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Economics of Alfalfa Rotations

Economics of Alfalfa Rotations. Ken Barnett UW-Extension January 26, 2005. Alfalfa is a major profit center on most dairy farms. Annual yield has the largest impact on its profitability. As the stand ages, the yield declines due to environmental stresses, wheel traffic, and diseases.

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Economics of Alfalfa Rotations

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  1. Economics of Alfalfa Rotations Ken Barnett UW-Extension January 26, 2005

  2. Alfalfa is a major profit center on most dairy farms. • Annual yield has the largest impact on its profitability.

  3. As the stand ages, the yield declines due to environmental stresses, wheel traffic, and diseases. • Alfalfa yield decline with advancing age means that farmers should consider turning over stands faster to stay in a high yield range.

  4. This presentation will shed some light on the factors that affect the economics of production and the profit from producing corn silage and alfalfa in rotations of various years. • The economic analysis was prepared using the Agriculture Budget Calculation Software (ABCS).

  5. This program allows the user to enter the tasks involved in the production along with the inputs required by each task. Example, the corn-planting task requires the inputs of corn seed and starter fertilizer.

  6. The ABCS program calculates the costs associated with using tractors and implements. The costs calculated are: energy, labor, repairs, ownership interest cost, and a depreciation charge.

  7. The economic analysis required the creation of seven enterprise budgets. They were: • an alfalfa establishment budget • an alfalfa hay budget for the first year following establishment • an alfalfa hay budget for the second year following establishment

  8. an alfalfa hay budget for the third year following establishment • an alfalfa hay budget for the fourth year following establishment • a corn silage budget for the year following the plowdown of the hay • a corn silage budget for the corn after corn year(s)

  9. The ABCS program has a feature that calculates whole farm incomes and costs based on enterprise budgets. • The acreage selected was 210 crop acres, sufficient to support 60 – 75 dairy cows.

  10. Six rotations (whole farm budgets) were studied within the 210 acre constraint. • The rotation shorthand used the notation of "E" for the alfalfa establishment year, "A" for the alfalfa hay year(s), and "C" for the corn silage year(s).

  11. The 6 rotations selected were: • EAAAACCC (8-year) • EAAAACC (7-year) • EAAACC (6-year) • EAACC (5-year) • EAAC (4-year) • EAC (3-year)

  12. The base prices were -- • oatlage - $71.50/ton of dry matter (tdm) • corn silage - $57.60/tdm • hay - $114.94/tdm • haylage - $114.94/tdm

  13. The base yields were -- • establishment crop, 2.0 tdm oatlage and 1.0 tdm haylage • hay crop, 4.25 tdm (decreasing 0.5 tdm each year as the stand aged) • corn crop, 5.0 tdm (10 percent larger in the year following plowdown)

  14. Income, Costs, and Profit ($) per Acre for Selected Rotations The 4-year rotation is the most profitable. The 3-year rotation is the least profitable.

  15. The 4-year rotation of EAAC was the most profitable. • The 3-year rotation of EAC was the least profitable, followed by the 5-year rotation of EAACC and 8-year rotation of EAAAACCC. • The 6-, and 7-year rotations were relatively close, profit wise.

  16. Tons of Dry Mater Production and Acres in each Crop per Year by Selected Rotations From 825 tdm/A for EAAAACC to 903 tdm/A for EAACC produced per year.

  17. Rotation EAAC (the most profitable) Percent Return on Assets by Alternative Methods of Valuing Land and Equipment The equipment complement selected had a new value of $689,234 with $456,458 cost basis value remaining.

  18. Rotation EAC (the least profitable) Percent Return on Assets by Alternative Methods of Valuing Land and Equipment

  19. When calculated as relative measure, the return to assets for the most profitable rotation is over 38 percent higher that the return to assets in the least profitable rotation.

  20. Profit per Acre ($) for Selected Rotations by Selected Starting Hay Yield and Rate of Yield Decline The 4-year rotation is the most profitable. The 3- and 8-year rotations are the least profitable.

  21. Profit per Acre for Selected Rotations by Selected Differences Between the Base Corn Silage Price and Changing Hay Prices The 4-year rotation is the most profitable. The 3- and 8-year rotations are the least profitable.

  22. Conclusions and Summary • The 4-year rotation (EAAC) was the most profitable at $91.91 per acre using the base values. • The 4-year rotation continued to be the most profitable for all of the changes in the base hay yield and rate of decline in the base hay yield as the stand aged.

  23. The 4-year rotation was the most profitable for all of the price differences, between corn silage and hay, considered. • The amount of profit per acre for all rotations increased substantially as the price difference between corn silage and hay increased.

  24. Rapid declines in the base hay yields per acre (1.0 tdm) cause the 8-year rotation to be less profitable than the 3-year rotation.

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