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Alfalfa - Cost to Establish

 

Economics of Alfalfa Persistence

UW-Extension Agronomy Advice FC 12.8.2 May 1999

 

How long should alfalfa stands last? Some consider that alfalfa stands should last for many years. But, recently many farmers have begun to realize that it may be more profitable to use shorter lived stands of alfalfa and take greater advantage of rotation benefits. The situation has changed greatly because of the great increase in allocated overhead (fixed costs). As shown in Table 1 below, allocated overhead, is approximately half the cost of growing a crop. Our current budgets would indicate that the current costs of establishing a crop of alfalfa are $352 and $276 for the following production years. The compares with approximately $325 to grow a crop of corn using the same assumptions.


 

Table 1. Economics of alfalfa production in establishment year 
and succeeding production years

                                         Establishment            Production
                                             $ per acre                $ per acre
Operating Costs
Input Expenses    
  Fertility                                18.00                       38.15  
  Lime                                    39.00                          --
  Alfalfa Seed                         50.00                          -- 
  Herbicide                             13.00                          --
  Overhead                             12.19                        12.19
  Pest Scouting                         5.00                         5.00
  Crop Insurance                       7.00                         7.00
  Part-time Labor                        --                           4.23
Energy Expenses                     10.91                        9.75
Repair and Maintenance           7.34                         6.60 
Input Interest                             9.77                         4.72

        Subtotal                            $172.21                        $87.64
 

Allocated Overhead
Land Charge                                75.00                        75.00
Property Taxes                             22.00                        22.00
Management                                  6.00                          6.00
Labor                                            30.63                         28.21  
Interest and Insurance                  46.93                         46.64
Depreciation                                 29.41                         28.34 

        Subtotal                            $209.97                     $218.37

Total                                          $382.18                     $306.01


The high fixed costs mean that maximum yield is the most profitable yield for forage production. For example, an extra $1/lb seed has little effect on the final production cost but will have significant effect on profitability if yield is increased 5%.

 

This large fixed cost has changes the consideration greatly with regard to the decision of how long to keep stands. Low yielding or weedy stands of alfalfa are not profitable and it becomes imperative that farmers plow these stands down and reseed new acreage. The scenario in Table 2 below uses the same whole farm analysis to consider the return to the farm (on a per acre basis for the whole farm) to consider the cost of shorter rotations.
 

Table 2. Comparison of whole farm income on per acre basis with short rotation (establishment plus 2 yrs) and long rotation (establishment plus 4 yrs) of alfalfa 

Analysis assuming: 
   200 acres of alfalfa 
   2 t/a yield on new seeding at $80/t 
   4 t/a yield on established stand at $80/t 
   60 acres of corn for grain 
   110 bu at $2.50/bu 
   40 acres of corn silage 
   5 t/a at $25/t 
 
Whole farm income and expenses for farms with 2 vs 4 year alfalfa rotations 

                                2 year         4 year 
 Gross income        $307.73      $322.13 
 Total Expenses      $290.45      $284.38 

 Net income/acre    $  17.28       $ 38.75 
 


 

It becomes apparent that, even without the consideration of any advantages of short rotations, the difference in income for farms with 2 vs 4 year rotations is small. The analysis also assumes that yield of stands is constant for the live of the stand, when yields actually tend to be highest for the year after establishment and tend to decline thereafter.

 

Also the analysis does not take into account the following benefits of short rotations:

a) legume credit to corn: (120 lbs * 254/lb = $30.00)

b) need for corn rootworm control on corn following corn but not alfalfa: ($15.00)

c) rotational benefit to corn following alfalfa (10% higher yield): (11 bu @ $2.50 = $27.50).

 

Two of short rotation benefits individually offset the cost of reseeding more frequently. Combinations of the benefits along will make the short rotation more profitable. An additional consideration of shorter rotations are that all fields have younger stands which are more winterhardy and more likely to survive severe winters than older stands and tend to be higher yielding and more weed free. Also, by seeding more frequently the farmer is able to take advantage of improvements in alfalfa genetics faster.

 

Thus in rotational systems, two to three-year stands of alfalfa may be more profitable than keeping the stand for more years.