The economics of continuing commercial rhodes grass production under sprinkler irrigation in the al-batinah Region of the Sultanate of Oman

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1 Zeitschrift für Bewässerungswirtschaft, 42. Jahrg., Heft 2 /2007, ISSN Seiten The economics of continuing commercial rhodes grass production under sprinkler irrigation in the al-batinah Region of the Sultanate of Oman Die Wirtschaftlichkeit des kontinuierlichen Produktion von Rhodesgras unter Beregnung in der Region Batinah des Sultanats von Oman D. Breazeale, I. Khan, N. Al-Saadi and K. Curtis Stichworte Rhodesgras, Produktionskosten, Bewässerungsmanagement, Wasserpolitik, Nachhaltigkeit Key words Rhodes grass, production costs, irrigation management, water policies, sustainability Summary Due to increased competition for limited water resources in Oman, crop profitability is now becoming more important and is receiving more attention, especially in the case of high-water-use crops such as Rhodes grass. As Rhodes grass production in the Al-Batinah region requires significant water, production of Rhodes grass is being held responsible for over-capacity water pumping, resulting in salt water intrusion into coastal aquifers. There is little documented information in Oman related to Rhodes grass profitability. This study found that while Rhodes grass is marginally profitable, given current yields and output prices, even small price increases for such inputs as irrigation would quickly create negative returns for producers. Therefore, the long term sustainability of Rhodes grass production in the Al- Batinah region appears to be pessimistic. 1. Introduction Rhodes grass (Chloris guyana) is an important irrigated crop in the Sultanate of Oman. In terms of total hectares, Rhodes grass ranks first among perennial crops at 7,300 hectares followed by alfalfa at 5,447 hectares and sorghum at 2,048 hectares (Ministry of Agriculture and Fisheries, 2004). The crop is used primarily as livestock feed within Oman but is also exported to surrounding countries.

2 120 Journal of Applied Irrigation Science, Vol. 42, No. 2 /2007 In Oman, the major producing region is Al-Batinah, located along the coast beginning north of the capital Muscat. The Al-Batinah region produces approximately 5,400 hectares while the Dhofar region in southern Oman is a distant second with less than 1,500 hectares (Figure 1 - Map). The other five ecological regions of Oman combined only have about 400 hectares of Rhodes grass under production. All of the Rhodes grass in Oman requires irrigation; mostly from sprinkler systems, but there is a small but sizable amount, under flood irrigation and a few farms with bubbler and even fewer with drip systems (Ministry of Agriculture and Fisheries, 2004). Depending on the location, Rhodes grass will use from 3 1/2 to 5 meters of water per hectare on an annual basis (Sultan Qaboos University, College of Agricultural and Marine Sciences, Agricultural Experiment Station, 2007). The concern in Al-Batinah is that increased competition for water is resulting in salt water intrusion into the coastal aquifer (Al-Barwani and Aboul A ata, 2006). In addition, as urban populations expand in the Al-Batinah region, there is increasing pressure for producers to move to areas where land is less expensive. As a result, political and economic pressures are being exerted on agricultural water users to increase irrigation efficiency, and in the case of Rhodes grass, to move their farming operations to the southern region where there is more rainfall and the aquifers are not as stressed. While water use efficiency studies have been conducted on forage crops in Oman (GOLOMBEK et al., 2007 and SIEBERT et al., 2007), there is little information on the economic feasibility of forage crops. Therefore, commercial producers are increasingly interested in the economic feasibility or profitability of remaining in the Al-Batinah region or growing Rhodes grass elsewhere. Due to the agronomic consequences of salt water intrusion and the economic importance of Rhodes grass production, producers and government policy makers are looking more closely at the costs and returns of the crop when discussing possible alternatives. Therefore, the purpose of this paper is to determine the economic profitability of Rhodes grass produced by a fully mechanized, commercial farming operation in the Al-Batinah region of Oman. While there is a growing body of information concerning the effects of salt water intrusion and evapotranspiration rates of Rhodes grass and other forages, there is little information on the actual costs of production and profitability of the crop for use by stakeholders. Therefore, the three objectives of the study are as follows: 1. To determine and document typical establishment and annual production costs for Rhodes grass in the Al-Batinah region of Oman. 2. To determine the profitability (break-even) of Rhodes grass in the Al-Batinah region of Oman. 3. To provide baseline data for policy makers and producers concerning the continuing feasibility of Rhodes grass production given the current level of salt water intrusion.

3 Zeitschrift für Bewässerungswirtschaft, 42. Jahrg., Heft 2 / Figure 1: Sultanate of Oman - Administrative areas

4 122 Journal of Applied Irrigation Science, Vol. 42, No. 2 / Methodology and assumptions Sample costs and returns to establish and produce Rhodes grass under sprinkler irrigation in the Al-Batinah region of the Sultanate of Oman were calculated based on the production practices considered typical for a large, commercial and mechanized farm in the region. All calculations are in Omani Rials (RO) and one RO is equal to 2.59 USD. Each RO contains 1000 baiza. The following assumptions refer to Tables 1 and 2 and reflect the typical establishment and annual costs and returns to produce Rhodes grass under sprinkler irrigation in the Al-Batinah region of Oman. The practices described are not recommendations, but rather the production practices and materials considered typical of a well-managed farm in the region, as determined from information gathered by in-person structured interviews with producers. Costs, materials, and practices are not applicable to all situations, as establishment and cultural practices will vary among growers and between regions. A Your Farm column in Tables 1 and 2 is provided for individual growers to compare their own costs. 3. Results and discussion 3.1 Establishment cost for rhodes grass production Representive establishment Farm The representative farm consist of 15 hectares of land in production. It is assumed that the farm will have sufficient infrastructure, including an irrigation system and machinery, to produce Rhodes grass. During the year, the farm will produce seven cuttings of hay with an average of just less than three tons per hectare. The land market value was estimated to be 4,800 RO per hectare in Stand establishment The establishment year includes approximately 15 months and typically follows a rotation of row or field crops. This time period allows for the establishment of the new planting and one full year of production. The life of the stand is estimated to be 10 years. Establishment costs and returns are provided in Table 1. Land preparation Rhodes grass is generally planted into the ground after removal of the previous plant material. The land will normally be irrigated once or twice during this period. Discing, and smoothing of the soil takes places in order to provide for a proper seed bed. In this example it is assumed that the land owner does this himself. An application of herbicide is often applied during this time period at a cost of RO per hectare.

5 Zeitschrift für Bewässerungswirtschaft, 42. Jahrg., Heft 2 / Table 1: Oman Al-Batinah Rhodes Grass Establishment Costs, 15 Hectares 2007 Calculations are in Omani Rials (RO) - 1 RO = 2.59 USD Total Units Unit Price/Cost Per Unit Total Cost/Value Total Cost/Value Per Hectare Your Farm OPERATING COSTS Herbicide (Combi-U46) 9.00 Liters Land Preparation hectare Fertilizer ( ) 6.00 Bags Seed Kg Irrigation (electrical power only) 1.00 hectare Owner Labor 1.25 annual Hired Labor (1 person) 1.25 annual Fuel & Lube 1.25 Annual Annual Repairs 1.25 Annual Harvest bundles Interest Operating Capital 6, RO TOTAL OPERATING COSTS OWNERSHIP COSTS CASH OVERHEAD COSTS Office & Travel TOTAL CASH OVERHEAD COSTS NONCASH OVERHEAD COSTS (Capital Recovery) Irrigation System Machinery & Vehicles TOTAL NONCASH OVERHEAD COSTS TOTAL OWNERSHIP COSTS TOTAL COSTS YEAR ONE INCOME Rhodes Grass Hay Tons TOTAL GROSS INCOME TOTAL ESTABLISHMENT INVESTMENT Fertilization A basal dose of 300 kg of NPK per hectare is broadcast into the soil during seed bed preparation at a cost of RO per hectare. Planting In late summer or early winter, Rhodes grass seed is drilled or broadcast at a rate of 25 kg per hectare. Seed cost is estimated to be approximately 18 RO per kg.

6 124 Journal of Applied Irrigation Science, Vol. 42, No. 2 /2007 Irrigation Immediately after seeding sprinkler irrigation commences to ensure proper germination of the seed. Water will initially be applied everyday and then about every two days after germination depending on the temperature at planting time. Electrical power is the cost and is 60 RO per hectare. Custom harvest The first harvest will take place two to three months after planting. Harvest costs are estimated based upon 100, 10 kg bundles, per ton and cost 90 baiza per bundle. Harvesting is handled by a custom harvesting company. The harvested bundles are either stored or transported. Establishment investment The Rhodes grass investment cost is depreciated across the 10-year life of the stand Production cultural practices and material inputs Irrigation - Rhodes grass in Al-Batinah requires constant irrigation. Irrigation costs are shown in Table 2 and cover the per hectare cost of power only. There are no costs for water at the present time in Oman. Maintenance costs on the sprinkler system are included under annual repairs. The annual estimated per hectare cost for irrigation is 60 RO. Fertilization - Fertilization normally is undertaken after each of the seven cuttings. After cuttings 1, 2, 4, 5, and 7 approximately 300 kg of Urea is applied at a cost of RO over the season. After cuttings 3 and 6, approximately 300 kg of NPK is applied at a cost of RO per hectare. Total fertilizer costs are equal to 258 RO per hectare. Weeds - Weed control applications are quite variable. However, many growers will use Combi-U46 for weed control once or twice during the year at a cost of RO. Custom harvest - For our particular example, we assumed that the farmer did not own his own harvesting equipment, but that he custom-hired a harvesting crew to cut, cure, and bundle the Rhodes grass hay. With approximately 100 bundles per ton and a yield estimated at almost 3 tons per hectare, 300 bundles are harvested and hauled away at a cost of 90 baiza per bundle or RO per hectare. This is based upon a custom harvesting rate. As during the establishment year, the bundles are either stored or transported. Labor - The owner labor is based upon a 100 RO monthly management fee. The laborer salary is based upon a rate 80 RO per month inclusive of the yearly labor licensing fee.