By
Etaferahu Takele, Area Farm Advisor, Farm Management Economics, Southern Region
Jose Aguiar, Farm Advisor, Vegetable Crops and Small Farms, Riverside County
Delos Walton, Staff Research Associate, Farm Management Economics, Southern Region
Detailed costs to produce loose leaf lettuce in Coachella Valley, Riverside County, California are presented in this study. The hypothetical farm used in this report consists of 1200 acres of which 300 acres are in lettuce production.
We base this study on assumption of production practices and costs that are considered typical for loose leaf lettuce production in the Coachella Valley of Riverside County. These production practices and costs are an amalgamation of costs and practices in the region. They do not reflect the exact values or practices of any grower or shipper. Sample costs given for labor, materials, equipment and contract services are based on 1996 prices. The use of trade names 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. This study is intended as a guide, it can be used in making production decisions, determining potential returns, preparing budgets and evaluating production loans.
Costs are presented in six tables:
Table 1. Costs Per Acre To Produce Loose Leaf Lettuce
Table 2. Costs And Returns Per Acre To Produce Loose Leaf Lettuce
Table 3. Monthly Cash Costs Per Acre To Produce Loose Leaf Lettuce
Table 4. Whole Farm Equipment List, Prices, And Annual Investment, And Business Overhead Costs
Table 5. Hourly Equipment Costs Based On Whole Farm Operation
Table 6. Ranging Analysis To Produce Loose Leaf Lettuce
A blank Your Costs column is provided to enter your actual costs on Tables 1 (Costs Per Acre To Produce Lettuce ) and 2 (Costs And Returns Per Acre To Produce Lettuce ).
For an explanation of calculations used in the study refer to the attached General Assumptions, call Etaferahu Takele, Area Farm Management Economics Advisor, Riverside County Cooperative Extension, (909) 683-6491 ext. 243 or call Jose Aguiar, Vegetable Crops Farm Advisor in the Coachella Valley of Riverside County, (619) 863-7949.
The University of California Cooperative Extension in compliance with the Civil Rights Act of 1964. Title IX of the Education Amendments of 1972, and the Rehabilitation Act of 1973 does not discriminate on the basis of race, creed, religion, color, national origins, or mental or physical handicaps in any of its programs or activities, or with respect to any of its employment practices or procedures. The University of California does not discriminate on the basis of age, ancestry, sexual orientation, marital status, citizenship, medical condition (as defined in section 12926 of the California Government Code) or because the individuals are disabled or Vietnam era veterans. Inquiries regarding this policy may be directed to the Personnel Studies and Affirmative Action Manager, Agriculture and Natural Resources, 2120 University Avenue, University of California, Berkeley, California 94720, (415) 644-4270.
University of California and the United States Department of Agriculture cooperating.
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The following is a description of the assumptions used in this study to develop costs for production of fall planted and harvested loose leaf lettuce in the Coachella Valley of Riverside County in 1996.
Loose leaf lettuce is an aggregate term for the different types including the greenleaf, endive, escarole, redleaf, butterhead and romaine types with very similar cultural, harvesting and marketing requirements. In Riverside County, romaine lettuce is considered a separate crop. It is the most popular type, constituting about 40% of loose leaf lettuce.
This report is based on a 1200 acre farm, of which 50% is double cropped. This practice results in 1800 farmed acres per year with 300 acres of loose leaf lettuce production.
Rental contracts and charges for land suitable for lettuce production can range widely. Land in this study is leased on a cash rent basis at $200 per acre per year for the entire 1200 acres. As 600 of the 1200 acres is double cropped, the amount of the annual rent per planted acre allocated to the lettuce operation is $133.
Land Preparation: Primary tillage and planting groundwork operations which include plowing, ripping, stubble discing, leveling, discing, and listing beds are performed from July through September. Most operations requiring equipment are performed with a 120 or 200 hp 4-wheel drive tractor. A D-8 crawler is rented to perform pre-planting ripping procedures. Operations that are done on only a portion of the lettuce acreage are noted throughout this section and in the tables; all other operations are done on 100% of the crop acreage of this study.
Beginning in July the acreage intended for loose leaf lettuce production is plowed. Stubble is disced across the previous crop rows to assure good aeration of the soil, adequate burial of organic matter from previous crops, and control of pests and diseases. This operation is followed by deep ripping the soil profile 2 to 3 feet, breaking up any underlying soil compaction for improved root and water penetration. Then laser leveling is done using a landplane to improve irrigation efficiency of the soil. Laser leveling typically is performed by a contract leveling company every two to four years.
Following leveling of the field, chicken manure is spread on the soil. Chicken manure is custom applied a week or more prior to the lettuce bed formation. The manure is broadcasted, and then incorporated by discing the soil twice to break up any remaining clods and to smooth and firm the soil. After discing, the soil is ready for bed preparation and it is then listed into lettuce beds of 40 inches width.
Stand Establishment: Planting for the fall crop in the Coachella Valley is done from the early part of September to the end of October.
In this study, seeds are planted using a machine at a depth of ¼ inch. Seeding is spaced at 2" intervals in two lines per bed. Approximately 120,000 seeds per acre are planted. About one month later the lettuce crop is thinned to an 11” spacing between lettuce plants and weeded manually to enhance growth and quality.
Weed Management: Weeds common in this area include the various winter grasses and broad leaf weeds. Many growers and consultants advise against planting lettuce without using a herbicide. In this study, an application of Kerb ® herbicide is broadcasted at 3 pounds per acre. At the time of thinning the lettuce crop, hand weeding is also a common practice.
Fertilization: In this study chicken manure, as indicated above, is applied prior to discing during land preparation. The manure is broadcasted, then disced and floated for incorporation. The soil is then listed into the lettuce beds. A light application of starter fertilizer (3/35/0) is injected at planting two inches away and below the seed line. It is used to provide a synergistic effect to the lettuce seedling.
Nitrogen fertilizer is applied in liquid form using UAN 32 or CAN 17. Liquid N is applied into the lettuce beds via shank injection during three growth stages. A typical liquid nitrogen fertilizer application approximates 50 gallons per acre. Also light cultivations are performed during the N application.
Irrigation: Lettuce is germinated via sprinkler irrigation. In this study the sprinkler irrigation equipment and pumps are rented. Once the seedlings have broken through the soil, irrigation is converted to a less costly system of furrow irrigation. Surface gated pipe is used to furrow irrigate.
Commonly, about 48 acre inches of water is applied to the lettuce crop up to the beginning of harvest for a cost of $55 per acre. Within each calendar year a farm can take irrigation water deliveries from 180 to 365 days a year. However, the actual number of days of water deliveries can often be found by determining the amount of days a crop will be in the ground. The majority of farms within the district will grow two crops per year over the same acreage. This is based on nine months of cultural activities and three months of land preparation in each year. Therefore the approximate number of delivery days for two crops will be 275 per year. In our study, a single crop of loose leaf lettuce with four one-half months of an actual growing period (or one-half (½) of a standard delivery schedule for a calendar year.), receives 138 scheduled and 31 unscheduled deliveries.
The CVWD Gate Charges include $10 for each scheduled delivery and $65 for each unscheduled delivery. Based on the 300 acre loose leaf lettuce farm, this results in a per acre charge for scheduled deliveries of $4.60 and for unscheduled deliveries of $6.75.
The energy costs for irrigating lettuce vary by type of irrigation. For the first acre-foot of water, the crop is irrigated via a sprinkler system. The cost is approximately $45 per acre. The remaining three acre-feet of water is irrigated by furrow irrigation at a cost of about $20 per acre foot. This results in energy costs of approximately $105 per acre. Therefore the total cost of water, deliveries and energy approximates to $171.35 per acre. The cost of irrigation shown in Table 1, Table 2 and Table 3 are for the cost of the water and labor to apply it.
Pest Management: Silverleaf whiteflys are a common pest of loose leaf lettuce in the Coachella Valley. They are treated by an application of AdmireTM at planting. Other insects that can affect lettuce during the cultural period include armyworms, aphids, cutworms and loopers. Most of these pests can be treated at the larval stage with an application of biological insecticides such as D i p e l 2 x ® o r AgreeTM. In addition, Ladybugs are used for a biological control of aphid infestation. Typically, one gallon of Ladybugs per acre are applied in the growing period. If you have a specific pest problem, consult a licensed pest control advisor (PCA). Chemicals which may be legally used to control these pests are subject to change frequently. Current information is imperative before treating a field.
At planting, avian control is essential. The birds are controlled with people watching over the field with a shotgun. Growers feel that this is the most effective way to prevent birds from consuming the seeds.
Disease Management: Depending on the region, a number of diseases may infect lettuce during any phase of growth. In the Coachella Valley the most common diseases affecting loose leaf lettuce are fungi such as downy mildew, bottom rot, and lettuce big vein. Treatments can vary for each disease. Consult your PCA before commencing a treatment regime.
Many growers take preventive steps to ensure a good crop. In this study, a soil analysis is done in August prior to planting to examine soil nutritive value and fertility. Additionally, the field is checked twice during the growing period by a PCA to ensure that pest management guidelines are being followed and to diagnose any potential threats to the crop.
The pesticides and rates mentioned in this cost study are a few of those that are listed in Pest of the Garden and Small Farm: A Growers Guide to Using Less Pesticide and University of California Pest Management Guidelines. In this study, no disease treatment was included. Written recommendations, made by State of California licensed pest control advisors, are required for pesticides. For information and pesticide use permits, contact the local county Agricultural Commissioner's office. Contact the Riverside County farm advisor for additional production information. Pest management information can also be found on the University of California Integrated Pest Management web site: http://www.ipm.ucdavis.edu.
Loose leaf lettuce is field packed beginning in December. Boxes typically contain 24 head of lettuce per box packaged in 35 pound boxes for romaine lettuce and in 22 pound boxes for the other varieties of loose leaf lettuce. After packing, the lettuce is transported to a local storage facility where it is chilled quickly and palletized before being shipped directly to market. On occasion growers are charged fees for this service, but the majority of the time chilling and palletization fees are charged to the party receiving the lettuce.
Lettuce is best stored as close to 32° F (0° C) as possible to maximize shelf-life. However, the freezing point of lettuce is about 31.5° F, so typically it is stored and transported at 33-34° F (1-2° C) to reduce potential freeze injury. When held at the proper temperature and high humidity ( > 90% RH), loose leaf lettuce will have a storage life of 2-3 weeks. In general, lettuce has the same requirements as other cool season leafy vegetables. It should not be stored with any ethylene producing commodities (such as apples, pears, etc.) as this will cause russet spotting. Costs for harvest operations are shown in Table 1 and Table 3.
After the lettuce is harvested, the soil is disced two times in preparation of the next crop to be planted.
Yields: In any given year yields vary considerably. Average crop yields in Coachella Valley from 1986 to 1995 are shown to range from 530 to 900 boxes per acres (Tables A & B). In this study, a yield of 875 boxes per acre, the most common yield obtained from participant growers is used as the basis for our analysis.
Returns: The market for loose leaf lettuce is very volatile and prices per box can vary greatly during the season. Growers market their crop through the local or Los Angeles brokers where they pay a percentage fee based on the FOB price per box. Brokers fees are usually 10% of the wholesale prices in the local market and 20% of the wholesale prices in the Los Angeles Market. In this study, marketing of lettuce is through a local broker. We used a price of $6.20/box as the basis for our analysis. This price approximates the ten year weighted average price for romaine lettuce and loose leaf lettuce in Riverside County. However, to cover a broader scenario of productivity and prices, we analyzed returns at various yields and prices (Table 6).
| Year | Acres Planted | Boxes Per Acr | Price/Box |
|---|---|---|---|
| 1 Riverside County Agricultural Production Reports, 1986-1995. 1996 Coachella Valley Loose Leaf Lettuce Cost Study |
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| 1986 | 490 | 873 | 6.93 |
| 1987 | 1266 | 753 | 4.21 |
| 1988 | 1421 | 547 | 12.19 |
| 1989 | 1387 | 610 | 5.10 |
| 1990 | 1346 | 633 | 5.66 |
| 1991 | 1157 | 731 | 5.54 |
| 1992 | 1159 | 540 | 3.80 |
| 1993 | 379 | 792 | 7.22 |
| 1994 | 1258 | 714 | 4.44 |
| 1995 | 1611 | 789 | 11.48 |
| AVERAGE | 1147 | 698.20 | 6.66 |
| Year | Acres Planted | Boxes Per Acre | Price/Box |
|---|---|---|---|
| 2 Riverside County Agricultural Production Reports, 1986-1995. 1996 Coachella Valley Loose Leaf Lettuce Cost Study |
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| 1986 | 855 | 590 | 5.24 |
| 1987 | 2002 | 752 | 4.11 |
| 1988 | 1510 | 568 | 10.86 |
| 1989 | 1174 | 630 | 5.11 |
| 1990 | 1969 | 669 | 4.51 |
| 1991 | 1612 | 545 | 4.75 |
| 1992 | 1579 | 536 | 4.54 |
| 1993 | 2687 | 803 | 6.68 |
| 1994 | 1875 | 768 | 4.14 |
| 1995 | 2371 | 891 | 8.67 |
| AVERAGE | 1763 | 675 | 5.85 |
The risks associated with fresh market lettuce production should be noted. 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 of fresh market lettuce production. Risk is caused by various sources of uncertainty which include production, price, and financing. Examples of these risks are insect damage, a decrease in price, and increase in interest rates. Because of the risk involved, access to information on production practices, prices, and markets is crucial.
Hourly labor wages used in this study are $6.25 per hour for machine operators and $5.50 per hour for non-machine workers. Growers also pay 20 to 34 percent for Workers Compensation, Social Security, Medicare insurance and other possible benefits. In this study we used 34% which brings the labor rate to $8.38 per hour for machine operators and $7.37 for non-machine workers. Machinery labor is 20% higher than the actual operation time to account for equipment set up, moving, maintenance and repair.
Cash overhead consists of various cash expenses paid out during the year that are assigned to the whole farm. These costs include property taxes, interest on operating capital, office expense, liability and property insurance, and equipment 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.
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 11.61% per year. A nominal interest rate is the going market cost of borrowed funds during the production year.
Insurance: Insurance for farm investments vary depending on the assets included and the amount of coverage. Property insurance provides coverage for property loss and is charged at 0.713% of the average value of the assets over their useful life. Liability insurance covers accidents on the farm and costs $35 per cropped acre.
Management Fee: A fee for management at $105 per acre per year is included for a professional supervisor of the farm. An owner - manager must adjust the cost study for salary or management fees.
Office Expenses: Office and business expenses are estimated at $50.00 per acre. These expenses include office supplies, telephone, bookkeeping, accounting, legal fees, road maintenance, etc. Cash overhead costs are found in Table 1, Table 2, Table 3 and Table 4.
Non-cash overhead is comprised of depreciation and interest charged on equipment and other investments. Typically farm equipment in the Coachella Valley is purchased used. In this study, the current purchase price for new equipment is reduced by 40% to indicate a mix of new and used equipment. Annual equipment and investment costs are shown in Table 1 and Table 4. They represent the per acre depreciation and interest costs for each investment on an annual basis.
Depreciation: Depreciation is a reduction in market value of investments due to wear, obsolescence, and age, and is on a straight line basis. Annual depreciation is calculated as purchase price minus salvage value divided by years of ownership of the investment. The purchase price and years of life are shown in Table 4
Interest On Investment: Interest is charged on investments to account for income foregone (opportunity cost) that could be received from an alternative investment. The investments are assumed to be owned outright. Therefore, interest on investments is a non-cash cost. Investments include buildings and equipment. Interest is calculated as the average value of the investment during its useful life, multiplied by 3.72% per year.
Average value for equipment and buildings equals new cost plus salvage value divided by 2. The interest rate used to calculate opportunity cost is the average of the agricultural sector long-run rate of return to production assets.
Equipment costs are composed of three parts; non-cash overhead, cash overhead, and operating costs. The non-cash and cash overhead have been discussed in previous sections. The operating costs consist of fuel, lubrication, and repairs.
In allocating the equipment costs on a per acre basis, hourly charges are calculated first and shown in Table 5. Repair costs are based on purchase price, annual hours of use, total hours of life, and repair coefficients formulated by the American Society of Agricultural Engineers (ASAE). Fuel and lubrication costs are also determined by ASAE equations based on maximum PTO hp, and type of fuel used. The fuel and repair cost per acre for each operation in Table 1 is determined by multiplying the total hourly operating cost in Table 5 for each piece of equipment by the number of hours per acre for that operation. Tractor time is 10% higher than implement time for a given operation to account for setup time. Prices for on-farm delivery of diesel is $1.10 (off-road, no tax) and gasoline is $1.25 per gallon.
Back up to list of "Assumptions Used in this Study"
We express our appreciation to those growers and other cooperators who provided data for the development of this cost study.
