Sustainable Practices for Vegetable Production in the South - Dr. Mary Peet, NCSU

Appendix 3. Economics

While most state Cooperative Extension programs put out sample cost estimates for vegetable crops produced conventionally, economic information is not readily available for sustainable production practices. The following information was produced by the U niversity of California Cooperative Extension and is part of the publication "Production practices and sample costs for a diversified organic vegetable operation in the Central Coast". This is not meant to provide costs for production in the South, but rather to serve as a guideline in producing such information based on the farmer's specific situation.

Green bell peppers will be used to illustrate how costs are calculated. This study was based on intensive interviews with Central Coast organic growers, Extension specialists, organic market specialists and California Certified Organic Farmers personnel. Yields per acre ranged from 600 to 1,200 28-pound boxes. Returns per acre ranged from a low of $4 per box to a high of $14 per box. The tables below make the following assumptions:

1. Farm size is 115 acres of which 45 acres are used to produce two vegetable crops per year. Crops are irrigated by sprinkler or furrow irrigation with water from underground wells.
2. Production practices followed the guidelines of the California Certified Organic Farmers.
3. Produce is marketed through local organic produce brokers.
4. Wages for workers are $6.50 per hour for machine operators and $6.15 per hour for field workers, respectively. Labor rates shown include 34 percent addition for SDI, FICA, insurance and other benefits. Wages for managers are not included as a cash c ost.
5. Business overhead includes 1 percent county taxes, investment insurance of 0.5 percent, liability insurance, sanitation services, office and business costs (estimated to be $85 per acre).
6. Interest on operating capital is 9 percent per year. Interest on investment is 4 percent per year.

Appendix Table 3.1. Costs per acre to produce organic peppers (green bell) - operations, Central Coast, CA 1992-1993

Labor rate:     $8.71/hr. machine labor         Interest Rate:  9.00%
                        $8.24/hr. non-machine labor             Yield per acre:  800 28 lb boxes

        Operation       
        Time    Labor   Fuel &  Material        Custom/ Total 
        (hrs/A) Cost    Repairs Cost    Rent    Cost
Cultural
Disc 4X 1.03    10.77   6.32    0.00    0.00    17.08   
Chisel 2X       1.00    10.45   5.44    0.00    0.00    15.89
Compost application     0.00    0.00    0.00    212.40  24.00   236.40
List beds       0.75    7.84    3.21    0.00    0.00    11.05
Preirrigate     1.40    11.54   0.00    16.10   0.00    27.64
Preplant cultivation    0.20    2.09    1.17    0.00    0.00    3.26
Shape beds      0.25    2.61    1.37    0.00    0.00    3.98
Transplant peppers      3.00    31.36   19.18   600.00  0.00    650.53
Transplant/Non-machine labor    20.00   164.80  0.00    0.00    164.80
Irrigate        12.60   103.82  0.00    110.40  0.00    214.22
Cultivate 4X    2.00    20.90   10.14   0.00    0.00    31.05
Hand weed       18.00   148.32  0.00    0.00    0.00    148.32
Rodent control (trap)   2.00    16.48   0.00    0.00    0.00    16.48
Pickup use      1.75    18.29   8.94    0.00    0.00    27.23

Total cultural costs    63.98   549.27  55.77   938.90  24.00   1567.94

Harvest
Field harvest/
  non-machine labor     160.00  1318.40 0.00    0.00    0.00    1318.40
Grade/size & pack peppers       160.00  1318.40 0.00    880.00  0.00    2198.40
Equipment use   0.40    4.18    2.24    0.00    0.00    6.42
Transport to broker     1.75    84.21   15.20   0.00    0.00    99.41

Total market costs      322.15  2725.19 17.44   880.00  0.00    3622.63

Assessments
CA state 
  organic registration fees     0.00    0.00    0.00    6.25    0.00    6.25
CCOF inspection fees    0.00    0.00    0.00    0.78    0.00    0.78
CCOF membership fees    0.00    0.00    0.00    0.78    0.00    0.78
CCOF .5% of gross sales 0.00    0.00    0.00    32.00   0.00    32.00

Total assessment costs  0.00    0.00    0.00    39.81   0.00    39.81

Interest on operating capital @ 9.00%                                   105.33

Total operating costs/acre              3274.46 73.21   1858.71 24.00   5335.72
Total operating costs/box                                               6.67

Cash overhead
Land rent                                               359.38
Office expense                                          61.09
Liability insurance                                             1.88
Sanitation services                                             6.19
Property taxes                                          11.87
Property insurance                                              5.93
Investment repairs                                              6.25

Total cash overhead costs                                               452.58

Total cash costs/acre                                           5788.30
Total cash costs/box                                            7.24

Non-cash overhead
                Per producing                -----Annual Cost---------
        Investment      acre    Depreciation    Interest @ 4.00%
Buildings       62.50   1.88    1.38    3.25
Fuel tanks & pumps      50.63   2.28    1.11    3.39
Shop tools      68.75   4.13    1.51    5.64
Tool carrier    76.25   3.43    1.68    5.11
Irrigation pipe 185.63  16.71   4.08    20.79
Harvest bins    117.50  10.57   2.58    13.16
Irrigation pipe trailers        6.25    0.28    0.14    0.42
Cover crop      20.35   18.31   0.45    18.76
Equipment       1569.61 136.76  34.53   171.29

Total non-cash overhead costs   2157.46 194.35  47.46   241.81

Total costs/acre                                6030.11
Total costs/box                         7.54


Appendix Table 3.2.  Detail of costs per acre to produce organic peppers (green bell) - inputs
Central Coast, CA  1992-93

Soil amendments:
Compost w/gypsum        6.00    ton     35.40   212.40
Custom: Spread compost  6.00    ton     4.00    24.00
Water Pumped    27.50   acin    4.60    126.50
Transplant Peppers      20.00   thou    30.00   600.00
Packing materials Box   800     box     1.10    880.00
Assessments
  CA St. Org. Reg. Fees 1.00    acre    6.25    6.25
CCOF Insp. Fees 1.00    acre    0.78    0.78
CCOF membership fees    1.00    acre    0.78    0.78
CCOF 5% of gross sales  1.00    acre    32.00   32.00
Labor (machine) 10.36   hrs     8.71    126.78
Labor (non-machine)     382.00  hrs     8.24    3147.68
Fuel - gas      11.66   gal     0.98    11.43
Fuel - diesel   32.81   gal     0.71    23.29
Lube                            5.22
Machinery repair                                33.21
Interest on operating capital @ 9.00%                           105.33

Total operating costs/acre                              5335.72
Total operating costs/box                               6.67

Cash overhead costs
Land rent                               359.38
Office expense                          61.09
Liability insurance                             1.88
Sanitation services                             6.19
Property taxes                          11.87
Property insurance                              5.93
Investment repairs                              6.25

Total cash overhead costs/acre                          452.58

Total cash costs/acre                           5788.30
Total cash costs/box                            7.24



Non-cash overhead costs (depreciation & interest)
Buildings                               3.25
Fuel tanks & pumps                              3.39
Shop tools                              5.64
Tool carrier                            5.11
Irrigation pipe                         20.79
Harvest bins                            13.16
Irrigation pipe trailers                                0.42
Cover crop                              18.76
Equipment                               171.29

Total non-cash overhead costs/acre                              241.81

Total costs/acre                                6030.11
Total costs/box                         7.54

Additional Resources:

University of California Available Cost and Return Studies.

Michigan State University Enterprise Budgets

Last Modified: Wednesday, December 4, 2002 11:08 AM