1. Economics of Alfalfa Rotations Ken Barnett UW-Extension January 26, 2005

2. Alfalfa is a major profit center on most dairy farms. Alfalfa is a major profit center on most dairy farms. Annual yield has the largest impact on its profitability. Annual yield has the largest impact on its profitability.

3. As the stand ages, the yield declines due to environmental stresses, wheel traffic, and diseases. As the stand ages, the yield declines due to environmental stresses, wheel traffic, and diseases. Alfalfa yield decline with advancing age means that farmers should consider turning over stands faster to stay in a high yield range. Alfalfa yield decline with advancing age means that farmers should consider turning over stands faster to stay in a high yield range.

4. This presentation will shed some light on the factors that affect the economics of production and the profit from producing corn silage and alfalfa in rotations of various years. This presentation will shed some light on the factors that affect the economics of production and the profit from producing corn silage and alfalfa in rotations of various years. The economic analysis was prepared using the Agriculture Budget Calculation Software (ABCS). The economic analysis was prepared using the Agriculture Budget Calculation Software (ABCS).

5. This program allows the user to enter the tasks involved in the production along with the inputs required by each task. Example, the corn-planting task requires the inputs of corn seed and starter fertilizer. This program allows the user to enter the tasks involved in the production along with the inputs required by each task. Example, the corn-planting task requires the inputs of corn seed and starter fertilizer.

6. The ABCS program calculates the costs associated with using tractors and implements. The costs calculated are: energy, labor, repairs, ownership interest cost, and a depreciation charge. The ABCS program calculates the costs associated with using tractors and implements. The costs calculated are: energy, labor, repairs, ownership interest cost, and a depreciation charge.

7. The economic analysis required the creation of seven enterprise budgets. They were: an alfalfa establishment budget an alfalfa establishment budget an alfalfa hay budget for the first year an alfalfa hay budget for the first year following establishment following establishment an alfalfa hay budget for the second an alfalfa hay budget for the second year following establishment

8. an alfalfa hay budget for the third year an alfalfa hay budget for the third year following establishment an alfalfa hay budget for the fourth year an alfalfa hay budget for the fourth year following establishment a corn silage budget for the year a corn silage budget for the year following the plowdown of the hay a corn silage budget for the corn after a corn silage budget for the corn after corn year(s) corn year(s)

9. The ABCS program has a feature that calculates whole farm incomes and costs based on enterprise budgets. The ABCS program has a feature that calculates whole farm incomes and costs based on enterprise budgets. The acreage selected was 210 crop acres, sufficient to support 60 – 75 dairy cows. The acreage selected was 210 crop acres, sufficient to support 60 – 75 dairy cows.

10. Six rotations (whole farm budgets) were studied within the 210 acre constraint. Six rotations (whole farm budgets) were studied within the 210 acre constraint. The rotation shorthand used the notation of "E" for the alfalfa establishment year, "A" for the alfalfa hay year(s), and "C" for the corn silage year(s). The rotation shorthand used the notation of "E" for the alfalfa establishment year, "A" for the alfalfa hay year(s), and "C" for the corn silage year(s).

11. The 6 rotations selected were: EAAAACCC (8-year) EAAAACCC (8-year) EAAAACC (7-year) EAAAACC (7-year) EAAACC (6-year) EAAACC (6-year) EAACC (5-year) EAACC (5-year) EAAC (4-year) EAAC (4-year) EAC (3-year) EAC (3-year)

12. The base prices were -- oatlage - $71.50/ton of dry matter (tdm) oatlage - $71.50/ton of dry matter (tdm) corn silage - $57.60/tdm corn silage - $57.60/tdm hay - $114.94/tdm hay - $114.94/tdm haylage - $114.94/tdm haylage - $114.94/tdm

13. The base yields were -- establishment crop, 2.0 tdm oatlage establishment crop, 2.0 tdm oatlage and 1.0 tdm haylage hay crop, 4.25 tdm (decreasing 0.5 tdm hay crop, 4.25 tdm (decreasing 0.5 tdm each year as the stand aged) corn crop, 5.0 tdm (10 percent larger in corn crop, 5.0 tdm (10 percent larger in the year following plowdown)

14. Rotation Gross Income Direct Costs Fixed Costs Total Costs Profit EAAAACCC350.24168.72121.84290.5759.67 EAAAACC359.13158.32121.95280.2778.86 EAAACC364.90167.23122.46289.6975.21 EAACC361.49179.70123.19302.8958.60 EAAC379.87164.25123.70287.9591.91 EAC360.01184.04125.32309.3650.65 Income, Costs, and Profit ($) per Acre for Selected Rotations The 4-year rotation is the most profitable. The 3-year rotation is the least profitable.

15. The 4-year rotation of EAAC was the most profitable. The 4-year rotation of EAAC was the most profitable. The 3-year rotation of EAC was the least profitable, followed by the 5-year rotation of EAACC and 8-year rotation of EAAAACCC. The 3-year rotation of EAC was the least profitable, followed by the 5-year rotation of EAACC and 8-year rotation of EAAAACCC. The 6-, and 7-year rotations were relatively close, profit wise. The 6-, and 7-year rotations were relatively close, profit wise.

16. RotationOatlageHay Corn Silage EAAAACCC 50.5 (25.25) 392.8 (105) 404.3 (78.25) EAAAACC 60.0 (30) 450.0 (120) 315.0 (60) EAAACC 70.0 (35) 428.8 (105) 367.5 (70) EAACC 84.0 (42) 378.0 (84) 441.0 (84) EAAC 105.0 (52.5) 472.5 (105) 288.8 (52.5) EAC 140.0 (70) 367.5 (70) 385.0 (70) Tons of Dry Mater Production and Acres in each Crop per Year by Selected Rotations From 825 tdm/A for EAAAACC to 903 tdm/A for EAACC produced per year.

17. Rotation EAAC (the most profitable) Percent Return on Assets by Alternative Methods of Valuing Land and Equipment The equipment complement selected had a new value of $689,234 with $456,458 cost basis value remaining. Equipment Valued at Equipment Valued at Including Land at Fair Market Value Including Land at Cost Basis Value Excluding Land and Land Interest Charge New Price 3.754.895.32 Cost Basis Value 4.095.766.82

18. Rotation EAC (the least profitable) Percent Return on Assets by Alternative Methods of Valuing Land and Equipment Equipment Valued at Equipment Valued at Including Land at Fair Market Value Including Land at Cost Basis Value Excluding Land and Land Interest Charge New Price 2.713.533.54 Cost Basis Value 2.914.104.39

19. When calculated as relative measure, the return to assets for the most profitable rotation is over 38 percent higher that the return to assets in the least profitable rotation.When calculated as relative measure, the return to assets for the most profitable rotation is over 38 percent higher that the return to assets in the least profitable rotation.

20. Rotation 5.25 and 0.5 5.25 and 1.0 4.25 and 0.5 4.25 and 1.0 3.25 and 0.5 EAAAACCC117.1474.0459.6716.572.20 EAAAACC144.5495.2879.9029.6013.18 EAAACC132.68103.9475.2146.4717.74 EAACC104.5893.0858.6047.1112.63 EAAC149.38135.0291.9177.5534.44 EAC88.9688.9650.6550.6512.34 Profit per Acre ($) for Selected Rotations by Selected Starting Hay Yield and Rate of Yield Decline The 4-year rotation is the most profitable. The 3- and 8-year rotations are the least profitable.

21. Rotation$20$30$40$50$60 EAAAACCC-5.6811.8229.3246.8264.32 EAAAACC4.1724.1744.1764.1784.17 EAAACC5.1923.9442.6961.4480.19 EAACC-1.1414.8630.8646.8662.86 EAAC17.2337.2357.2377.2397.23 EAC-2.2511.9226.0840.2554.42 Profit per Acre for Selected Rotations by Selected Differences Between the Base Corn Silage Price and Changing Hay Prices The 4-year rotation is the most profitable. The 3- and 8-year rotations are the least profitable.

22. Conclusions and Summary The 4-year rotation (EAAC) was the most profitable at $91.91 per acre using the base values. The 4-year rotation (EAAC) was the most profitable at $91.91 per acre using the base values. The 4-year rotation continued to be the most profitable for all of the changes in the base hay yield and rate of decline in the base hay yield as the stand aged. The 4-year rotation continued to be the most profitable for all of the changes in the base hay yield and rate of decline in the base hay yield as the stand aged.

23. The 4-year rotation was the most profitable for all of the price differences, between corn silage and hay, considered. The 4-year rotation was the most profitable for all of the price differences, between corn silage and hay, considered. The amount of profit per acre for all rotations increased substantially as the price difference between corn silage and hay increased. The amount of profit per acre for all rotations increased substantially as the price difference between corn silage and hay increased.

24. Rapid declines in the base hay yields per acre (1.0 tdm) cause the 8-year rotation to be less profitable than the 3-year rotation. Rapid declines in the base hay yields per acre (1.0 tdm) cause the 8-year rotation to be less profitable than the 3-year rotation.