH Affects Availability of Plant Nutrients

Figure 1 shows the range of soil pH that provides that greatest plant utilization of the listed nutrients in the soil. If the soil pH is out of the target range, the nutrients aren’t utilized as efficiently. It should be noted that higher pH range may result in less utilization of some micronutrients.  It is important to know the major nutrient and micronutrient requirements of the selected crop or forage.

There are various materials that are used for liming, and they have different attributes. Check with your supplier about what liming materials are available. Many states have regulations or laws associated with the characteristics and efficiency of materials that can be marketed as agricultural lime. 

It typically takes one to two months after an application of a liming material before it becomes effective, so plan accordingly. 

Producers should check with their land grant university for soil testing related information.  

Runge, Max. “The Value of Proper Soil pH“. Southern Ag Today 2(19.3). Permalink

Extension Budgets and Budget Tools

Extension Budgets and Budget Tools

The Southern Ag Today team of editors and contributing authors are, for the most part, a group of Extension Agricultural Economics Faculty from the Southern Region Land-Grant University Systems.  Many of this same group are responsible for a decades-old tradition of publishing crop and livestock enterprise budgets in their respective states or regions.  Extension budgets are typically published early in the year before the growing season starts, and they serve a number of purposes.  The first is to simply provide examples of common practices used in region-specific enterprises, as well as to illustrate a possible set of revenue/costs expectations for the coming year.  Ag lenders sometimes rely on these budgets as benchmarks to compare loan applications and borrowers’ production plans.  Various state and federal agencies and other agricultural industry researchers may use these budgets to compare practices, costs, or expected yields across regions and over time.  However, most of us that contribute to creating Extension budgets would consider those as secondary benefits.  

Extension budgets are best used as a planning tool, and even better if you make them your own with the published budget serving as a guide.  To that end, many of our budget projects also offer downloadable spreadsheets and other tools to create your own budgets.  The pre-season budget planning process offers a number of management benefits, including the ability to:

  • compare potential profits of various enterprises or production plans and choose appropriate crop mixes.
  • assess cost of production and break-even prices/yields; which help develop marketing plans and select appropriate levels of insurance.
  • conduct sensitivity analyses on specific items.  For example, determining the impact of recent fertilizer price increases on expected net returns and evaluating potential production plan adjustments.  

Another benefit to a formal spreadsheet budget is the ability to do what I call active or continuous budgeting.  The idea being that the budget and the budgeting process does not end when the growing season starts.  As you progress through the production season, planned expenses become actual expenses while yield and price expectations are constantly changing.  Incorporating these in-season changes into your budgets as you go will keep you mindful of cashflow needs and will assist with ongoing production and marketing decisions.  The process will also sharpen your management skills and improve your pre-season production plans in future seasons.  

To find budget publications and resources in your area, click below for your state’s Land-Grant University Extension program.  

Alabama             https://www.aces.edu/blog/tag/profiles-and-budgets/?c=farm-management&orderby=title

Arkansas            https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

Florida  https://fred.ifas.ufl.edu/extension/commodityenterprise-budgets/

Georgia              https://agecon.uga.edu/extension/budgets.html

Kentucky            https://agecon.ca.uky.edu/budgets

Louisiana         https://www.lsuagcenter.com/portals/our_offices/departments/ag-economics-agribusiness/extension_outreach/budgets

Mississippi          https://www.agecon.msstate.edu/whatwedo/budgets.php

North Carolina   https://cals.ncsu.edu/are-extension/business-planning-and-operations/enterprise-budgets/

Oklahoma          http://www.agecon.okstate.edu/budgets/

South Carolina   https://www.clemson.edu/extension/agribusiness/enterprise-budget/index.html

Texas                  https://agecoext.tamu.edu/resources/crop-livestock-budgets/

Tennessee          https://arec.tennessee.edu/extension/budgets/

Klose, Steven. “Extension Budgets and Budget Tools“. Southern Ag Today 2(18.3). April 27, 2022. Permalink

Examining the Used Combine Market

Examining the Used Combine Market

Buying and selling equipment is an important aspect of row crop production. Combine purchasing and resale represent one of the largest decisions row crop operators must make. These decisions can impact the overall profitability of an operation. Used combine prices continue to rise as ongoing supply chain issues ripple through the economy. While rising costs are not limited to the pandemic era, it’s clear the lack of new combines, parts delays for older combines, increasing crop prices, and increasing fuel costs continue to be factors that impact equipment prices. 

Pre-pandemic data suggested that the average price of a combine by age sold at auction has a wider dispersion for newer combines and 2018 prices were lower than 2017. Further breakdowns of the data found little variation in average prices of older combines while finding a larger spread as the machine became newer. These averages can be seen in the graph below. With the use of auction data from Machinery Pete, factors that impact these prices are examined and used to help farmers make more informed decisions about buying machinery. Some factors are common knowledge to most farmers, such as higher prices for certain manufacturers, locations, machinery conditions, and precision equipment. The data suggest a year in age on a combine would decrease its value by just under 10%, while 1000 hours would decrease the value by around 2%.  Interestingly, we also found that the statistical connection between age and value was stronger (more important) than that of hours and value.  Presumably meaning that the market is less consistent in terms of discounts/premiums for hours used, while the age of the combine was more critical in determining value. 

As for the post-pandemic market, farmers looking to buy or sell used machinery should consider the following suggestions. When buying a combine, farmers can expect lower sales prices through consignment sales. While farmers selling used machines should list their combines through either on-farm sales or online sales. For farmers only willing to purchase certain brands or models, their searches will need to be extended beyond their local region, but expect an even higher price than in previous years. For farmers looking for potential machinery savings, consider a combine that is older than 3 years of age and be careful not to overpay for low hours. 

Source: Machinery Pete Auction Data of Combines Sold in the US and Canada between 2015 and 2018.

Data Link: Machinery Pete Auction Data

Ellis, Robert, and Tyler Mark. “Examining the Used Combine Market“. Southern Ag Today 2(17.3). April 20, 2022. Permalink

On-Farm Cost of Contracting High Path Avian Influenza in a Commercial Broiler Flock

On-Farm Cost of Contracting High Path Avian Influenza in a Commercial Broiler Flock

As high path avian influenza (HPAI) spreads rapidly across the U.S., the on-farm financial ramification of an infection in a commercial poultry flock can be catastrophic.  This article is a follow-up to the recent Southern Ag Today article posted on March 29th, 2022, titled “The Cost of Avian Influenza to the Southeastern Broiler Industry.”  That article highlights that as of March 21st, 2022, there were 11,901,888 commercial birds destroyed due to HPAI.  Fifteen days later, that number has nearly doubled (22,851,072 as of April 5th, 2022).  While the continued outbreaks of HPAI have been mainly in commercial turkey and layer flocks, commercial broiler flocks are not immune to outbreaks.  

Understanding the financial implications of contracting HPAI in a commercial broiler flock is critical and will hopefully highlight the importance of strict adherence to biosecurity measures. While the federal government provides financial aid to a grower for depopulation, cleaning and disinfecting, indemnity payments are only for the birds infected with HPAI.  It is important to note that the contract grower is not guaranteed 100% of the indemnity payment, as a portion can be distributed to the owner/integrator.  There is also no financial assistance provided for future loss of production while the contaminated area is cleared of the virus.  This timeframe could last more than 120 days and has lasting financial implications.  For example, the HPAI outbreak in a 12-house broiler operation in Kentucky in early February 2022 is not expected to receive new placements until August 2022.  A +120-day loss of operation could mean the producer loses income associated with 2-3 broiler flocks but still has the expenses of maintaining the facilities and making any payments on debts related to the operation.  With the lack of financial support from the federal government for future losses and no private insurance options, the farm-level financial impact of contracting HPAI is significant.  

We examined the financial impact of contracting HPAI in a standard four broiler house (43 ft. x 600 ft.) operation in Kentucky with 32,300 broilers per house, a 56-day grow-out period, and 17 days to clean between flocks.  The loss in net farm income from contracting HPAI was $46,512, $97,658, and $158,348 for the loss of one, two, and three flocks, respectively.  This loss in net farm income could also be interpreted as the on-farm equity required to self-insure the operation from HPAI.  Therefore, early adoption of biosecurity measures is imperative as a financial risk mitigation method for a disease outbreak like HPAI.  Producers should also consider how they would manage this type of risk, should they be forced to deal with it.  

References:

Brothers, Dennis. “The Cost of Avian Influenza to the Southeastern Broiler Industry”. Southern Ag Today. March 29, 2022. Available online: https://southernagtoday.uada.edu/the-cost-of-avian-influenza-to-the-southeastern-broiler-industry/

USDA-APHIS. “The HPAI Indemnity and Compensation Process”. Available online: https://www.aphis.usda.gov/publications/animal_health/2016/hpai-indemnity.pdf

Shockley, J.M., T. Mark, K. Burdine, and L. Russell.  “Financial Implications from Contracting Avian Influenza in a U.S. Broiler Operation”. Journal of Applied Farm Economics 3, no. 1 (Spring 2020). Available Online: https://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1034&context=jafe

Shockley, Jordan. “On-Farm Cost of Contracting High Path Avian Influenza in a Commercial Broiler Flock“. Southern Ag Today 2(16.3). April 13, 2022. Permalink