PERMANENT PLANTINGS 4 TULARE COLLEGE CENTER

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1 COLLEGE OF THE SEQUOIAS COMMUNITY COLLEGE DISTRICT Board of Trustees Meeting March 14, 2016 PERMANENT PLANTINGS 4 TULARE COLLEGE CENTER Status: Presented by: Information C. Louann Waldner Provost, Tulare College Center Issue The Farming Operations Committee, as part of the Agriculture Advisory Executive Committee, is recommending planting of permanent crops. The Ag Advisory Committee will be seeking funding from the Special Farm Reserves fund for the implementation of the recommendation. Background The Tulare College Center manages the farming portion of the TCC campus to aid the COS District in providing the financial resources to support the agriculture instructional programs for the College. The Farming Operations Committee has analyzed the crop revenue for the past five years as well as the potential revenue from different cropping patterns. Factors considered include commodity prices, both surface and groundwater availability and the instructional needs of the educational programs. With those factors considered, the Committee is recommending the College go forward with permanent plantings, specifically almond trees. The Committee believes that the permanent plantings are the best cropping pattern choice to maximize the revenue and net profit of the 320 acre farming operation, efficiently manage both surface and groundwater resources and provide a cropping pattern to enhance the ag instructional program, specifically Plant Science. The factors considered when choosing the permanent planting are outlined in the attached document. Recommended Action The attached report is for informational purposes only and is intended to address questions from the board.

2 The COS District operates the farming portion of the TCC campus to provide the financial resources to support the agriculture instructional program for the college. To that end, the farm operations committee and College administrators responsible for the acreage have set the following goals in managing the operation: Maximize revenue and net profit on the 320 acre farming operation. Reduce water usage my efficiently managing both surface and groundwater resources. Provide a cropping pattern that enhances the agriculture instructional program. Why Permanent Plantings? Commodity prices, both surface and groundwater supplies and agriculture education needs of the Tulare College Center has prompted the community farm operations committee to plan for and recommend planting of permanent crops on 70 acres of the 320 acres of the farmland. The addition of permanent plantings provides diversification of crops and spreads out risks for the farming operation. Additionally, the investment today provides consistent long-term earnings for the District to support the Ag Instructional Units. Finally, the addition of permanent plantings gives additional opportunities in instruction related to trees, irrigation techniques and water management. The negatives of permanent plantings is that a permanent crop cannot be fallowed and the ground and surface water management must be directed toward the permanent crops (trees). Additionally, the investment is significant. However, the estimate of return over the row crops is significant with a net of 2.2 million for almonds versus 1 million in double cropped row crops over a 15 year period. The nut industry has had a stronger market in more recent years although fluctuations in the agriculture industry can be expected with any crop. PROJECTIONS 70 Acres Year With Almonds Net Profit/Loss Double Crop Net Profit/Loss ($352,107.00) $36, ($117,544.00) $70, ($116,746.00) $70, ($8,298.50) $70, $87, $70, $131, $70, $219, $70, $271, $70, $306, $70, $341, $70, $271, $70, Permanent Plantings Page 1

3 $306, $70, $262, $70, $324, $70, $306, $70, Cumulative Net Profit/Loss $2,236, $1,026, Permanent Planting Choices There are several factors to consider when choosing which type of permanent plantings would most benefit the educational and financial resources of the COS Agriculture Education Program. These would include: Establishment Costs Years to Production Water Requirements Tree Life Maximum Revenue Per Acre (Based on today s prices) Production Costs Per Acre (Based on today s costs) Net Profit Per Acre (Based on today s values and costs) Establishment Costs As shown in the chart below the establishment cost estimates per acre range from a high of $20,000 for table grapes to a low of $6,000 per acre for Clementine citrus. Nut crops are comparable with almonds at about $8,500 per acre and pistachios at about $11,500 per acre. Permanent Plantings Page 2

4 Years to Production, Tree Life and Water Requirements As shown in the chart below grapes and almonds have the fewest years to production at 3 while citrus, pistachios and walnuts take about 5 years. When comparing pistachios, almonds and walnuts, almonds come into production 2 to 3 years earlier. Almonds need to be replaced in about 22 years while the tree life of other permanent plantings goes up to 40 years of life. Water requirements are about the same for each tree type. Revenue, Expenses and Net Profit Comparisons Citrus has the potential to return the largest net profit per acre at maximum production levels based on current prices. However, citrus also faces the most risk when it comes to weather and potential of freeze in Tulare County. The entire citrus crop can be lost due to freezing temperatures in addition to damage to trees. For instance in , in Tulare County alone some citrus crops, which did not provide some method of freeze protection (wind machines, running water, etc.) lost 100% of the crop as well has having severe damage or total loss of established trees. Conversely, almonds, pistachios and walnuts need so many hours of cold or degree days to achieve maximum production. The chart illustrates that almonds would return the largest net return at maximum production based on current prices and costs at about $7,500 per acre. Permanent Plantings Page 3

5 Revenue, Expenses, Net at Maximum Production Revenue Expense Net $10,000 $3,500 $5,000 $10,000 $7,500 Considerations: Calculations based on maximum production and today s prices $7,200 $3,500 $2,800 $13,500 $15,000 $11,000 $10,000 $2,200 $1,500 $3,700 Clementine Citrus Grapes Almonds Pistachios Walnuts Analysis of Revenue and Expenses for the COS Farming Operation * Crop Revenue $ 291, $ 391, $ 804, $ 466, $ 304, $ 326, The chart above illustrates the crop revenue for the past five years of the COS farming operation. The average revenue from the 320 acres has averaged $430,687 per year. However, this average is somewhat misleading because of a record year of commodity prices that occurred in *. During that year commodity prices were at record levels. As shown in the price chart below as documented in the Tulare County Ag Commissioners Crop Report alfalfa hay was at $233 per ton, corn silage was in the $50-$55 range, and wheat silage at $50-$55 prices. In addition during that year the college grew corn grain which it sold for $237 per ton and wheat grain for $238 which added over $200,000 to the revenue for the farm Alfalfa $ $ $ $ $ $ $ Corn Silage $ $ $ $ $ $ $ Wheat Silage $ $ $ $ $ $ $ Permanent Plantings Page 4

6 If the year were adjusted to reflect normal commodity prices the average crop revenue on the 320 acres would be about $355,000 or about $1,110 per acre. As shown in the graph below the volatile commodity prices for double cropping of corn and wheat along with the dropping prices for alfalfa will reduce the farm revenue in the foreseeable future. The drought and lack of groundwater has forced the college to reduce cropping patterns to single cropping and planting early to take advantage of early harvest prices on corn and wheat crops. At the peak of almond production at about 10 years and utilizing a price of $3.50 per pound the revenue generated from only 70 acres of almonds would be $784,000 which would be more than double what the revenue is currently being achieved on the entire 320 acre farm. Permanent Plantings Page 5

7 Revenue Potential for Almond Plantings As shown in the chart below is the price of almonds for the past five years. Prices have increase from $1.73 to $4.00 per pound during that time period. According to the Tulare County Crop report the almond price per pound has averaged about $.78 cents per pound more than pistachios and $1.78 per pound more than walnuts. Permanent Plantings Page 6

8 According to the Tulare County Crop report the almond revenue per acre has averaged $362 more than pistachios and $1,774 more than walnuts. Water Usage Another important consideration to consider with permanent plantings is water usage. Shown in the chart below is the approximate water usage by various crops in acre feet. Alfalfa tops the list with over 5.1 acre feet of water needed to grow the 6-7 cuttings produced by this perennial crop each year. When using a double cropping rotation program combining corn and wheat silage a total of about 6.0 acre feet of water. In comparison your permanent plantings of tree crops (almonds, pistachios, walnuts or citrus) would range from about acre feet of water per year. Another important consideration would be that almonds would utilize a sprinkler-spray fan system which would result in a more efficient use of the water being applied over a traditional flood/furrow irrigation system. Permanent Plantings Page 7

9 Educational Mission The chart below illustrates the top 10 crops grown in Tulare County based on the Tulare County Ag Commissioners Crop Report for Currently the COS Agriculture Education program has a farm laboratory covering dairy, livestock and row crop production. However, 6 of the top 10 crops grown are tree crops including almonds, pistachios and walnuts. Planting 70 acres of almonds would be instrumental in bringing tree crops to the farm laboratory to enhance the instructional program. Tulare County 2014 Milk 1 Cattle & Calves 2 Oranges 3 Grapes 4 Almonds 5 Pistachios 6 Tangerines 7 Walnuts 8 Corn Grain & Silage 9 Peaches 10 Permanent Plantings Page 8