economics of manure presented at farm management inservice october 1, 2008
TRANSCRIPT
Economics of Manure
Presented at
Farm Management Inservice
October 1, 2008
What is going on in hog industry?
Slow down in growth Plain says 1.8% bigger YTD
http://www.aaea.org/sections/extension/AnnualMeetingDocs/2008/2003Meyer.pdf
web.missouri.edu/~plainr/PowerPoints/HogOutlook8-07.ppt
Circovirus vaccine & death losses
China & pork exports
Weather and corn/sb prices
Slaughter capacity & Canadian production
What’s happening in Iowa hog belt?Slowing in growth of new construction
200 in 200680 in 200740 in 2008
Table 1Percent of U.S. Hogs Sold Through Various Pricing Arrangements, January 1999-2008*
2000 2001 2002 2003 2004 2005 2006 2007 2008
Hog or meat market formula
47.2 54.0 44.5 41.4 41.4 39.9 41.8 38.3 37.1
Other market formula 8.5 5.7 11.8 5.7 7.2 10.3 8.8 8.5 11.0
Other purchase arrangement
16.9 22.8 8.6 19.2 20.6 15.4 16.6 15.2 13.4
Packer-sold 2.1 2.2 2.1 2.4 2.6 6.7 6.1Packer-owned 16.4 18.1 17.1 21.4 20.0 22.7 23.1
Negotiated - spot 25.7 17.3 16.7 13.5 11.6 10.6 10.2 8.6 9.2
*2006, 2007, and 2008 data were reported to USDA voluntarily; 2002 through 2005 data are based on USDA Mandatory reports; 1999-2001 are based on industry surveys by the Univ. of Missouri..
Table 1Percent of U.S. Hogs Sold Through Various Pricing Arrangements, January 1999-2008*
Source: Ron Plains
http://agebb.missouri.edu/mkt/vertstud08.htm
http://www.agriculture.com/ag/story.jhtml?storyid=/templatedata/ag/story/data/1220544957474.xml
Good news is Canada gave up 73,000 sows
Buyout program to target 150,000 sows
Maybe reach 125,000
Top five have 200,000
Other issues
Will expansion continue?
Will Iowa remain the low cost corn state?
Will there be more consolidation in pork industry?
Will the demand remain for older barns?
Phosphate ---- $39.15
price per pound $0.87
pounds per acre 43 45
Potash ---- $52.50
price per pound $0.70
pounds per acre 72 75
48 bushels of soybeans following corn
Nitrogen ---- $117.60
price per pound $0.70
pounds per acre 168 168
Phosphate ---- $59.16
price per pound $0.87
pounds per acre 68 68
Potash ---- $37.80
price per pound $0.70
pounds per acre 54 54
180 bushel corn following soybeans
Total value of replacement N,P,K is $300
Nitrogen ---- $140.00
price per pound $0.70
pounds per acre 200
Phosphate ---- $55.68
price per pound $0.87
pounds per acre 64 64
Potash ---- $35.70
price per pound $0.70
pounds per acre 51 51
170 bu corn following corn
$230 worth of N,P, and K
• Only one year agreement required• Banker may want it for as long as the loan• DeCoster has a few permanent• It attaches to the “deed to the ranch”• Usually written by the “other” attorney• Requires the landowner’s signature so often a
“three way”. Tenant, landowner, bldg, pig owner• Mays, shalls, will• Who pays what, where, when,
Manure easements and agreements
Costs associated with
Manure Management
Manure management plans
Storage
Manure transportation and application
Misc.
Manure Management Plans
Application permit - Matrix
Phosphorus Index
Annual DNR update fees
Storage Costs
Initial Construction – usually part of facility
Maintenance of facility
Maintenance of the grounds
Property taxes
Licensing fees
Liability insurance
Labor
Record Keeping
Fixed costs
Variable costs
Manure transportation and application
$
http://www.extension.iastate.edu/Publications/PM710.pdf
Estimating Farm Machinery Costs
Tractor $150,000,
purchase $140,000
New so 0 hours
Life 10 years
Interest rate 6%
500 hours a year, 225 hp., $13 labor
http://www.extension.iastate.edu/Publications/PM710.pdf
Estimating Farm Machinery Costs
Manure Tank Wagon
$55,000 list ( now is $75,000)
$50,000 cost
New so 0 hours
Last 7 years
2000 acres
4 acres per hour
Other Costs
Licenses
Pickup
Pump and tractor
Additional labor
Moving from site to site
$
Operating costsSee Machinery Spreadsheet
Importance of fixed costs on equipment
a) Seasonal leasing
b) Spring season
c) Other uses for tractors
Revenue
4 acres per hour (4.4 mph)
12 hours per day (70% eff.)
60 days per year
3500 gallons per acre (4,000 gal./acre)
$.009 per gallon ($.015 per gallon)
$75,600 per rig ($00,000 per rig)
load unloadbase travel
extra travel time percentage
4 5 15 24
4 5 15 6 30 125%
Traveling one mile farther will increase time by 25%
Cost of TravelTime in Minutes
Assuming 20 mph travel speed, base distance equals 2 1/2 miles
load unloadbase travel
extra travel time percentage
4 5 6 15
4 5 6 6 21 140%
Traveling one mile farther will increase time by 40%
Cost of TravelTime in Minutes
Assuming 20 mph travel speed, base distance equals one mile
Need to charge $12 per acre more when the acres per hour declines from 4 to 3.
Cost of fewer acres per hour
rate gals. acres/hr. income
$0.0100 3500 4 $140.00
$0.0133 3500 3 $140.00
$0.0033 3500 3 $35.00
$11.67
Need to charge $20 per acre more when the acres per hour declines from 4 to 3.
Cost of fewer acres per hour
rate gals. acres/hr. income
$0.015 4000 4 $240.00
$0.015 4000 3 $180.00
$0.005 4000 3 $60.00
$20.00
Conclusions
Travel time is a major factor in costs.
Need to run the numbers to see how it impacts your operation.
With the higher fertilizer prices it will pay to haul farther.
Placing a value on manure
Two schools of thought:
What ever the market will bear or
Nutrient Replacement Values
What ever the market will bear.Based on supply, demand and transaction costs with discounts for potential limitations.
When demand increases and supply remains constant the value goes up if there aren’t competing substitutes.
Ex: Discussion about ethanol plants competing with feed mills if areas import corn and the trans-portation costs that could be associated with that.
Potential limitations
Uniformity of product
Correct Ratio of ingredients
Need all of the ingredients
Timeliness
Compaction
As well as benefits such as organic matter, slower release N and micro-nutrients .
What ever the market will bear.Based on supply, demand and transaction costs with discounts for potential limitations.
When supply increases and demand remains constant the value goes down if there aren’t new uses.
Ex: If one area is over supplied, the buyers will be able to discount price. When the cost of exporting increases the local market price will decline further.
Nutrient Replacement Values2005
Nitrogen $.33 160 units = $52.80
Phosphorus $.31 100 units = $31
Potassium $.17 115 units = $19.55
Total value = $103.35
Assumes corn/soybean rotation with 170 and 44 bu. yields
Crop Removal Rates
Nutrient Replacement Values2009
Nitrogen $.70 160 units = $112
Phosphorus $.87 100 units = $87
Potassium $.70 115 units = $80
Total value = $280
Assumes corn/soybean rotation with 170 and 44 bu. yields
Crop Removal Rates
Nutrient Replacement Values2005
Nitrogen $.33 160 units = $52.80Phosphorus $.31 173 units = $53.63Potassium $.17 195 units = $33.15
Total value = $139.58
ISU Extension Pm-1811
4,339 gallons of hog manure – wet dry feeders 58-40-45
Note: this rate is above crop removal for nitrogen for a C/SB rotation. Potentially have lose of N from application.
Nutrient Replacement Values2005
Nitrogen $.33 145 units = $47.85Phosphorus $.31 100 units = $31.00Potassium $.17 112 units = $19.04
Total value = $97.89
ISU Extension Pm-1811
2,500 gallons of hog manure – wet dry feeders 58-40-45
Note: crop removal rate for phosphorus for a C/SB rotation.
Nutrient Replacement Values2009
Nitrogen $.70 145 units = $101Phosphorus $.87 100 units = $87Potassium $.70 112 units = $78
Total value = $266
ISU Extension Pm-1811
3,000 gallons of hog manure – wet dry feeders 50-35-35
Note: crop removal rate for phosphorus for a C/SB rotation.
http://extension.agron.iastate.edu/soilfertility/nrate.aspx
$
Manure Nutrient Calculator
Compares the value of commercial fertilizer with manure.
Estimates the acres needed.
Includes the Iowa P-Index formulas, summary report and landform maps.
Costs $10
Bob Koehler Extension Educator - Livestock Systems/Swine
University of Minnesota
William F. LazarusProfessor and Extension Economist
http://swroc.coafes.umn.edu/Bob/koehler_main_page.html
Bob Koehler – Southwest Research & Outreach Center, University of Minnesota
Bill Laser, Department of Applied Economics, University of Minnesota
Bob Koehler – Southwest Research & Outreach Center, University of Minnesota
Bill Laser, Department of Applied Economics, University of Minnesota
http://www.extension.iastate.edu/agdm/livestock/xls/b1-65manurecalculator.xls
http://www.agriculture.state.ia.us/APPLICATION8.htm
http://www.agriculture.state.ia.us/APPLICATION8.htm
http://www.agriculture.state.ia.us/APPLICATION8.htm
FertilizersAccording to the Iowa Fertilizer Law (Chapter 200), the definition of fertilizer is “… any substance containing one or more recognized plant nutrient which is used for its plant nutrient content and which is designed for use and claimed to have value in promoting plant growth …” Fertilizers have a guaranteed analysis that is “… the minimum percentage of plant nutrients claimed and reported as total nitrogen (N), available phosphorus (P) or P2O5 or both, soluble potassium (K) or K2O or both …” According to the Fertilizer and Agricultural Lime Rule (Chapter 43), specific additional plant food elements beside N, P, and K can be guaranteed: calcium, magnesium, sulfur, boron, chlorine, cobalt, copper, iron, manganese, molybdenum, sodium, and zinc. There is a minimum analysis requirement (Table 1). For mixed fertilizers, the sum of the guaranteed analysis of total N, available P2O5, and soluble K2O must be 20 percent or greater. Thus, materials below these levels cannot be registered as a fertilizer; however, this rule does not apply to specialty fertilizers for nonfarm use or materials ordinarily applied directly to plant foliage.
http://www.extension.iastate.edu/CropNews/2008/0916sawyer.htm
Soil conditionersAccording to Chapter 200, the definition of soil conditioner is “… any substance which when added to the soil or applied to plants will produce a favorable growth, yield or quality of crop or soil flora or fauna or other soil characteristics, other than a fertilizer, recognized pesticide, unmanipulated animal and vegetable manures or calcium and magnesium carbonate materials used primarily for correcting soil acidity.” According to Chapter 43, product claims may be substantiated by one of two methods: 1) efficacy testing or 2) available research data relevant to Iowa crops and soils.
http://www.extension.iastate.edu/CropNews/2008/0916sawyer.htm
Thank You!
Kelvin LeiboldFarm & Ag Business Management
Field SpecialistISU Hardin County Extension
524 LawlerIowa Falls, IA 50126(641) 648-4850
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