Montana Budgets for Organic Crops
This publication provides an overview of the economics of producing a range of organic crops in Montana as of 2021. It is designed to enable producers to understand the production operations, the costs of equipment, materials, and labor required to produce these crops. The enterprise budgets provided are estimated costs and returns to produce specific agricultural commodities. We profile organic hard red spring wheat, hay barley, lentil, alfalfa, and a cover crop mix in the Northern Plains. Estimates reflect production practices considered typical for the crop area, but they do not reflect any particular farm. The crops profiled in these budgets follow three different crop sequences. These sequences were implemented by researchers and replicated by several farmers as a part of an Organic Research and Extension Initiative (OREI) grant examining creeping weeds in organic cropping systems.
Last Updated: 09/22by Kabir Tumber, Consultant; Kate Binzen Fuller, Associate Professor and Agriculture Economics Extension Specialist, Montana State University; Alex Maas, Assistant Professor, Agricultural Economics and Rural Sociology, University of Idaho
Budget Assumptions
Values presented in these budgets are a combination of publicly available figures as noted in the references at the end of the guide, in combination with consultations with researchers, several farmers, crop insurance agents, and ag bankers in Montana. Yields reflect those in a ‘typical’ year, and do not reflect those collected in the study. These numbers will not apply to every situation. Importantly, they were largely collected in 2021 and do not reflect price changes realized thereafter.
General Crop Assumptions
Land: Budgets are based on a 2,400-acre farm, with 800 acres planted to the crop of interest. The other 1,600 acres in the system are planted in rotation with two other crops. The organic crop rotations considered for the economic analysis are summarized in Table 1 and presented below:
1. Nurse barley and alfalfa establishment (year 1), alfalfa (year 2), alfalfa (year 3), and hard red spring wheat (year 4)
2. Lentil (year 1), hard red spring wheat (year 2), clover (year 3), and hard red spring wheat (year 4)
3. Clover (year 1), hard red spring wheat (year 2), clover (year 3), and hard red spring wheat (year 4)
Budgets assume that 44% (1,056 acres) of acres are rented at $35 per acre based on average farmland rental rates in Montana, estimated premiums for non-irrigated certified organic land, and farmer feedback. The balance (1,344 acres or 56% of acreage) is assumed to be owned and valued at $1,300 per acre. Therefore, the average acre contributes $15.40 ($35*0.44) in rented land costs, plus land ownership costs of $33 ($1,300*0.56, amortized over 30 years). Total rental and ownership land costs are estimated at $48.40 per acre. Prices are estimated based on the 2020 USDA NASS cropland estimates across Montana, North Dakota, and South Dakota average prices and farmer feedback.
Irrigation: Budgets assume that all crop water needs are met by rainfall. No additional irrigation systems are used in the budgets.
Input Costs:
- Budgets assume equipment operator base labor wages of$16 per hour. An additional 40% is added to the base wage to incorporate taxes, insurance, benefits, and other overhead costs, for total labor costs of $22.50 per hour. These estimates are based on Bureau of Labor Statistics published wage estimates for farm and ranch laborers in Montana and farmer feedback.
- Fuel costs are estimated at $2.93 per gallon for red-dye diesel. These estimates are 3-year (2019-2021) average prices, adjusted to 2020 dollars.
- These budgets follow the field trials in the study in that no fertilizers or fertilizer costs are applied. However, organic farmers may use manure, compost, or other fertilizers approved for organic production.
- Herbicide is not applied. No additional tillage or other weed suppression is implemented.
Table 1. OREI Crop Rotation Systems, Average Annual Costs & Returns per Acre
|
Nurse Barley +
Alf Est, Alfalfa, Alfalfa, HRSW
|
Lentil, HRSW, Clover, HRSW |
Clover, HRSW, Clover, HRSW | |
| average annual cost/return per acre | |||
| GROSS RETURNS | $209 | $322 | $193 |
| TOTAL OPERATING COSTS/ACRE | $70 | $104 | $100 |
| Net returns above operating costs | $139 | $217 | $93 |
| TOTAL CASH OVERHEAD COSTS/ACRE | $27 | $35 | $31 |
| Total cash costs/acre | $97 | $140 | $131 |
| Net returns above cash costs | $112 | $182 | $62 |
| TOTAL NON-CASH OVERHEAD COSTS/ACRE | $39 | $60 | $54 |
| TOTAL COST/ACRE | $136 | $200 | $185 |
| NET RETURNS ABOVE TOTAL COST | $73 | $122 | $8 |
Equipment: Farm equipment is purchased new or used. This study uses the current purchase price for new equipment obtained from John Deere in 2021, adjusted to 60% to show a mix of new and used equipment. The budgets assume the farmer owns and operates the following equipment for the rotations noted above. (Not all equipment is used for each crop.)
- ½ ton and ¾ ton pickup trucks
- 400 HP 4WD Tractor
- Combine
- 165 HP 2WD Tractor
- 63 HP Utility Tractor
- 40’ Chisel Plow
- 35’ Tandem Disk
- 40’ Roller Packer
- 42’ and 30’ Seed Drill
- 40’ Grain Header
- 14’ Pickup Header
- 30’ Swather
- Side Delivery Rake
- 1,500-lb Round Baler
- Bale Spear
- Grain Cart
Organic certification: Farmers must pay to certify their land and crops as organic. Typically, a farmer will pay a flat fee of $1,000 for the operation, plus approximately $300-$400 for an inspection. Fees are estimated based on Montana Department of Agriculture data and farmer feedback. Budgets assume annual organic certification cost is $1,320 for the 2,400 acre farm ($0.55 per acre).
Office expenses: Office and business expenses are estimated at $10 per acre ($24,000 for 2,400 acres). These expenses include office supplies, telephones, bookkeeping, accounting, office utilities, and miscellaneous administrative charges. These estimates follow other state budgets for similar production systems.
Interest rates: Generally, a farmer will use two different types of loans: operating and capital. Operating loans are typically used to fund the annual operating costs of the farm operations and are paid back after harvest. These budgets assume operating loan interest rates of 5%. Capital loans are used to finance purchases such as land and equipment and are typically considered long-term loans. These budgets assume capital loan interest rates of 4.5%. These rates were acquired from an agricultural lender in the Northern Plains in 2021.
Property Insurance & Taxes: Montana property taxes are assessed at a base rate of $1,080 per $100,000 of value (1.08%). Property insurance is estimated at a rate of $1 per $1,000 of value. Property insurance is estimated following other state budgets for similar production systems.
Economic costs: These budgets use economic costs, rather than accounting costs. Economic costs take into account opportunity costs, or the value of the next best thing a given resource could be used for. For example, the value of operator labor enters the budget as a cost because the farm operator could be making a wage by working somewhere else instead.
Organic Hard Red Spring Wheat
Organic hard red spring wheat (HRSW) produced in the Northern Plains is milled and used in products manufactured by some of the largest organic wheat product brands in the United States.
HRSW land preparation begins in April by chisel plowing once across the entire field based. Chisel plowing breaks up sub-surface soil without turning the soil. The majority of surface residue is left intact. After chisel plowing, land is seeded with a grain drill at 80 pounds per acre.
The crop is harvested in August with a combine and transferred to a grain cart. Grain is then hauled away, paid for by the farmer. Hauling costs are estimated at $0.35 per bushel. HRSW yields are estimated at 25 bushels per acre. Returns are based on a 4-year average of USDA organic wheat prices in Montana, inflated to 2020 dollars. The four-year average price is $15.43 per bushel, though individual price received will vary by protein and moisture content. A longer time series for prices was unavailable.
The budget assumes that no fertilization or pest management materials are used throughout the season.
This budget also assumes that crop insurance is purchased for HRSW at a price of $14.05 per acre, based on estimates from Organic Center enterprise budgets and consultation with a crop insurance agent in Montana.
HRSW production costs and returns are summarized in Table 2.
Organic Lentils
Organic lentils are produced in the Northern Plains for domestic consumption and international markets.
Lentil land preparation in Montana typically begins in May by chisel plowing one-time through the field. Following chisel plowing, land is seeded with a grain drill at 50 pounds per acre based on enterprise budgets from The Organic Center and farmer feedback. Following drilling, the field is rolled to help level and smooth the soil surface. Rolling improves seed-to-soil contact and increases harvest efficiency.
In August, lentils are swathed and then picked up separately. Lentils are then transferred to a grain cart and hauled away, paid for by the farmer. Hauling costs are estimated at $0.17 per hundredweight (CWT). Lentil yields are estimated at 10 CWT per acre (1,000 pounds per acre). Returns are based on a 3-year average of USDA organic lentil prices in Montana and are assumed to be $51.49 per CWT ($0.51 per pound). A longer time series for prices was unavailable.
Adrian Sanchez-Gonzalez, MSU
The budget assumes that no fertilization or pest management materials are used throughout the season.
This budget also assumes that crop insurance is purchased for lentils at a price of $16.20 per acre based on estimates from The Organic Center and consultation with a crop insurance agent in Montana.
Organic lentil production costs and returns are summarized in Table 3.
Nurse Barley & Alfalfa Establishment
This budget assumes barley is produced in the Northern Plains for use as hay.
Barley land preparation begins in October by chisel plowing one-time through the field. In April of the following spring, land is seeded with a grain drill at 60 pounds per acre. This budget assumes that barley is planted as a nurse crop to alfalfa. Alfalfa is seeded at the same time as barley, drilled at 12 pounds per acre. The alfalfa stand will establish for a full year before its first harvest, and then be terminated after two years of harvest.
The barley crop is harvested in July. Barley is swathed, raked, and baled into 1,500-pound round bales. Bales are picked up and stacked. Barley hay yields are estimated at 0.8 tons per acre. Organic barley hay is assumed to sell for $155 per ton. This is based on conventional prices estimates for 2022 and an assumed $20 organic premium to conventional barley hay.
The budget assumes that no fertilization or pest management materials are used throughout the season.
Nurse barley and alfalfa establishment production costs and returns are summarized in Table 4.
Alfalfa
This budget assumes alfalfa is produced in the Northern Plains for livestock feed.
Following the rotation description in the OREI grant, this alfalfa stand is planted simultaneously with the hay barley. The stand is then harvested for two seasons before termination. The hay barley serves as a nurse crop that is terminated at harvest. Alfalfa is harvested the following July after the barley hay is harvested. Alfalfa is swathed, raked, and baled into 1,500 pound round bales. Bales are picked up and stacked. Returns are based on a 5-year average of USDA organic alfalfa prices in Montana and are assumed to be $162.14 per ton. Prices are based on several forage quality factors including protein content, fiber, and total digestible nutrients. This return does not include hauling charges.
The budget assumes that no fertilization or pest management materials are used throughout the season.
Alfalfa production costs and returns are summarized in Table 5.
Cover Crop Mix
This budget assumes a cover crop mix is produced in the Northern Plains, primarily for soil health benefits.
An organic cover crop mix is drilled in June, with the following composition per acre: barley (Lavina) at 7 pounds, emmer at 13 pounds, oat (Otana) at 5 pounds, Peas (4152) at 42 pounds, lentils (Beluga) at 7 pounds, fava beans at 20 pounds, mustard at 2 pounds, radish at 6 pounds, and turnip at 1 pound. The cover crop is planted to provide several benefits, including providing vegetative cover to reduce soil erosion, contributing organic matter and associated benefits to the soil, and enhancing water infiltration in the soil. The cover crop is terminated by discing in September. Costs are summarized in Table 6.
Table 2. Organic Hard Red Spring Wheat Costs and Returns
| Quantity/Acre | Unit | Price or Cost/Unit | Value or Cost/Acre | |
| GROSS RETURNS | ||||
| Organic HRSW | 25 | bu | $15.43 | $386 |
| TOTAL GROSS RETURNS | $386 | |||
| OPERATING COSTS | ||||
| Custom: | $9 | |||
| Hauling | 25 | bu | $0.35 | $9 |
| Rent: | $15 | |||
| Land Rent (44% Ac) $35/Ac | 0.44 | acre | $35 | $15 |
| Seed: | $19 | |||
| Organic Spring Wheat | 80 | lb | $0.24 | $19 |
| Labor: | $9 | |||
| Equipment Operator Labor | 0.38 | hrs | $22.50 | $9 |
| Machinery: | $22 | |||
| Fuel – Gas | 0 | gal | $1.67 | $0 |
| Fuel – Diesel | 6.14 | gal | $2.93 | $18 |
| Lube | $2 | |||
| Machinery Repair | $5 | |||
| Interest on Operating Capital (5%) | $0 | |||
| TOTAL OPERATING COSTS/ACRE | $78 | |||
| TOTAL OPERATING COSTS/BU | $3.11 | |||
| NET RETURNS ABOVE OPERATING COSTS | $308 | |||
| CASH OVERHEAD COSTS | ||||
| Liability Insurance | $0 | |||
| Office Expense | $10 | |||
| Organic Certification | $1 | |||
| Crop Insurance – HRSW | $14 | |||
| Property Taxes | $9 | |||
| Property Insurance | $1 | |||
| Investment Repairs | $4 | |||
| TOTAL CASH OVERHEAD COSTS/ACRE | $38 | |||
| TOTAL CASH OVERHEAD COSTS/BU | $1.51 | |||
| TOTAL CASH COSTS/ACRE | $115 | |||
| TOTAL CASH COSTS/BU | $4.50 | |||
| NET RETURNS ABOVE CASH COSTS | $270 | |||
| NON-CASH OVERHEAD COSTS (Capital Recovery) | ||||
| Fuel Tanks & Pumps | $1 | |||
| Fuel Wagon | $0 | |||
| Shop Building | $3 | |||
| Shop Tools | $0 | |||
| Storage Building | $1 | |||
| Tool Carrier | $1 | |||
| Land Ownership (56% Ac) $1300/Ac | $33 | |||
| Equipment | $20 | |||
| TOTAL NON-CASH OVERHEAD COSTS/ACRE | ||||
| TOTAL NON-CASH OVERHEAD COSTS/BU | $2.33 | |||
| TOTAL COST/ACRE | $174 | |||
| TOTAL COST/BU | $6.95 | |||
| NET RETURNS ABOVE TOTAL COST | $212 |
Table 3. Organic Lentil Costs and Returns
| Quantity/Acre | Unit | Price or Cost/Unit | Value or Cost/Acre | |
| GROSS RETURNS | ||||
| Organic Lentil | 1,000 | lb | $0.51 | $515 |
| TOTAL GROSS RETURNS | $515 | |||
| OPERATING COSTS | ||||