American Eggplant

UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION

2005

SAMPLE COSTS TO PRODUCE

EGGPLANT

AMERICAN EGGPLANT

SAN JOAQUIN VALLEY - South

Drip Irrigation

Prepared by:

Richard H. Molinar, UC Cooperative Extension Farm Advisor, Fresno County

Michael Yang, UC Agricultural Assistant, Fresno County

Karen M. Klonsky, UC Cooperative Extension Specialist, Department of Agricultural and Resource Economics, UC Davis

Richard L. De Moura, Staff Research Associate, Department of Agricultural and Resource Economics, UC Davis

UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION

SAMPLE COSTS TO PRODUCE

EGGPLANT

San Joaquin Valley - South 2005

STUDY CONTENTS

INTRODUCTION .......................................................... 2

ASSUMPTIONS ................................................. 3

Production Operating Costs ....................................................... 3

Cash Overhead ............................................................ 5

Non-Cash Overhead ......................................................... 5

REFERENCES .............................................................................. 7

Table 1. COSTS PER ACRE to PRODUCE EGGPLANT ....... ........................... 8

Table 2. COSTS AND RETURNS PER ACRE to PRODUCE EGGPLANT ... ........................ 9

Table 3. MONTHLY CASH COSTS PER ACRE to PRODUCE EGGPLANT .................................................... 10

Table 4. RANGING ANALYSIS .............................................. 11

Table 5. WHOLE FARM ANNUAL EQUIPMENT, INVESTMENT and OVERHEAD COSTS .......................... 12

Table 6. HOURLY EQUIPMENT COSTS ......................... 13

Table 7. OPERATIONS WITH EQUIPMENT ........................................ 14

INTRODUCTION

Sample costs to produce American eggplant in the San Joaquin Valley are shown in this study. The study is intended as a guide only, and can be used to make production decisions, determine potential returns, prepare budgets and evaluate production loans. The practices described are based on production operations considered typical for this crop and region, but will not apply to every farm. Sample costs for labor, materials, equipment and custom services are based on current figures. "Your Costs" columns in Tables 1 and 2 are provided for entering your farm costs.

The hypothetical farm operations, production practices, overhead, and calculations are described under the assumptions. For additional information or an explanation of the calculations used in the study call the Department of Agricultural and Resource Economics, University of California, Davis, California, (530) 752-3589 or the local UC Cooperative Extension office.

Sample Cost of Production Studies for many commodities can be downloaded at http://coststudies.ucdavis.edu, requested through the Department of Agricultural and Resource Economics, UC Davis, (530) 752-4424 or obtained from the local county UC Cooperative Extension offices.  Some archived studies are also available on the website.

The University of California does not discriminate in any of its policies, procedures or practices.  The university is an affirmative action/equal opportunity employer.

University of California and USDA, Risk Management Cooperating.

ASSUMPTIONS

The assumptions refer to Tables 1 to 7 and pertain to sample costs to produce American eggplant in the southern San Joaquin Valley.  The cultural practices described represent production operations and materials considered typical for a farm in the region.  Costs, materials, and practices in this study will not apply to all farms.  Timing of and types of cultural practices will vary among growers within the region and from season to season due to variables such as weather, soil, and insect and disease pressure. The use of trade names and cultural practices in this report does not constitute an endorsement or recommendation by the University of California nor is any criticism implied by omission of other similar products or cultural practices.

Farm.  This report is based on a 300 contiguous acre farm owned and managed by the grower. The farm is planted to assorted vegetable crops and field crops.  In this study 20 acres are planted to American eggplant.  Roads and buildings occupy approximately five acres. 

Production Operating Costs

Land Preparation.  The grower rips the land one time, discs two times, rolls the ground and lists the beds in February.  In a single operation after listing, the beds are shaped, and the black plastic mulch and drip tape laid.  Besides the tractor driver, two people follow the shaper to handle the plastic and drip tape.  Beds are fumigated for weed and soil borne pests through the dripline with metam sodium.

Plant.  The purchased eggplant seedlings are transplanted in the field in March.  The variety planted is Black Bell. The grower transplants on six 60-inch beds, leaving every seventh and eighth bed unplanted, 3,267 plants per acre at a two-foot in-row spacing.  Holes for the plants are punched in the plastic by a mechanical punch machine.  Rows with drip tape are 300-400 feet long from the header lay-flay main lines.  Ten people (50 man hours) plant one acre in five-hours.  To extend the harvest, the grower mows the plants back to about 18-inches in July and allows them to grow out again.

Irrigation.  Irrigation includes the water costs per irrigation and irrigation labor.  The drip line is buried approximately 2-inches deep in the center of the bed at bed shaping. Irrigation begins in late March after planting and the field is irrigated once a week during the season up to the week prior to the last harvest in October.  The crop uses approximately 36 acre-inches per season.  Three acre-inches are applied preplant with the metam sodium fumigation for a total of 39 acre-inches.  Irrigation labor is calculated as 0.05 hours per acre per irrigation. 

Fertilization.  An NPK fertilizer, 15-15-15, is broadcast at 500 pounds per acre prior to listing.  Beginning in April through the drip line, nitrogen (N) as UN32 is applied weekly at five pounds per acre in April during the vegetative stage, at 15 pounds per acre in May during flowering, and at 10 pounds per acre from June through September during fruit enlargement. 

Pest Management.  If insects or diseases appear, contract your local farm advisor or pest control adviser.  For information on pesticide use permits, contact the local county agricultural commissioner’s office.  Adjuvants are recommended for many pesticides for effective control, but are not included in this study.  Pesticide costs vary by location and grower volume.  Pesticides costs in this study are taken from a single dealer and shown as full retail.  

Weeds.  Mulch is laid on the bed prior to planting, in addition to conserving moisture and warming the soil, it controls weeds.  Metam sodium (Vapam) for weed/disease control is applied with water through the drip line prior to planting

Insects.  The field is sprayed 4 to 5 times for worms from June through August with Success, and/or Pounce. Lygus and aphids are treated with Pounce, Thiodan, or Vydate.  Whiteflies are controlled with Admire. Mites are treated with Trilogy, Vendex or Vydate.  In this study, Pounce is applied in June for worm, aphid, and lygus control.  Success for worms and Vendex for mites is applied in early July.  A second spray is applied in July with Pounce for worms, aphid, and lygus, and Vydate for mites.  Two worm control applications are made in August, one with Success and one with Pounce.  The grower makes the spray applications.  Admire is applied through the drip line in August for whitefly control.  Insect pressure will vary between years and not all insecticide operations will be needed every year, but also in some years, additional applications may be necessary.

Diseases.  Verticillium wilt can be a problem if the ground is not fumigated or solarized.  Metam sodium (Vapam) is applied through the drip line prior to planting.

Cleanup.  After harvest the plants are mowed, the plastic mulch, and drip tape removed and discarded by hauling to the landfill.  Landfill fees are based on the weight of the discarded material.

Pickup.  Costs for a 1/2-ton pickup are included in the study.  The pickup is used by the grower to inspect the fields and general ranch business.  The calculations in the study do not represent results from any collected data.

Harvest.  The crop is harvested an average of twice a week from June to mid-October, except for a three week non-harvest period after the plants are cut back in mid-July.   The crop is hand harvested and the fruit is packed in the field.  A self propelled packer (12 rows wide) travels down the unplanted beds.  The harvest crew consists of the driver for the packer unit, 12 cutters that cut the stems on the plants and pick the eggplant, and 4 packers on the packing unit.  In addition a forklift and truck, each with operators, load and transport the boxes to the growers storage. 

Yields.  The eggplants are picked and sold by size, 18 or 24 eggplants per box averaging approximately 20 pounds per box.  The crop yields an average of 1.5 twenty-pound boxes per plant or 2,450 boxes per acre. 

Returns.  Based on county crop reports and 70% of the June to October 2004 USDA wholesale prices, the overall grower returns are estimated at $6 to $7 per box.

Labor. Labor rates of $12.42 per hour for machine operators and $9.32 for general labor includes payroll overhead of 38%. The basic hourly wages are $9.00 for machine operators and $6.75 for general labor.  The overhead includes the employers’ share of federal and California state payroll taxes, workers' compensation insurance for truck crops (code 0172), and a percentage for other possible benefits. Workers’ compensation costs will vary among growers, but for this study the cost is based upon the average industry final rate as of January 1, 2005 (California Department of Insurance). Labor for operations involving machinery are 20% higher than the operation time given in Table 1 to account for the extra labor involved in equipment set up, moving, maintenance, work breaks, and field repair.

Equipment Operating Costs.  Repair costs are based on purchase price, annual hours of use, total hours of life, and repair coefficients formulated by American Society of Agricultural Engineers (ASAE).  Fuel and lubrication costs are also determined by ASAE equations based on maximum power takeoff (PTO) horsepower, and fuel type.  Prices for on-farm delivery of diesel and gasoline are $1.51 and $2.05 per gallon, respectively.  The cost includes a 2% local sales tax on diesel fuel and 8% sales tax on gasoline.  Gasoline also includes federal and state excise tax, which are refundable for on-farm use when filing your income tax.  The fuel, lube, and repair cost per acre for each operation in Table 1 is determined by multiplying the total hourly operating cost in Table 6 for each piece of equipment used for the selected operation by the hours per acre.  Tractor time is 10% higher than implement time for a given operation to account for setup, travel and down time.

Interest On Operating Capital.  Interest on operating capital is based on cash operating costs and is calculated monthly until harvest at a nominal rate of 7.65% per year.  A nominal interest rate is the typical market cost of borrowed funds.  The interest cost of post harvest operations is discounted back to the last harvest month using a negative interest charge.

Risk. Production risks should not be minimized. While this study makes every effort to model a production system based on typical, real world practices, it cannot fully represent financial, agronomic and market risks, which affect the profitability and economic viability.

Cash Overhead

Cash overhead consists of various cash expenses paid out during the year that are assigned to the whole farm and not to a particular operation.  These costs include property taxes, interest on operating capital, office expense, liability and property insurance, and investment repairs.

Property Taxes.  Counties charge a base property tax rate of 1% on the assessed value of the property.  In some counties special assessment districts exist and charge additional taxes on property including equipment, buildings, and improvements.  For this study, county taxes are calculated as 1% of the average value of the property.  Average value equals new cost plus salvage value divided by 2 on a per acre basis. 

Insurance.  Insurance for farm investments varies depending on the assets included and the amount of coverage.  Property insurance provides coverage for property loss and is charged at 0.69% of the average value of the assets over their useful life.  Liability insurance covers accidents on the farm and costs $836 for the entire farm.

Office Expense.  Office and business expenses are estimated at $30 per acre.  These expenses include office supplies, telephones, bookkeeping, accounting, and legal fees.  The cost is a general estimate and not based on any actual data.

Investment Repairs.  Annual maintenance is calculated as two percent of the purchase price.

Non-Cash Overhead

Non-cash overhead is calculated as the capital recovery cost for equipment and other farm investments. 

Capital Recovery Costs.  Capital recovery cost is the annual depreciation and interest costs for a capital investment.  It is the amount of money required each year to recover the difference between the purchase price and salvage value (unrecovered capital).  It is equivalent to the annual payment on a loan for the investment with the down payment equal to the discounted salvage value.  This is a more complex method of calculating ownership costs than straight-line depreciation and opportunity costs, but more accurately represents the annual costs of ownership because it takes the time value of money into account (Boehlje and Eidman).  The formula for the calculation of the annual capital recovery costs is ((Purchase Price – Salvage Value) x Capital Recovery Factor) + (Salvage Value x Interest Rate).

Salvage Value.  Salvage value is an estimate of the remaining value of an investment at the end of its useful life.  For farm machinery (tractors and implements) the remaining value is a percentage of the new cost of the investment (Boehlje and Eidman).  The percent remaining value is calculated from equations developed by the American Society of Agricultural Engineers (ASAE) based on equipment type and years of life.  The life in years is estimated by dividing the wear out life, as given by ASAE by the annual hours of use in this operation.  For other investments including irrigation systems, buildings, and miscellaneous equipment, the value at the end of its useful life is zero. The salvage value for land is the purchase price because land does not depreciate.  The purchase price and salvage value for equipment and investments are shown in the tables.

Capital Recovery Factor.  Capital recovery factor is the amortization factor or annual payment whose present value at compound interest is 1.  The amortization factor is a table value that corresponds to the interest rate used and the life of the machine. 

Interest Rate.  The interest rate of 6.01% used to calculate capital recovery cost is the USDA-ERSs ten-year average of California’s agricultural sector long-run rate of return to production assets from current income.  It is used to reflect the long-term realized rate of return to these specialized resources that can only be used effectively in the agricultural sector. 

Building.  The metal building(s) are on a cement slab and total approximately 2,400 square feet.  The buildings are used for shops and/or storage.

Land.  Cropland in the region ranges from $1,500 per acre to $5,500 per acre.  Land values are affected by location in the county and water availability.  Land in this study is valued at $3,500 per acre and is assumed to receive surface or district water.

Tools.  This includes shop tools, hand tools, and miscellaneous field tools.  The tools are an estimated value and not taken from any specific data. 

Irrigation/Laterals.  The grower purchases drip tape for the beds annually and owns the lateral lines (vinyl flat pipe) that connect to the drip tape.  The rows are assumed to be 400 feet long and require 2,178 feet of lateral lines for the 20 acres.

Irrigation System.   Water is purchased from the local water district.  The irrigation system consists of a booster pump, filters, and chemigation equipment.  The cost is estimated and not based on any specific system.

Equipment.  Farm equipment is purchased new or used, but the study shows the current purchase price for new equipment.  The new purchase price is adjusted to 60% to indicate a mix of new and used equipment.  Annual ownership costs for equipment and other investments are shown in the Whole Farm Annual Equipment, Investment, and Business Overhead Costs table.  Equipment costs are composed of three parts: non-cash overhead, cash overhead, and operating costs.  Both of the overhead factors have been discussed in previous sections.  The operating costs consist of repairs, fuel, and lubrication and are discussed under operating costs.

Table Values.  Due to rounding, the totals may be slightly different from the sum of the components.

REFERENCES

Agricultural Commissioner. Crop Reports 2004.  Agricultural Commissioner, Fresno County, Fresno, CA.

Aguiar, Jose, Richard Molinar, and Jesus Valencia.  1998. Eggplant Production in California.  University of California, Division of Agriculture and Natural Resources.  Publication 7235.

American Society of Agricultural Engineers. 1994. American Society of Agricultural Engineers Standards Yearbook. Russell H. Hahn and Evelyn E. Rosentreter (ed.) St. Joseph, Missouri. 41st edition.

Barker, Doug. 2005. California Workers’ Compensation Rating Data for Selected Agricultural Classifications as of January 1, 2005. California Department of Insurance, Rate Regulation Branch.

Boelje, Michael D., and Vernon R. Eidman.  1984. Farm Management. John Wiley and Sons. New York, New York

California Chapter of the American Society of Farm Managers and Rural Appraisers.  2005. Trends in Agricultural Land and Lease Values.  California Chapter of the American Society of Farm Managers and Rural Appraisers, Inc.  Woodbridge, CA.

California State Automobile Association. 2005. Gas Price Survey 2003. AAA Public Affairs, San Francisco,

USDA-ERS. 2005. Farm Sector: Farm Financial Ratios. Agriculture and Rural Economics Division, ERS. USDA. Washington, DC http://www.ers.usda.gov/data/farmbalancesheet/fbsdmu.htm; Internet accessed January 5, 2005.

For information concerning University of California publications contact UC DANR Communications Services (1-800-994-8849), online at http://anrcatalog.ucdavis.edu or your local county Cooperative Extension office.