Oriental Eggplant

UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION

2005

SAMPLE COSTS TO PRODUCE

ORIENTAL EGGPLANT

SAN JOAQUIN VALLEY - SOUTH

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

ORIENTAL EGGPLANT

San Joaquin Valley - South 2005

STUDY CONTENTS

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

ASSUMPTIONS ........................….................................................. 3

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

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

  Non-Cash Overhead .......................................................... 6

REFERENCES ....................................................... 8

Table 1. COSTS PER ACRE to PRODUCE ORIENTAL EGGPLANT .. ................................. 9

Table 2. COSTS AND RETURNS PER ACRE to PRODUCE ORIENTAL EGGPLANT .................................... 10

Table 3. MONTHLY CASH COSTS PER ACRE to PRODUCE ORIENTAL EGGPLANT ................................ 11

Table 4. RANGING ANALYSIS ......................................................... 12

Table 5. WHOLE FARM ANNUAL EQUIPMENT, INVESTMENT and OVERHEAD COSTS .......................... 13

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

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

INTRODUCTION

Sample costs to produce oriental 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 oriental eggplant in the San Joaquin Valley.  The cultural practices described represent production operations and materials considered typical for a small 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 study is intended as a guide only.  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 hypothetical 10 contiguous acre farm. The land is rented and planted to Asian vegetables.  Two acres are planted to oriental eggplant and the remaining acres to other Asian vegetables.  The grower and family do the majority of the labor for the operations, but a labor cost (opportunity cost) is shown for each operation.

Production Operating Costs

Land Preparation.  In January, a custom operator plows the land one time, discs two times and lists the beds.  After listing, the bed peaks are flattened using the grower’s tractor and a nine-foot pipe (3 rows) towed behind the tractor.   Black plastic is then laid by hand (2 persons) on alternate beds.

Plant.  The purchased oriental eggplant seedlings (transplants) are planted in the field in February.  The grower plants on 36-inch beds, alternate beds, 2,420 plants per acre at a three-foot in-row spacing.  Holes for the plants are burned or punched in the plastic on the bed as the planter plants.  Rows are usually 250 to 300 feet long.  Two people (16 man hours) plant one acre per day.  Some growers grow their own seedlings or transplants by planting the seed in their greenhouse in November.  Growers who grow their own seedlings, will plant seed saved from their crop and most likely purchase virus free seed in alternate years.

Irrigation.  Irrigation includes the water costs and irrigation labor.  Lay flat vinyl pipe is laid at the end of the rows or furrows where the water is run down the furrows. Irrigation begins in March two to three days after planting.  The field is irrigated twice a week from March through September.  Water at $2.50 per irrigation is assumed to be a typical cost. Water costs were provided from the growers pumping charges for the summer months.  Assuming the crop uses 30 acres-inches per season, this equates to a cost of $4.83 per acre-inch.  Irrigation labor is calculated as one-half hour per acre per irrigation. 

Fertilization.  At planting 15-15-15 fertilizer at 75 pounds per acre is banded along the plants.  The fertilizer is applied by hand alongside the plants by making a hole near the plant with a hoe and dropping in the fertilizer.  The 15-15-15 is also sidedressed twice in March and once in April at 75 pounds per acre each time (every 15 days until flowering).  The fertilizer is applied by hand at the edge of the bed or plastic and irrigated in.

Crop Protection.  The grower builds tunnels over the new transplants (February transplants).  Wire-hoops (reusable) are spaced down the row every six-feet.  Three-foot wide plastic is laid over each side of the hoop and attached to each other with a clothespin at the top or stapled.  They are opened as needed to allow the plants to grow through.  It takes one person per acre per day to set out the hoops and two persons per acre per day to stretch the plastic over the hoops.  The tunnels are removed in mid-May and it takes two-hours per acre with two persons.  If the plants are set out later in March or a second planting made in May, tunnels are not necessary and should be subtracted from the cultural costs to establish the planting costs.

 Support System.  In June, five-foot stakes are pounded in the ground at 10-foot down-the-row spacing; nylon twine is attached to the stakes (reusable) on each side of the plant to support the plants.  It takes two persons a day per acre to pound the stakes. Soon after staking, the twine is attached to the stakes to form a trellis or support system to hold the plants up in the air.  Some growers will make two to three additional passes during the season attaching each twine higher on the stake than the previous stringing; the costs are not accounted for in this study.  It takes two people two-hours per acre to pull the twine each time.  The support system is removed at the end-of-the season.  See Field Cleanup below. 

Pruning.  The leaves are thinned two to three times during the season to improve fruit color and increase yield.  In this study, contract labor thins the leaves in April and July at $10 per row per pass.  The plants are assumed to be planted on alternate 250-foot rows or 29 passes or planted rows per acre.

Pest Management.  If insects or diseases appear, contract your local farm advisor or pest control adviser.

Weeds.  The furrows are hand sprayed with Roundup using a backpack sprayer in April or May and in August.  The plastic mulch laid on the beds prior to planting provides weed control on the beds.

Insects.  The field is hand sprayed in June with Vydate and/or Asana for worms and lygus bugs.  Vydate or Vendex for mites is applied by hand in July.  The grower uses a backpack sprayer and proper protective gear.

Diseases. None

Field Cleanup.  In November after the last harvest the support (stakes, twine) and the plastic mulch are removed.  Non-reusable materials are discarded by hauling to the local landfill.  It takes three persons one day per acre (24 man-hours) to remove the materials.

Pickup/Trailer. Costs for a 1/2-ton pickup are included in the study.  The pickup and the trailer are used for hauling the harvested oriental eggplant to the packing shed and the costs are included in that operation.  The pickup and trailer are also used to haul the discarded tunnels and the mulch from the field cleanup to the landfill.  The costs are included in each of those operations.  In addition, the grower drives another 250 miles per acre for farming purposes.

Harvest.  The crop is harvested once a week during July and twice a week from August through October.  The stems on the fruit are cut with a sharp knife rather than being pulled from the plant and placed in the packing box.  Picking time ranges from 30 to 45 minutes per 250-foot row or 14.5 to 21.75 hours per acre per picking.  Although yields will affect picking rates, for this study each picking is assumed to take 20 hours per acre.  The grower delivers the harvested product to a farmers market, packinghouse, or is picked up by a cash buyer.  The delivery time/miles are estimated and included in the hauling costs.

Yields.  The crop yields an average of 2,100 thirty-pound boxes per acre.  In this study the grower harvest 200 boxes in July, 700 boxes each in August and September, and 500 boxes in October.

Returns.  Based on grower and USDA Market reports grower’s overall returns are estimated at $7 to $8 per box.  The prices are used to show a range of returns over various yields in the Ranging Analysis Table.

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 Take Off (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 0.690% of the average value of the assets over their useful life.  Liability insurance covers accidents on the farm and costs $429 for the entire farm.

Office Expense.  Office and business expenses are estimated at $10 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.

Land Rent. The 10 acres are rented for cash at $300 per acre.  The rented land includes the irrigation system that is maintained by the landlord.  The owner also pays the land property taxes. Land rents range from $250 to $350 per acre.

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-ERS’s 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. 

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.  The grower owns 1,732 feet of vinyl flat pipe to deliver the water to the furrows.  The pipe was purchased for the farm and the cost is allocated among the various crops.

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

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.

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

California State Automobile Association. 2005. Gas Price Survey 2004. 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.

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