Flue Cured Tobacco Production Costs2012 2350 2075 2375 2013 1845 1490 1945 2014 2303 2500 2320 2015...
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Flue Cured Tobacco Production Costs: S. Gary Bullen North Carolina State University Department of Agricultural and Resource Economics 2018_TWC03_Bullen.pdf TWC2018(48) - Document not peer-reviewed
Transcript of Flue Cured Tobacco Production Costs2012 2350 2075 2375 2013 1845 1490 1945 2014 2303 2500 2320 2015...
Flue Cured Tobacco Production Costs:
S. Gary Bullen North Carolina State UniversityDepartment of Agricultural and Resource Economics
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Cost of Production
In theory, there is no difference between theory and practice
BUT IN PRACTICE THERE IS
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Crop BudgetsHow is profit defined? Typically return to unpaid labor, management and capital
Can mean other thingsReturn to assetsReturn to labor and management
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Crop Budget
Most budgets include a revenue section Revenue: price X quantityWhat yields and prices will be used
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Tobacco Yields in Three CountiesYR Wilson, NC Robeson, NC Granville, NC
2006 2195 2290 20452007 2640 1925 15652008 2520 2260 23702009 2410 2645 21902010 2020 2210 21402011 2041 1965 18172012 2350 2075 23752013 1845 1490 19452014 2303 2500 23202015 2370 2165 2325
Average 2269 2152 2109
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Total Revenue
Per Acre Per Pound
Tobacco 2500 * ?
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Flue Cure Tobacco Prices
What 2014 Prices?
1.82 1.85 1.85
1.48 1.5 1.53
1.76 1.761.67 1.68
1.98
2.152.08
1.87
1
1.2
1.4
1.6
1.8
2
2.2
2.4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
What prices for 2015?2017- $1.85-$1.90?
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Operating CostsPer Acre Per Pound
Insecticide 53 0.02Herbicides 54 0.02Sucker Control 190 0.08Fumigation 180 0.08
Chemical cost 477 0.20
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Other Operating CostsPer Acre Per Pound
Fertilizer 153 0.06Plants 240 0.10Curing Fuel 320 0.13Electricity 126 0.05Hauling 125 0.05Insurance 120 0.05Miscellaneous 64 0.03
Total Costs $1,148 $0.46
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Tobacco Cost Of Production
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Total Operating CostsAcre Pound
Equipment Variable 230 0.09
Labor 826 0.33
Total $1,054 $0.42
Piedmont hand harvest,115 labor hours= $1,433, $607 more
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Breakeven Analysis Variable cost $2,633 $2,633/yields of 2,500 LBS
Price needed to cover variable costs = $1.05
Total costs: $2,633+$722=$3,355/acre
Price needed to cover total costs =$1.34/LBS
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Breakeven Analysis Variable cost $2,633
$2,633/yields of 2,000 LBS Price needed to cover
variable costs = $1.31 Total costs: $2,633+$722=$3,355/acre
Price needed to cover total costs =$1.68/LBS
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Total CostsPer Acre Per Pound
Operating Costs 2,633 1.05Machinery Costs 567 0.22
Total Costs $3,200 $1.28
Additional Costs…. Land Rent: $150Range $50-$200
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Labor: H2A Using NC Growers Association Adverse Economic Wage Rate: $11.47
Workers Com. Insurance: $0.96 Acquisition cost using NCGA $1.10 Housing $0.62 Transportation $0.61 Additional Cost /Hour $3.29
Total hourly wage rate $14.76$206 more
B1
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Slide 15
B1 Bullen, 2/3/2016
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Cost Analysis of Labor Strategies in Tobacco Production
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Tobacco Labor Study
According to NCSU production budgets 22% of total variable cost are labor cost for Machine
harvesting farms 38% of total variable cost for hand harvesting farms Keep these budgets updated to provide accurate resource
for the growers H-2A labor is growing
No study or data had been gathered in regards to the costs of the required provisions for these workers.
Costs were not currently identified or accounted for on the NCSU budgets
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Survey Profiles
Displacement of farm size Small: Less than 75 acres Medium: Between 75 and
150 acres Large: Greater than 150
acres
Displacement of farm location East/West divided by I-95
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Methods of Production
There are three methods of production Hand Harvest and Hand
topping Hand Harvest and Machine
Topping Machine Harvest and
Machine Topping
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Labor Sources
East
Family-14% Seasonal workers- 28% Migrant Labor- 11% H-2A- 50%
West
Family-27% Seasonal workers- 15% Migrant Labor- 1% H-2A- 71%
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H-2A non-wage costs Focused on the following areas of non-
wage costs Housing Utilities Workman Compensation Grower Association Fees Transportation
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Housing, $434.58
Transportation, $424.89
Grower Association Fees, $771.49
Workman Comp, $675.57
Utilities, $216.57
NON-WAGE COSTS PER WORKER
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H-2A Non-wage Costs
Average farmer spend $2,391.25 per worker Maximum $4,462.50 and Minimum of
$1,312.50 H2A Fixed Cost per Hours Worked
East $2.68 West $2.30 Range .60- 4.9
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$2,371.00 $2,408.90 $2,392.44
$3,002.00
$2,158.68
$2,391.25
$-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
Large Medium Small East West Overall
Dolla
rs p
er W
orke
r
Areas of Interest
H-2A Non-Wage costs per worker
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Acres per Worker 13.2
9.95
5.06
11.35
8.2
9.91
0
2
4
6
8
10
12
14
Large Medium Small East West Overall average
Acr
es p
er w
ork
er
Areas of Interest
Acres per worker
Range 1.03-28.2
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Average Labor demands by different Production Methods Per Acre
Production tasks Methods of Production
Hand top and Hand Harvest
Hand Top and Machine Harvest
Machine Top and Machine Harvest
Pre-Harvest 44 Hours 38 hours 35 hours
Harvest and Baling 67 Hours 20 hours 14 hours
Post-Harvest 1.75 Hours 2 hours 1.25 hours
Total 112.75 hours 60 Hours 50.25 hours
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Piedmont Labor CostsMachine Harvest Hand Harvest
Pre Harvest $394, 35 hours $485, 43 hourHarvest $372, 33 hours $755, 67 hoursPost Harvest $23, 2 hours $23, 2 hours
Total Costs $789 $1,263$473 difference
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Capital Equipment Investments
•Only 49% have purchased tobacco equipment in the past 10 years.
•Of the farms that purchased equipment in the past 10 years, 75% of those same people purchased equipment in the last 5 years.
49%51%
Farms that Purchased Equipment in the last 10
Years
Purchased
NoPurchases
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Mechanical Toppers
• Of the farms that have mechanical toppers an average of 68% of the crop is topped mechanically.
• Possibility that farmers are getting better results in long term sucker control from letting workers remove a flower on every plant.
• Topper values range from $300-$6,000 with an average value of $2,233.
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Conclusion Farms using all hand labor had little
difference in labor hours Small farms reported - 111 hours Medium farms - 109 hours Large farms - 112 hours
Machine topper and harvester Small farms - 45 hours Medium farms - 40 hours Large farms - 54 hours
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Conclusion Continued Total cost per worker is unchanged across size
categories The larger the farm the greater number of aces
per worker Labor hours per acre had large variance in every
labor category Farmers with mechanical harvester reported 53
les labor hours With $11.27 wage rate labor cost with mechanical
harvester would be $597 less than hand harvest
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Model Farm Scenario using FINPACK
• Created by University of Minnesota Center for Farm Financial Management
• Business analysis, cash flow planning, and long range financial management for WHOLE farm
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Whole Farm Analysis 1000 acre farm comparing
machinery investment Crop plan
150 acres of tobacco 350 acres soybeans 870 acres cotton
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Differences in Production Costs Between Alternatives
Hand Harvest
Machine Harvest Machine Harvest with BLS
Hired labor $206,320 $126,562 $113,477
Repairs Machinery $62,112 $81,668 $81668
Depreciation $60,762 $70,304 $74,635
Cash farm expenses $939,380 $874,276 $865,608
Net Farm Income $111,383 $166,946 $171,282
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Projected Returns 3 Variable Cost Total Cost Returns
Profit/Loss
Corn $382.44 $431.19 $133.29
Soybean $208.68 $244.81 $104.49
Cotton $510.36 $633.56 $63.88
Peanuts $643.74 $790.05 $109.95
Tobacco $2633.33 $3,356.36 $970
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Tobacco Budgets Web Site
S. Gary Bullen
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