UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION

SAMPLE COSTS TO PRODUCE

GREEN BEANS

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 GREEN BEANS ............................ 8

Table 2. COSTS AND RETURNS PER ACRE to PRODUCE GREEN BEANS .................................................... 9

Table 3. MONTHLY CASH COSTS PER ACRE to PRODUCE GREEN BEANS .............................................. 10

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

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

Table 6. HOURLY EQUIPMENT COSTS ................................ 12

Table 7. OPERATIONS WITH EQUIPMENT......................................... 13

INTRODUCTION

Sample costs to produce green beans 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 green beans 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 60 contiguous acre farm. The land is rented and farmed by the grower.  In this study 20 acres are planted to green beans and the remaining acres to other vegetables. 

Production Operating Costs

Land Preparation.  A custom operator rips the land, once every seven years and one-seventh of the cost is included each year.  The grower discs two times, rolls the ground and lists the beds in February.  In a single operation after listing, the beds are shaped, and the drip tape lain.  Besides the tractor driver, two people follow the shaper to handle the drip tape.

Plant.  In this study a bush green bean variety such as Jade, Savannah, Strike, or Benchmark, is planted.  The beans are planted at 80 pounds per acre, two lines (rows) per 38-inch bed at six to eight seeds per foot.  There are approximately 2,000 seeds per pound.  The seed is planted in early March with a tractor and precision planter or Planet Junior.  The beans may also be planted as a fall crop in August.

Irrigation.  Irrigation includes the water costs per irrigation and irrigation labor.  The crop in this study is drip irrigated.  The drip line is buried two to three inches in the center of the bed at bed shaping.  Trenches are made at the top edge of the field with the grower’s equipment; the laterals are laid by hand in the trenches and covered with a tractor and blade, and the drip line connected. The field is preirrigated prior to planting and then irrigated weekly, beginning after planting, through the first week of May when harvest begins.  Water costs were provided from the growers’ summer pumping charges and converted to acre-inches.  Three acre-inches are applied during the preirrigation and 30 acre-inches during the growing season.  Rainfall is not taken into account in this study, but can affect the number of irrigations and amount of water applied.  Irrigation labor is calculated as one-half hour per acre per irrigation. 

Fertilization.  The crop is fertilized prior to planting by broadcasting 15-15-15 fertilizer on the beds at 500 pounds per acre.  CAN 17 is applied once a week beginning with first bloom in April (4 applications) and in May (one application) at 18 pounds of nitrogen (N) per application for a total of 90 pounds of N.

Pest Management.  The pesticides and rates mentioned in this cost study are listed in UC Integrated Pest Management, Beans. For more information on other pesticides available, pest identification, monitoring, and management visit the above UC IPM website at www.ipm.ucdavis.edu or contact your local farm advisor or pest control adviser.  Adjuvants are recommended for many pesticides for effective control, but are not included in this study.  Pesticide costs in this study are take from a single dealer and shown as full retail.

Weeds.  The field is cultivated once in March and once in April. 

Insects.  Dipel insecticide (Bt) is applied in May for worm control.  For fall plantings, the field may need to be sprayed one to two times for aphids and/or whiteflies.  The materials are applied with the grower’s equipment.

Diseases.  No diseases treated.

Pickup/ATV.  Costs for a 1/2-ton pickup is included in the study.  The grower drives 250 miles per acre for farming purposes.  The miles driven is assumed and not taken from any specific data.  Grower miles vary by farm size and location, and by crops grown.

Harvest.  The crop is hand harvested in May/June by a labor crew for $4 per box. A truck driver and one stacker haul the picked beans to the packinghouse. In this study, the field is harvested as a single picking.  Sometimes there may be several hand pickings.  Growers with an August planted crop will harvest in October/November.

Yields.  The crop yields an average of 340 thirty-pound boxes (10,200 pounds) per acre.  A range of yields over various returns is shown in Table 4.

Returns.  Returns to growers of $11 per 30-pound box are calculated as 70% of the USDA average wholesale prices for May and June 2004.  October/November average returns for round green type beans are approximately $31 per box.  The returns are used in the Ranging Analysis Table to calculate a range of returns over various yields.

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 0.69% of the average value of the assets over their useful life.  Liability insurance covers accidents on the farm and costs $529 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.

Land Rent. The 60 acres are rented for cash at $300 per acre.  The rented land includes the irrigation system that is maintained by the landlord.  The landlord pays the property taxes.  Land rents range from $250 to $350 per acre.

Investment Repairs.  Annual maintenance except 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 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/Laterals.  The landlord maintains the irrigation system.  The grower purchases drip tape for the beds annually and owns the lateral lines that connect to the drip tape.  The field is assumed to be one-quarter mile long and require 660 feet of lateral lines.

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, Franklin Laemmien, Aziz Baameur, and Keith S. Mayberry. 1999. Snap Bean Production in California. University of California, Division of Agriculture and Natural Resources. Davis, CA. Publication 7240.

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,

California State Board of Equalization.  Fuel Tax Division Tax Rates. Internet accessed January 2005. http://www.boe.ca.gov/sptaxprog/spftdrates.htm. 

Energy Information Administration. 2004. Weekly Retail on Highway Diesel Prices.  Internet accessed January 2005.  http://tonto.eis.doe.gov/oog/info/wohdp.  

United States Department of Agriculture-Economic Reporting Service.  Farm Financial Ratios Indicating Solvency and Profitability 1960 – 02, California.  2002.  Internet; accessed January 4, 2005.  www.ers.usda.gov/data/farmbalancesheet/fbsdmu.htm   

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.