2012 Cost of Potato Production Comparisons for Idaho Commercial Potato Production

Transcription

1 2012 Cost of Potato Production Comparisons for Idaho Commercial Potato Production Prepared by University of Idaho Extension Agricultural Economist Paul E. Patterson Agricultural Economics Extension Series No November 15, 2012 Department of Agricultural Economics and Rural Sociology Moscow, Idaho

2 2012 Cost of Potato Production Comparisons for Idaho Commercial Potato Production Conducted by: University of Idaho College of Agricultural and Life Sciences Department of Agricultural Economics & Rural Sociology Paul E. Patterson Extension Agricultural Economist Report Submitted to: The Idaho Potato Commission R & E Committee, Potato Processors, and Grower Organizations November 15, 2012 This project is funded in part by the Idaho Potato Commission, IPC Project No. 8742, UI Project No. BDK902, Cost of Potato Production. Copies of the report and earlier reports can be found at: Click Resources then Project Reports

3 ii Table of Contents Table of Contents Page ii Idaho Potato Production Costs Project: Goal and Objectives Page 1 Cost of Production Background Page Crop Input Costs Page 2 Potato Cost of Production Overview Page 3-6 Farm Size and Potato Acreage Input Costs Potato Yields Fumigation Yield and Cost Dilemma Page 6-7 Unresolved Yield Issue Page Cost of Potato Production Overview and Comparison Page 8-10 Cost Summaries Cost Comparisons Adjustments Table 1.Listing of 2012 Idaho potato costs and returns estimates by region Page 11 Table 2. Current & historical farm size and potato acreage assumptions by region Page 11 Table 3.Current and historical interest rates, labor charges and power rates used Page 12 in costs and returns estimates Table 4. Current and historical fuel, water assessments and fertilizer component prices 4-a Southwestern Idaho Page 12 4-b Southcentral Idaho Page 13 4-c Eastern Idaho Page 13 Table 5. Current and historical fertilizer component prices for southern Idaho: Page and percentage change from 2011 to 2012 Table 6. Potato yields by region for published and unpublished University of Idaho Page 14 costs and returns estimates, both with and without fumigation Table 7. Historical potato yields published by IASS for and historical Page 14 3-year averages. Table 8. Historical potato yields reported by IASS for primary commercial Page 15 potato counties of eastern Idaho and historical 3-year averages. Table 9. Fumigation yield adjustment and percentage fumigation factors by region Page 15 Table 10. Cost changes per acre by region from 2011 to Page 16

4 iii Table 11. Cost changes per hundredweight by region from 2011 to Page 17 Table 12. Per acre and percentage change in costs from 2011 to 2012 for Page 18 Irrigated Russet Burbank potatoes: no storage costs Table 13. Per acre and percentage change in costs from 2011 to 2012 for Page 19 Irrigated Russet Burbank potatoes: with storage costs and no fumigation Table 14. Per acre and percentage change in costs from 2011 to 2012 for Page 20 Irrigated Russet Burbank potatoes: with storage costs and no fumigation Table 15.Idaho potato cost of production and storage costs by month Page 21 Appendix Page 22 Table Southwestern Idaho commercial Russet Burbank: Page fumigation and no storage potato costs and returns with comparison to 2011 Table Southwestern Idaho commercial Russet Burbank: Page fumigation and storage potato cost and returns with comparison to 2011 Table Southcentral Idaho commercial Russet Burbank: Page no storage potato cost and returns with comparison to 2011 Table Southcentral Idaho commercial Russet Burbank: Page storage potato cost and returns and comparison with 2011 Table Southcentral Idaho commercial Russet Burbank: Page fumigation and storage potato cost and returns with comparison to 2011 Table Eastern Idaho- South commercial Russet Burbank: Page no storage potato cost and returns with comparison to 2011 Table Eastern Idaho- South commercial Russet Burbank: Page storage potato cost and returns with comparison to 2011 Table Eastern Idaho- South commercial Russet Burbank: Page fumigation and storage potato cost and returns with comparison to 2011 Table Eastern Idaho- North commercial Russet Burbank: Page storage potato cost and returns with comparison to 2011 Table Eastern Idaho- North Russet Burbank G3 seed: Page storage potato cost and returns with comparison to 2011

5 Costs of Potato Production in Idaho 1 The overall goal of this project is to provide the Idaho potato industry with an unbiased and consistently calculated estimate of the cost of producing potatoes in three regions of Idaho and to track the change in production costs per acre and per hundredweight over time. The following objectives are designed to meet the project goal: 1. To collect data from input suppliers, machinery and equipment dealers, and growers as appropriate. 2. To revise and update existing potato costs and returns estimates to reflect current input costs and production practices. 3. To develop cost of production estimates for new varieties or new or proposed production systems as needed or as requested. 4. To calculated changes in production costs per acre and per hundredweight and include both the detailed and summary cost changes in an annual report. 5. To make the annual report available to the Idaho potato industry and to present the information as requested. 6. To maintain a Cost of Production Advisory Committee representing the different segments of the Idaho potato industry and to meet with this group to review the CAR estimates and to obtain input on proposed revisions. I would like to acknowledge the cooperation and support that I receive from all segments of the Idaho potato industry, including growers, processors, and input suppliers. I would also like to thank the Idaho Potato Commission for the funding I receive to support this project, IPC Project Number 8742, UI Project number BDK902. Cost of Production Background The University of Idaho Department of Agricultural Economics and Rural Sociology (AERS) develops and publishes crop costs and returns (CAR) estimates also referred to as enterprise budgets or cost of production estimates -- for many of the major crops grown in Idaho. CAR estimates are revised and published every other year in odd-numbered years, typically in the early winter. Crop CAR estimates have historically been developed for four geographic regions of the state: southwestern Idaho, southcentral Idaho, eastern Idaho, and northern Idaho. Enterprise budgets are tied to region-specific production management systems that reflect climate and soil conditions as well as current cultural practices. Production practices depicted in the University of Idaho CAR estimates are typical or representative for that crop and region, recognizing that there is a wide range in production practices pcop-12.doc University of Idaho November 15, 2012

6 among growers, or even between fields on the same farm. Primarily because of data collection limitations relating to sample size, these costs of production estimates do not represent a regional average. 2 Information used in developing production practices modeled in the CAR estimates comes from a variety of sources, including: information from individual growers, information from grower panels, industry fieldmen, as well as University of Idaho county Extension educators and production specialists. Both crop and livestock CAR estimates are available from the Internet at the following URL: Click on Resources and then either Crops or Livestock. The crop CAR estimates are organized by year and by region. Copies of this report and earlier reports on changes in potato production costs in Idaho can be found at the same web address. Click on Resources and then Project Reports Crop Input Costs Prices used to value inputs in the 2012 potato CAR estimates came from data collected from input suppliers by the University of Idaho. This information is published in the Agricultural Economics Extension Series. The Idaho Crop Input Price Summary for 2012 is available at Data were collected between February and October. Sources included irrigation districts and canal companies, agricultural lenders, crop insurance companies, trucking companies, aerial and other custom applicators, fuel suppliers, and chemical and fertilizer dealers. Information on seed potato prices and the cost to cut and treat potato seed was taken from a survey of Idaho seed potato growers and commercial growers. A charge for handling and transportation is added to the FOB seed farm-based seed potato prices to derive a seed potato cost for each region. Machinery and equipment prices were obtained from a survey of dealers conducted between August and December of 2010, and published in 2011 as PNW 346: The Cost of Owning and Operating Farm Machinery in the Pacific Northwest: These prices were increased by 5% based on the annual change in USDA s Prices Paid Machinery Index from 2010 to Irrigation equipment prices and costs were based on Extension Bulletin 788, Economics of Sprinkler Irrigation Systems: handline, solid set & wheelline, and Extension Bulletin 787, Economics of Low-Pressure Sprinkler Irrigation Systems: center pivot and linear move. Irrigation system costs were also adjusted using the USDA Prices Paid Machinery Index. pcop-12.doc University of Idaho November 15, 2012

7 Potato Cost of Production Overview 3 Cost of production estimates are influenced by assumptions made in depicting a representative or typical farm. Farm size and acreage planted to different crops will influence costs, particularly machinery ownership costs. It is important to recognize this when making comparisons between regions where assumptions differ or within a region over time as the underlying assumptions change. The University of Idaho currently has ten potato CAR estimates. Nine CAR estimates are for commercial potato production and one is for seed production. A list of CAR estimates by region and variety is found in Table 1. Table 1 also indicates whether the CAR estimates include storage or fumigation costs. Farm Size and Potato Acreage Table 2 shows the farm size and potato acreage for each region s model farm for the five most recent years when cost of production estimates were made. For 2012 the model farm in southwestern Idaho is 1,200 acres with 300 acres in potatoes, while the model farms for southcentral and eastern Idaho are 1,800 acres with 450 acres and 600 acres in potatoes, respectively. In general, operating costs are not influenced by farm size. However, ownership costs do change with farm size, primarily because of economies of size and scale with equipment. Equipment ownership costs per acre are strongly influenced by the number of acres over which these costs are spread. The more acres, the lower the cost. In setting the farm size and selecting the machinery compliment, we attempt to achieve an economically efficient combination. Equipment that is under utilized has high ownership costs, while equipment with too many hours of use results in unrealistically low ownership costs. Input Costs Some input prices are region specific, while other input prices are standardized for the entire state since they don t vary consistently by region. Table 3 contains information on three such items: interest rates, labor wage and benefit rates, and power costs based on Idaho Power s Service Schedule 24, and the resulting cost per acre inch of water applied. Table 3 has values for 2012, the previous 3 years and the percentage change from 2011 to In the costs and returns estimates, interest is charged from the time an expenditure is made until the harvest month using the operating interest rate shown in Table 3. Operating interest is identified as a separate line item in the CAR estimates. The intermediate interest rate is used in calculating non-cash machinery costs. The labor used in crop production falls into four classes shown in Table 3. Labor used to operate machinery, drive trucks, and manage pivot irrigation systems receive a higher wage than irrigation labor used on set-move systems (handlines and wheellines) and unskilled general farm labor used primarily during harvest to pick clods and rocks and to help with storage and trans-loading operations. Prior to 2012, irrigation labor was not split between set-move and continuous move irrigation systems. The labor costs include the base wage rate plus payroll taxes and pcop-12.doc University of Idaho November 15, 2012

8 4 benefit costs. These are shown as a percentage. Additional labor information is included in the background and assumptions page that accompanies each CAR estimate. While Idaho Power s service area does not extend to all irrigated areas of southern Idaho, it is by far the largest supplier of power to Idaho farms and ranches and that is why it is used in the CAR estimates. The power rates shown in Table 3 are used with a center pivot irrigation system to derive the cost per acreinch of water applied. The power demand used in the calculation is for pressurization only. The standard assumption for each region is that surface water is delivered to the farm from a canal. Cost per acre-inch of water applied by different irrigation systems and with different pumping lifts are found in Table 2 of the Crop Input Cost Summary for 2012 referenced earlier. Tables 4-a, 4-b and 4-c contain cost information on commonly used inputs where prices generally vary by region. These include fuel (gas, farm diesel and road diesel) and irrigation water assessments. Table 4-a shows these costs for southwestern Idaho, Table 4-b shows the costs for southcentral Idaho and Table 4-c shows the costs for eastern Idaho. Prior to 2008, fuel prices were determined by a survey conducted at a single point in time, typically August. Since 2008, fuel prices found in the Crop Input Cost Summary and used in CAR estimates are the simple average of prices collected at four times during the year: February, April, June and August. This change was made at the request of the potato cost of production advisory committee. Table 5 contains the fertilizer component prices from 2010 through 2012 used in the CAR estimates, and the percentage changes from 2011 to Prior to 2009 fertilizer was collected and summarized by region. Potato Yields The yield in a CAR estimate is used to calculate gross revenue and break-even prices needed to cover costs in different categories. Yield is also the basis for certain costs, such as promotion or inspection fees paid by growers. Yield also drives storage and transloading costs which are calculated on a hundredweight basis. Table 6 shows the potato yields used in the University of Idaho s 2012 commercial potato CAR estimates, as well as the previous four yearss. Some values are shown only as a reference and indicate the value we would use if we published a CAR estimate for that area and with those production practices. Only those shown in bold type are used in CAR estimates. Prior to 1991 there was not a consistent method used to determine potato yields in CAR estimates for all three regions. Starting in 1991, yields in all three regions were based on USDA-NASS county or regional- pcop-12.doc University of Idaho November 15, 2012

9 5 level yield data. From 1991 to 1995, the yield was calculated using a 5-year rolling average. From 1995 through 2003 the yields used were based on a projected yield using exponential smoothing with an alpha value of.20. This procedure eliminated the negative bias that resulted from using historical data to calculate averages when yields were increasing rapidly. Unfortunately, exponential smoothing also produced projected yields that varied widely from actual yield when potato yield variation from one year to the next was substantial. To avoid this problem, the yield calculation for CAR estimates was switched to a projected 3-year average starting in For 2006, the 3-year average consisted of two years of historical data and the third year was projected, based on the November USDA crop production report. Starting in 2007, the 3-year average was switched to the three most recent years of published USDA data. For the 2012 CAR estimates, yield data for the 2009, 2010 and 2011 crops were used. The 2012 county-level data for Idaho will not be published until October 2013, so the yields used in calculating the average will always be lagged by one year. Yields used in the CAR estimates are rounded to the nearest 5 hundredweight. These base area yields are then adjusted to account for fumigation, a procedure described later. For crop reporting purposes, the Idaho NASS Field Office breaks Idaho into regions. The USDA calculates potato yields both for individual counties within a region and for the region itself. The yield estimates used in southwestern and southcentral Idaho CAR estimates are based on the USDA-NASS regions and includes all the counties in that region. Prior to 2001, yields in eastern Idaho CAR estimates were based on four major commercial potato counties: Bannock, Bingham, Bonneville and Power. Starting in 2001, separate CAR estimates were made for commercial potato production in the southern counties, Bannock, Bingham and Power, and the northern counties: Bonneville, Jefferson and Madison. Starting in 2012, Jefferson County was removed from the northern county s average. (See Tables 6-8.) Because of changes in how yields were calculated and other procedural changes, it can be difficult to make historical comparisons going back more than one year. In this report when procedural changes occur in cost calculations, the previous year s CAR estimate is re-calculated using the new procedure so that the year-to-year change is based on the price and quantity change of inputs, not based on procedural changes. Because of this, the resulting costs for the previous year can be different than those published the previous year. The potato yields used in the 2012 CAR estimates are 10 cwt higher than those used in 2011 for eastern Idaho, both South and North districts. Yields are the same for southwestern Idaho and are 5 cwt lower for pcop-12.doc University of Idaho November 15, 2012

10 6 southcentral Idaho. (See Table 6.) Note that for the second year, the yield for Southwestern Idaho was switched to a Russet Burbank Adjusted Yield, which is 96% of the region s average yield. The following section explains how the yield values used in the fumigation and non-fumigation CAR estimates are derived. Fumigation Yield and Cost Allocation Dilemma Fumigation has a significant impact on per acre production costs and can also have a large impact on potato yield and quality. For an individual grower, this is does not pose a problem because the cost and yield increases correspond. In budgeting procedures used to generate potato CAR estimates, the cost increase is not a problem when fumigation is included. There are, however, two yield questions that must be considered. The first question: how much of a yield increase should be attributed to fumigation? The second question: what should the base yield in the non-fumigation CAR estimate be? Since the county and regional yields published by USDA contain both fumigated and non-fumigated potato acreage, USDA values are not appropriate for either a CAR estimate with fumigation or one without fumigation unless some attempt is made to identify and separate the fumigation yield impact in the data. Historic yields based on USDA data are too low if used in a CAR estimate with the full cost of fumigation included. Historic yields are too high if used in a CAR estimate when no fumigation cost is included. Including only a partial cost for fumigation would be appropriate in calculating average production costs, but not for calculating typical costs where fumigation is either used or it is not. In addition, the methods used by the University of Idaho to obtain farmer production practice data is not consistent with calculating average production costs for a region. Using the USDA yield data and including a partial fumigation cost in a typical budget is not appropriate as it gives the appearance that fumigation is less expensive then it actually is. The USDA county-level or regional potato yield data are used to calculate a 3-year average yield for a given area. These procedures were discussed in the previous section. This base area yield value is set equal to the weighted average of the fumigated yield and the non-fumigated yield as shown in the following formula. The weights are estimated percentages of potato acres in that region that are fumigated and not fumigate, respectively. The yield adjustment attributable to fumigation as well as the percentage of acres fumigated in each region is shown in Table 9. Fumigation Yield Adjustment Factor pcop-12.doc University of Idaho November 15, 2012

11 7 (% of acres not fumigated x Y) + (% acres fumigated x FY) = Area Average Yield, Where Y = non-fumigation yield, FY = fumigation yield, and FY = Y + fumigation yield adjustment The following example illustrates how the fumigation adjustment factor was used, given an area yield of 400 cwt, with 60 percent of the potato acreage fumigated and a fumigation yield adjustment of 50 hundredweight per acre. Set up the equation as shown below and solve for Y..4Y +.6 (Y+50) = 400.4Y +.6Y + 30 = Y + 30 = 400 Y = 370 And FY = 420 Check:.4 x x 420 = 400 Fumigation yield in this example is 420 and non-fumigation yield is 370, while the area average is 400. The fumigation CAR estimate would include the full cost of fumigation and the non-fumigation would have no fumigation costs. Thus, the costs and yields would correspond. Note: There are limitations to this type of adjustment and there is a lack of publicly available data on which to base fumigation estimates. While not perfect, using this methodology does reduce the previous negative bias that occurred when calculating costs per hundredweight when the benefit of fumigation on yield was included in the region or county yields, but the cost of fumigation was not. Comments from the potato industry on how to improve this procedure are encouraged, particularly on how to improve the values shown in Table 9. Using the percentages of acres fumigated from Table 9 and the number of potato acres grown in each region produces a statewide weighted-average of approximately 45 percent of the potato acreage being fumigated. This falls within the ranges of values of percent given by knowledgeable people in the industry. Unresolved Yield Issue Regardless of how the area potato yields are calculated, how does this yield compare to the grower s paid yield? The answer will vary depending on whether the potatoes are sold in the fresh or in the process pcop-12.doc University of Idaho November 15, 2012

12 8 market. The yield data from USDA includes all tubers greater than 1-1/2 inches. Since the University of Idaho CAR estimates do not segment the yield into size and grade components that would sell for different prices, the breakeven prices shown in the CAR estimates are what the grower would have to average in order to cover costs. The implicit assumption is that the yields shown in the CAR estimates are a paid yield. But with unusable averaging around 8 percent for processing potatoes, the yield shown in the UI CAR estimates is greater than what growers would be paid on. This issue may not be resolved in the CAR estimates, but it certainly needs to be addressed if the potato industry uses the values from these CAR estimates to justify contract base prices and incentives. The underlying issue is whether per the per acre cost and the changes in per acres costs from year-to-year is a better measure to use than cost per hundredweight and the change in per hundredweight costs from year-to-year Cost of Potato Production Overview and Comparison Direct comparisons with previously published estimates should not be made without accounting for differences in procedures and assumptions. Procedural adjustments were made in several calculations between 2011 and These are discussed later. Note that beginning with the 2003 CAR estimates, the non-storage CAR estimates model a situation where potatoes are trans-loaded to a semi-trailer, rather than being hauled directly to the plant or processor storage in field trucks, which was the assumption prior to The semitrailer is hired, not owned, so it shows up as a custom hauling expense. The labor costs for the crew at the transloading point must also be accounted for. The assumption used in the U of I CAR estimates is that the transloading crew is the same as the cellar crew used when potatoes are placed in storage. Transloading labor is included in the transloading operating expense, and is not included in the labor cost category. There is also an ownership cost in the non-storage CAR estimates to account for depreciation, interest and insurance on the trans-loading equipment. The trans-loading equipment includes most but not all the equipment that is used in the storage CAR estimates and includes: conveyers, even-flow bin, eliminator/sizer, and piler. Information regarding the specific farm situation for each CAR estimate, i.e. farm size, tillage, cultivation, fertilization practices, irrigation method, etc., is discussed on the background and assumptions page that is included with published CAR estimates, but not included in this report. Cost Summaries Table 10 summarizes the dollar values per acre for operating, ownership and total costs for 2011 and 2012, as well as the change per acre between these two years measured both in dollars and as a pcop-12.doc University of Idaho November 15, 2012

13 9 percentage. Table 10 includes eight of the nine commercial potato budgets published by the University of Idaho. The CAR estimates in Table 10 are grouped by region. The changes in operating costs per acre were all positive, ranging from a $133 to $240. Ownership costs increased for potato CAR estimates, ranging from $37 to $71 per acre. Total costs per acre increased for all the CAR estimates, ranging from $180 to $311. On a percentage basis, operating costs changes ranged from 6.3% to 9.2%. Percentage ownership costs per acre increases ranged from 3.1 to 5.7%, while total costs percentage increases ranged from 5.2% to 8.1%. Table 11 is organized the same as Table 10, but shows the dollar values and percentage cost change per hundredweight. When yield from one year to the next remains the same, the percentage change per acre and per hundredweight are the same. But with yields used in the CAR estimates up in eastern Idaho and down in southcentral Idaho, percentage increases per hundredweight were different in those regions in comparison to percentage changes in costs per acre. The change in operating costs per hundredweight ranged from $0.22 to $0.45. The increase in ownership costs per hundredweight ranged from $0.05 to $0.13. Increases in total costs per hundredweight ranged from $0.27 to $0.59. On a percentage basis, the operating costs per hundredweight increases ranged from 4.3% to 9.2%. Percentage increases in ownership costs per hundredweight ranged from 1.9% to 5.7%, while total cost increases ranged from 3.5% to plus 8.1%. Tables 12, 13 and 14 show the dollar and percentage changes per acre by major cost category for the nonstorage, storage and storage with fumigation CAR estimates, respectively. This allows for a side-by-side comparison across regions of potato CAR estimates in the same production category. Making cost comparisons between regions may not always be appropriate, however, because of difference in the assumed management practices and farm sizes. Management practices for southcentral and southeastern Idaho are fairly similar, making direct comparisons more meaningful. The detailed CAR estimates for each production system and region are shown in the appendix, starting on page 23. Cost Comparisons CAR estimates without storage ranged from $2,776 per acre in eastern Idaho (nofumigation) up to $4,167 in southwestern Idaho (with fumigation). CAR estimates with the standard 4-1/2 months of storage costs ranged from $3,038 in eastern Idaho (no fumigation) to a high of $4,528 in southwestern Idaho (with fumigation). The range in values per hundredweight is not so extreme. Without storage costs, cost per hundredweight ranged from $$7.40 in eastern Idaho up to $7.86 in southwestern Idaho In storage CAR estimates, costs per hundredweight ranged from a low of $8.10 in eastern Idaho without fumigation up to $8.54 in southwestern Idaho where fumigation is the standard. pcop-12.doc University of Idaho November 15, 2012

14 10 Seed costs were down in 2012 compared to Operating interest paid was also down in 2012 compared to 2011 because of the lower interest rate, in spite of an overall increase in operating expenses. Storag operating costs declined in southcentral Idaho because of the lower yields, and in southwestern Idaho because the lower interest rate more than offset the increase in other storage operating costs. Depreciation and interest on equipment was only slightly higher in spite of a 5% increase in machinery prices. The lower interest rate used kept the increase to aound 1%. Land costs were up as rental rates move higher with the higher commodity prices. Because operating costs increased, overhead went up as well since it is calculated as a percentage of the overall operating expenses. Adjustments for 2012 Changes in insectides applied because of the threat of Zebra Chip was factored in. The biggest change was in southwestern Idaho and the smallest change was in eastern Idaho. Treating for potato psyllids also increased custom costs as the additional insecticides were often applied by air. Assumptions used to calculate miles on pickups and trucks were reviewed and applied consistently across all regions, which resulted in some minor changes in fuel use. The wage rate used for irrigation labor was increased to the same rate as that used for machinery labor to reflect the higher quality of labor used to manage pivots compared to the labor used for set-move irrigation systems. A new table, Table 15, was added this year. This table shows the base cost of rasing and harvesting potatoes. It then shows the storage repair and operating costs, and the resulting cost of production and storage by month. The numbers shown in bold are for the 4-1/2 months of storage used in the storage CAR estimates. The values shown for 2011 were re-calculated using the new procedures for consistency.. pcop-12.doc University of Idaho November 15, 2012

15 Table 1.Idaho potato costs and returns estimates by region for Region/Publication No. Variety Storage Fumigation Commercial Potatoes 11 Southwestern: EBB2-Po1-12 Russet Burbank No Yes EBB2-Po3-12 Russet Burbank Yes Yes Southcentral: EBB3-Po1-12 Russet Burbank No No EBB3-Po2-12 Russet Burbank Yes No EBB3-Po3-12 Russet Burbank Yes Yes Eastern South Counties: EBB4-Po1-12 Russet Burbank No No EBB4-Po5-12 Russet Burbank Yes No EBB4-Po6-12 Russet Burbank Yes Yes Eastern North Counties: EBB4-Po2-12 Russet Burbank Yes No Seed Eastern Seed Counties EBB4-Po4-12 G3 Russet Burbank Yes No Eastern South Counties: Bannock, Bingham and Power. Eastern North Counties: Bonneville and Madison. Jefferson County was dropped in Table 2. Model farm size and potato acreage assumptions by region: Farm Potato Farm Potato Farm Potato Farm Potato Farm Potato Southwestern Southcentral Eastern pcop-12.doc University of Idaho November 15, 2012

16 Table 3. Interest rates, labor charges and power rates used in CAR estimates: and percentage changes from 2011 to Change Operating Interest Rate 6.75% 7.0% 6.75% 6.0% -11.1% Intermediate Interest Rate 7.0% 7.5% 7.0% 6.25% -10.7% Labor Class (overhead) Equipment Operator Labor (30%) $15.60 $15.80 $16.25 $ % Truck Driver Labor $12.50 $13.00 $ % Irrigation Labor (30%) $11.05 $11.25 $11.55 Irrigation Labor: HL & WL (30%) $11.55 $ % Irrigation Labor: CP (25%) $16.25 $ % General Farm Labor (15%) $9.20 $9.30 $9.55 $ % Power Rate: Idaho Power Irrigation Service Schedule 24 Monthly Service Charge $15.75 $17.92 $18.18 $ % Demand Charge: irrigation season $4.90 $ 5.57 $5.65 $ % Base Rate: per kwh % Power Cost Adjustment per kwh ,036% Effective Rate: per kwh % Pumping Cost per Acre Inch $1.72 $1.50 $1.47 $ % Pumping cost is calculated using Idaho Power Company rates for a 160-acre center pivot with a corner system: 69% pumping plant efficiency and with zero lift. Pumping costs per acre-inch at different lifts (0-, 100-, 200- and 300-feet) and different irrigation systems (center pivots without corner systems and wheellines) can be found in the Idaho Crop Input Cost Summary for Table 4-a. Current and historical fuel and water assessment prices for southwestern Idaho: and percentage change from 2011 to Change Gasoline $2.30 $3.00 $3.50 $ % Off-Road Diesel $2.00 $2.65 $3.50 $ % Road Diesel $2.50 $3.15 $4.00 $ % Water Assessment $43.25 $45.55 $45.85 $ % pcop-12.doc University of Idaho November 15, 2012

17 Table 4-b. Current and historical fuel and water assessment prices for southcentral Idaho: and percentage change from 2011 to Change Gasoline $2.25 $3.00 $3.50 $ % Off-Road Diesel $1.95 $2.60 $3.45 $ % Road Diesel $2.45 $3.10 $3.95 $ % Water Assessment $38.20 $42.20 $41.30 $ % 13 Table 4-c. Current and historical fuel and water assessment prices for eastern Idaho: and percentage change from 2011 to Change Gasoline $2.20 $2.90 $3.45 $ % Off-Road Diesel $1.95 $2.55 $3.35 $ % Road Diesel $2.45 $3.05 $3.85 $ % Water Assessment $14.55 $14.80 $14.60 $ % E. Idaho South District $25.00 $25.00 $30.00 $ % E. Idaho North District $11.05 $11.40 $11.55 $11.65$ +0.9% Table 5. Current and historical fertilizer component prices for southern Idaho: and percentage change from 2011 to Change Dry Nitrogen (46-0-0) $0.50 $0.47 $0.61 $ % Liquid Nitrogen (32-0-0) $0.56 $0.48 $0.70 $ % P 2 O 5 Dry ( )* $0.46 $0.34 $0.57 $ % P 2 O 5 Liquid ( )* $0.63 $0.50 $0.76 $ % K 2 O (0-0-60) $0.69 $0.43 $0.51 $ % Sulfur $0.19 $0.17 $0.22 $ % *Nitrogen in and was valued at the price of N in urea and Solution 32, respectively. pcop-12.doc University of Idaho November 15, 2012

18 Table 6. Calculated potato yields used in published University of Idaho costs and returns estimates by region, both with and without fumigation: * Area cwt cwt cwt Southwest Region: Base Yield Potatoes: No Fumigation Potatoes: Fumigation Adj. Russet Burbank: Fumigation Southcentral Region: Base Yield Russet Burbank: No Fumigation Russet Burbank: Fumigation Eastern Region: Russet Burbank: Base 350 South Counties* : Base Yield South: No Fumigation South: Fumigation North Counties*: Base Yield North: No Fumigation North: Fumigation Note: Values in bold indicate published CAR estimates. There are no published CAR estimates for those not in bold. These are shown only for reference and comparison. *Eastern Idaho North Counties: Bonneville and Madison. Jefferson County was dropped in *Eastern Idaho South Counties: Bannock, Bingham and Power. Note: Russet Burbank adjustment factor on SWI is -4%. This was first used in Table 7. Potato yields published by USDA for crop years and the 3-year averages based on the most recent published data. 3-Year Area Average Southwest Region Southcentral Region Eastern Region South District North District Statewide Source: USDA-NASS. Note: Yields for Eastern North District are the revised yields that include only Bonneville and Madison Counties. pcop-12.doc University of Idaho November 15, 2012

19 15 Table 8. Historical potato yields reported by USDA for the primary commercial potato counties in eastern Idaho for and historical 3-year average for crop year. 3-Year Area Average North District Counties: Bonneville Madison county Average Jefferson South District Counties: Bannock na Bingham Power county Average Source: USDA-NASS. Note: Jefferson County was dropped from the North District in 2012 (2011 potato crop year). Values for previous years were re-calculated using only Bonneville and Madison counties. Table 9. Fumigation percentage by region and yield adjustment factors by region. Region Acres Fumigated Fumigation Adjustment Southwest 60% + 65 cwt Southcentral 50% + 55 cwt Southeastern South District 45% + 45 cwt North District 30% + 40 cwt Note: current values have been used since 2007 when fumigated percentages were increased by 5 percentage points in all regions. pcop-12.doc University of Idaho November 15, 2012

20 16 Table 10. Cost changes per acre by region from 2011 to 2012, University of Idaho. Southwestern Idaho Southcentral Idaho Eastern Idaho-South R. Burbank: Fumigation & No Storage R. Burbank: Fumigation & Storage R.Burbank: No Storage R.Burbank: Storage R.Burbank: Fumigation & Storage R.Burbank: No Storage R.Burbank: Storage R.Burbank: Fumigation & Storage Po1 Po3 Po1 Po2 Po3 Po1 Po5 Po Op. Cost $2,606 $2,783 $2,006 $2,159 $2,568 $1,741 $1,872 $2, Op. Cost $2,846 $3,014 $2,173 $2,305 $2,730 $1,887 $2,006 $2,366 $ Change $240 $231 $167 $146 $162 $146 $133 $157 % Change 9.2% 8.3% 8.3% 6.8% 6.3% 8.4% 7.1% 7.1% 2011 Own. Cost $1,250 $1,443 $1,030 $1,192 $1,222 $848 $986 $1, Own. Cost $1,321 $1,513 $1,069 $1,229 $1,259 $889 $1,032 $1,056 $ Change $71 $70 $39 $37 $37 $41 $46 $46 % Change 5.7% 4.9% 3.8% 3.1% 3.1% 4.9% 4.7% 4.6% 2011 Total Cost $3,856 $4,226 $3,036 $3,351 $3,790 $2,589 $2,858 $3, Total Cost $4,167 $4,528 $3,242 $3,534 $3,989 $2,776 $3,038 $3,423 $ Change $311 $302 $206 $183 $199 $187 $180 $204 % Change 8.1% 7.1% 6.8% 5.5% 5.2% 7.2% 6.3% 6.3% Note: rounded values may not add up. Op. = Operating and Own. = Ownership Summary per Acre University of Idaho 11/7/2012

21 17 Table 11. Cost changes per hundredweight by region from 2011 to 2012, University of Idaho. Southwestern Idaho Southcentral Idaho Eastern Idaho-South R. Burbank: Fumigation & No Storage R. Burbank: Fumigation & Storage R.Burbank: No Storage R.Burbank: Storage R.Burbank: Fumigation & Storage R.Burbank: No Storage R.Burbank: Storage R.Burbank: Fumigation & Storage Po1 Po3 Po1 Po2 Po3 Po1 Po5 Po Op. Cost $4.92 $5.25 $4.78 $5.14 $5.41 $4.77 $5.13 $ Op. Cost $5.37 $5.69 $5.24 $5.55 $5.81 $5.03 $5.35 $5.63 $ Change $0.45 $0.44 $0.46 $0.41 $0.40 $0.26 $0.22 $0.25 % Change 9.2% 8.3% 9.6% 8.0% 7.4% 5.5% 4.3% 4.6% 2011 Own. Cost $2.36 $2.72 $2.45 $2.84 $2.57 $2.32 $2.70 $ Own. Cost $2.49 $2.86 $2.58 $2.96 $2.68 $2.37 $2.75 $2.51 $ Change $0.13 $0.13 $0.12 $0.12 $0.11 $0.05 $0.05 $0.05 % Change 5.7% 4.9% 5.0% 4.4% 4.2% 2.1% 1.9% 2.1% 2011 Total Cost $7.28 $7.97 $7.23 $7.98 $7.98 $7.09 $7.83 $ Total Cost $7.86 $8.54 $7.81 $8.52 $8.49 $7.40 $8.10 $8.15 $ Change $0.59 $0.57 $0.58 $0.54 $0.51 $0.31 $0.27 $0.30 % Change 8.1% 7.1% 8.1% 6.7% 6.4% 4.4% 3.5% 3.8% Note: rounded values may not add up. Op. = Operating and Own. = Ownership Summary per CWT University of Idaho 11/7/2012

22 18 Table 12. Per acre and percentage change in costs from 2011 to 2012 for irrigated Russet Burbank potatoes: no storage costs. Item Southwestern Idaho Southcentral Idaho Eastern Idaho Change from 2010 Change from 2010 Change from 2010 Yield 0 0.0% % % Operating Inputs $ % $ % $ % Seed: -$ % -$ % -$ % Fertilizer: $ % $ % $ % Pesticides & Chemicals: $ % $ % $ % Custom & Consultants: $ % $ % $ % Irrigation: $ % $ % $ % Machinery: Fuel & Repairs $ % $ % $ % Labor $ % $ % $ % Transload $ % $ % $ % Other: Fees & Crop Insurance $ % $ % $ % Operating Interest -$ % -$ % -$ % Total Operating Costs $ % $ % $ % Operating Costs per Unit $ % $ % $ % Ownership Costs: Transloading Equipment $ % $ % $ % Tractors & Equipment $ % $ % $ % Land * $ % $ % $ % Overhead $ % $ % $ % Management Fee $ % $ % $ % Total Ownership Costs $ % $ % $ % Ownership Costs per Unit $ % $ % $ % Total Costs: Total Costs per Acre $ % $ % $ % Total Cost per Unit $ % $ % $ % Click on: Resources Click on: Project Reports No Stor % Change University of Idaho 11/7/2012

23 19 Table 13. Per acre and percentage change in costs from 2011 to 2012 for irrigated Russet Burbank potatoes: with storage costs & no fumigation. Item Yield % % Operating Inputs $ % $ % Seed: -$ % -$ % Fertilizer: $ % $ % Pesticides & Cehmicals: $ % $ % Custom & Consultants: $ % $ % Irrigation: $ % $ % Machinery: $ % $ % Labor: $ % $ % Storage: -$ % $ % Other: Fees & Crop Insurance $ % $ % Operating Interest -$ % -$ % Total Operating Costs $ % $ % Operating Costs per Unit $ % $ % Ownership Costs: Potato Storage System Tractors & Equipment Land * Overhead Management Fee Southcentral Idaho Change from 2010 Eastern Idaho Change from 2010 $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % Total Ownership Costs $ % $ % Ownership Costs per Unit $ % $ % Total Costs: Total Costs per Acre $ % $ % Total Cost per Unit $ % $ % Click on: Resources Click on: Project Reports Stor % Change University of Idaho 11/7/2012

24 20 Table 14. Per acre and percentage change in costs from 2011 to 2012 for irrigated Russet Burbank potatoes: with storage costs & fumigation. Item Southwestern Idaho Southcentral Idaho Eastern Idaho Change from 2010 Change from 2010 Change from 2010 Yield 0 0.0% % % Operating Inputs $ % $ % $ % Seed: -$ % -$ % -$ % Fertilizer: $ % $ % $ % Pesticides & Chemicals: $ % $ % $ % Custom & Consultants: $ % $ % $ % Irrigation: $ % $ % $ % Machinery: $ % $ % $ % Labor: $ % $ % $ % Storage: -$ % -$ % $ % Other: Fees & Crop Insurance $ % $ % $ % Operating Interest -$ % -$ % -$ % Total Operating Costs $ % $ % $ % Operating Costs per Unit $ % $ % $ % Ownership Costs: Potato Storage System $ % $ % $ % Tractors & Equipment $ % $ % $ % Land * $ % $ % $ % Overhead $ % $ % $ % Management Fee $ % $ % $ % Total Ownership Costs $ % $ % $ % Ownership Costs per Unit $ % $ % $ % Total Costs: Total Costs per Acre $ % $ % $ % Total Cost per Unit $ % $ % $ % Click on: Resources Click on: Project Reports Stor & Fum % Change University of Idaho 11/7/2012

25 21 Table Idaho potato base cost of production, monthly storage costs and cumulative production and storage costs by region: base + monthly storage costs. Storage Op. Costs SWI SCI EI-S EI-N Base $7.21 $7.18 $6.77 $6.69 Storage Ownership $0.48 $0.48 $0.48 $0.48 Base + Storage Ownership $7.69 $7.66 $7.25 $7.17 Storage System Repairs $0.061 Cumulative Storage Op. Costs October $0.34 $8.09 $8.06 $7.65 $7.57 November* $0.52 $8.27 $8.24 $7.83 $7.75 December $0.61 $8.36 $8.33 $7.92 $7.84 January $0.71 $8.45 $8.42 $8.01 $7.93 February $0.80 $8.55 $8.52 $8.11 $8.03 March $0.89 $8.64 $8.61 $8.20 $8.12 April* $1.09 $8.83 $8.80 $8.39 $8.31 May $1.20 $8.95 $8.92 $8.51 $8.43 June $1.33 $9.08 $9.05 $8.64 $8.56 SWI = Southwestern Idaho SCI - Southcentral Idaho (Magic Valley), No Fumigation SEI-S = Eastern Idaho - Southern Counties (Bannock, Bingham & Power), No Fumigation EI-N = Eastern Idaho - Northern Counties (Bonneville & Madison), No Fumigation Base includes the cost to grow and harvest potatoes, not including storage or transloading. Storage operating costs include: repairs (shown separately), plus monthly operating costs: labor, power, chemicals, interest, shrink & insurance. * Sprout inhibitor applied. The values shown in bold correspond to the standare 4-1/2 months of storage assumed in the potato costs and returns estimates that include storage. Cumulative storage operating expenses are calculated to the end of the month. Monthly Storage University of Idaho 11/7/12

26 Appendix

27 Table Southwestern Idaho Irrigated Russet Burbank Commercial Potatoes: With Fumigation and No Storage. Comparison with Final 11/7/2012 Quantity Price or Value or Item Per Acre Unit Cost Cost/Acre Comparison Gross Returns 2011 Yield Change Potatoes 530 cwt $7.50 $3, % Operating Inputs $ Change % Change Seed: $ $ $ % G-3 Burbank Potato Seed 24 cwt $13.75 $ $ $ % Seed Cutting 24 cwt $1.65 $39.60 $38.40 $ % 23 Fertilizer: $ $ $ % Dry Nitrogen - Preplant 210 lb $0.69 $ $ $ % Dry P2O5 230 lb $0.60 $ $ $ % K2O 265 lb $0.57 $ $ $ % Sulfur 115 lb $0.25 $28.75 $25.30 $ % Micronutrients & Foliars 2 ac $26.00 $52.00 $50.00 $ % Liquid Nitrogen 195 lb $0.75 $ $ $ % Liquid P2O5 65 lb $0.91 $59.15 $49.40 $ % Pesticides & Chemicals: $ $ $ % K-Pam 35 gal $7.50 $ $ $ % Potato Seed Treatment 24 cwt $0.45 $10.80 $10.80 $ % Admire Pro 8.0 fl oz $2.65 $21.20 $ $ % Quadris Flowable (2x) 14.0 fl oz $2.75 $38.50 $ $ % Eptam 7E 4.0 pt $6.25 $25.00 $24.20 $ % Endura (2x) 7.0 oz $6.45 $45.15 $44.10 $ % Metribuzin 75DF 1.0 lb $12.60 $12.60 $ $ % Prowl 3.3EC 2.0 pt $5.05 $10.10 $9.50 $ % Bravo Weather Stik 1.5 pt $4.65 $6.98 $6.98 $ % Dithane F45 Rainshield 1.6 qt $8.50 $13.60 $ $ % Gavel 75DF 2.0 lb $8.10 $16.20 $0.00 $16.20 Fulfill 5.50 oz $6.85 $37.68 $0.00 $37.68 Movento (2x) fl oz $7.00 $70.00 $0.00 $70.00 Agri-Mek 0.15EC (3x) 36.0 fl oz $0.95 $34.20 $0.00 $34.20 Asana XL 0.00 fl oz $0.84 $0.00 $8.06 -$8.06 Leverage fl oz $1.80 $0.00 $6.75 -$6.75 Reglone 1.0 qt $22.85 $22.85 $ $ % Custom & Consultants: $ $ $ % Custom Fumigate: Deep Inject 1 ac $35.00 $35.00 $32.00 $ % Custom Fertilize 2 ac $9.25 $18.50 $ $ % Consultant 1 ac $22.00 $22.00 $22.00 $ % Custom Air Spray-5G 4 ac $9.15 $36.60 $36.60 Custom Air Spray-10G 2 ac $11.75 $23.50 $ $ % Custom Hauling 530 cwt $0.38 $ $ $ % Irrigation: $ $ $ % Water Assessment 1 ac $45.85 $45.85 $45.85 $ % Irrigation Power-CP * 35 acin $1.56 $54.60 $51.45 $ % Irrigation Repairs-CP * 35 acin $0.48 $16.80 $15.75 $ % Machinery: $ $ $ % Fuel - Gas 1.69 gal $3.60 $6.08 $5.92 $ % Fuel - Farm Diesel 23.1 gal $3.55 $82.01 $80.85 $ % Fuel - Road Diesel 2.02 gal $4.05 $8.18 $8.08 $ % Lube 1 ac $14.45 $14.45 $14.23 $ % Machinery Repairs 1 ac $67.06 $67.06 $62.00 $ % Labor: $ $ $ % Equipment Operator Labor 3.23 hr $17.50 $56.53 $52.49 $ % Truck Driver Labor 2.48 hr $13.50 $33.48 $32.24 $ % Irrigation Power-CP 2.44 hr $17.50 $42.70 $39.65 $ % General Farm Labor 3.98 hr $10.05 $40.00 $38.01 $ % Transload: $82.15 $76.85 $ % Transloading Costs 530 cwt $0.128 $67.84 $63.60 $ % Transloading Equipment Repair 530 cwt $0.027 $14.31 $13.25 $ % Other: $ $ $ % Crop Insurance 1 ac $60.00 $60.00 $58.00 $ % Fees & Assessments 530 cwt $0.17 $90.10 $90.10 $ % Operating 6.0% $91.69 $ $ % Total Operating Costs $2,846 $2,606 $ % Operating Costs per Unit $5.37 $4.92 $ % Net Returns Above Operating Expenses $1,129 $1,297 SWI-Po1-12 University of Idaho