Paul L. Hollis

December 4, 2008

4 Min Read

It won't come as a surprise to those who grow them, but a recent USDA report reveals the cost of producing vegetables and melons has risen significantly, by about 32 percent from 2004 to 2006.

The report examines all major expenses on specialized regional vegetable and melon farms during the period 1998-2006.

The report concludes that expenses were higher in the West and lowest in the Midwest, with labor accounting for 30 percent of U.S. cash expenses, followed by fertilizer and agricultural chemicals at 18 percent.

During 2004 to 2006, the production expenses — excluding operator dwelling expenses — of all U.S. farms and ranches averaged $213 billion annually. The portion consisting of fixed and variable cash expenses during this period averaged $195 billion, up 12 percent from the average of the previous three years.

The USDA report states that the production of vegetables and melons in the United States occurs on less than seven million acres, about 2 percent of all harvested cropland. However, from this relatively small acreage comes a diverse set of high-value products, which generated 16 percent of all farm cash receipts and 8 percent of U.S. farm export value during 2004-2006.

Reflecting the intensive, high-cost nature of U.S. vegetable and melon production, total farm cash expenses of such farms averaged $288,036 per farm in 2004-2006 and accounted for roughly one-seventh of total U.S. farm cash expenses. The largest vegetable and melon farms — those with more than $1 million in sales — averaged $2.9 million in total cash expenses. Cash expenses for all farms and ranches with more than $1 million in sales averaged about 40 percent less, at nearly $1.7 million.

Up to now, according to the report, national or regional information on production expense components that are specifically for the vegetable and melon sector has not been widely available. Most expense research has grouped vegetables and melons with fruit and tree nuts, grouping the combination as one sector. No previous studies have focused solely on the expenses of vegetable and melon farms.

For this report, farms are defined as specialized vegetable farms if vegetables and melons account for at least half the total value of farm production. According to ARMS data, these specialized farms represent the bulk of U.S. vegetable and melon output, relying heavily on vegetable sales for a substantial proportion of their farm income.

On average, specialized vegetable farms accounted for more than half of all the farms producing vegetables in the United States and contributed nearly 90 percent of the total value of U.S. vegetable production since 2004-2006.

In addition to a national overview, specialized vegetable farms are examined in the report according to four census regions: Northeast, Midwest, South and West. Regionally, these farms tend to be most heavily concentrated in the South, with substantial numbers also found in the Midwest and West. The West, however, dominates in terms of crop value, with about two-thirds of the national total for vegetable and melon farms.

Very large farms accounted for 88 percent of the total value of vegetables produced by all specialized vegetable farms, and these tend to be concentrated in the West, according to the report. Vegetable and melon farms that produced less than $40,000 worth of commodities (small farms) made up 70 percent of these farms, yet accounted for just 1 percent of the total value of production. Small farms are largely concentrated in the South.

The specialized vegetable and melon farm group consists of hundreds of individual commodity markets each with unique supply and demand characteristics, says the report. So the aggregate data for specialized vegetable and melon farms may not be representative of any single commodity within the industry.

This is also true for farms raising individual vegetables that may serve both fresh and processed markets, such as sweet corn or tomatoes.

In the case of tomatoes, the production expenses for fresh market tomatoes differ radically from those of tomatoes grown for processing, especially the labor expense. Each acre of tomatoes is heavily dependent on hand labor for harvest, while an acre of processing tomatoes is machine-harvested in a fraction of the time — usually by a processor-owned machine.

Over the past decade, concludes the report, prices paid by vegetable and melon growers for production inputs have moved steadily higher. The top five inputs in terms of nominal price gains between 1998-2000 and 2004-2006 were fuels (up 99 percent), fertilizer (up 47 percent), seeds and transplants (up 38 percent), farm machinery (up 27 percent), and wage rates (up 23 percent).

Farm chemicals (up 3 percent) had the slowest gain in prices over the period.

In 2007, strong demand from field crop farmers helped push fertilizer and seed prices higher, while rising interest rates boosted the cost of credit. At the same time, strong world demand for petroleum and limited U.S. refinery capacity pushed diesel fuel prices higher.

Labor was found to account for 30 percent of total cash expenses of all vegetable and melon farms. For farms in the South, labor accounted to 36 percent of cash expenses.

Fertilizer and agricultural chemicals made up the second largest expense category, with 18 percent of total cash expenses — a share unchanged in each of the three-year periods studied.

Further substantial increases are expected in 2008, led by escalating prices for fuel and fertilizers.

About the Author(s)

Paul L. Hollis

Auburn University College of Agriculture

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