 Today, I'm going to talk with you a little bit about the economics of establishing alfalfa. Now, this can be done in a couple different scenarios, kind of the way we've been looking at it lately. The first is establishing alfalfa, you know, as just a traditional pure stand of alfalfa. The other thing we've been looking at lately is establishing alfalfa in a couple different stands, whether that be mixed grass pastures, Bermuda grass, Bahia grass or a fescue pasture. And so I think we can evaluate either scenario here. So we'll get into talking about a little bit about the economics of establishing alfalfa. Okay, so whenever we're thinking about establishing alfalfa from an economics perspective, we're going to do an economic analysis to involve the estimation of production costs, as well as the expected receipts generated from the adoption of alfalfa. So once production costs are known, producers are in a much better position in order to evaluate the adoption of alfalfa or any other forge. So our first objective here today is just to determine what our establishment costs for alfalfa are. And we're going to do that using a couple different methods here. The first one is looking at our variable costs. Our variable costs are those costs that can be eliminated by not producing the crop. So you know, if we decided not to plant alfalfa this year, obviously those fertilizer or lime or seed costs would not occur for. So those costs can be eliminated. These are typically, variable costs are also going to be cash costs that are typically used for production. They can be seeded, as we mentioned, fertilizer, lime, custom hire applications. We're talking about fuel, repairs and maintenance, hired labor. We're talking about operating capital. This is a business. We're going to treat it like one. We're going to have to include interest in operating capital and then some chemicals that we may do. We're going to use a burn down in order to get our alfalfa established in the fall. So we're going to have a little bit on all these variable costs here for us to include in our budget. The next one is going to be our fixed costs. So whenever we're evaluating things, fixed costs, we probably already occurred these fixed costs, but these fixed costs recur regardless of whether we decide to produce the crop. So fixed costs, we're just going to use our prorated share towards alfalfa. Whenever we're beginning into alfalfa, we don't need to plant the whole farm in alfalfa. To try it over several years to establish our stands, this is a large investment. We want to make sure that we diversify our risk if we're able to. So the fixed costs are going to include a prorated establishment cost. So prorated establishment costs of alfalfa. Then there's going to be our tractor costs, planting and land preparation equipment, and rental as well as our management. This is a high management crop that is going to take a lot of time and we've got to focus on that. So we're going to also include a management fee to make sure we pay ourselves for the additional management that we have to apply to an alfalfa crop. There's also fixed costs on equipment, like depreciation, interest on that investment as well as insurance. There's lots of fixed costs for us potentially include in establishing this alfalfa stand. Again, I understand that we may have already incurred some of these costs, but if we're taking out some other production and putting it into alfalfa, that took those costs from that perennial stand or just an annual forward stand and put those additional fixed costs into this alfalfa category. So whenever we're thinking about our largest fixed cost, this is probably going to be the cost of establishment. And again, we'll prorate this establishment cost, but it's very important to think about, you know, on an annual basis, we get three or four years out there and you're looking at what your cash costs are. It's very important for us to realize that our largest cost for alfalfa on the fixed side of things was probably that cost of establishment. And so in order to account for the stand establishment in an economic analysis, our total establishment costs are going to be prorated over the stand's useful life. And so as a result of this, obviously that longer, useful life is going to be very important in reducing those annual fixed costs, whereas we're talking about that cost of establishment, reducing that cost of establishment based on a longer, useful life of that stand. So that's very important for us. So just a couple of things here. We'll go to Excel spreadsheet in just a moment, but whenever we're thinking about establishment costs for alfalfa, you know, in this changes each time we run the numbers, it can be anywhere from, from 300 to $500 per acre with some of the producers I've been working with, and these are just averages here. 28% of our establishment cost has been in seed costs. It's a very expensive seed and 38% have been in fertilizer and lime expenditures. So lime and fertilizer inputs. Obviously, these are going to vary greatly depending on the level of fertility of the soil as well as our soil pH. And then the seed costs are going to depend, that percentage of seed costs is going to depend if we're talking about a pure stand of alfalfa or if we're blending this in or mixing this into a mixed stand of alfalfa permutagrass, alfalfa behagrass, or even an alfalfa fescue stand. So those are just some of the things we're going to be thinking about as we, as we make some of these, some of these decisions. So I talk a little bit about the keys to alfalfa success. So in terms of, you know, the first key obviously is going to be stand longevity. The useful life of these alfalfa stands is, is, is really going to be the number one factor in determining the success of alfalfa from an economics perspective. And we'll get to an example on that in just a second. The second one is going to be total level of forage production. Whether this is alfalfa by itself or alfalfa mixed with permutagrass or behagrass or fescue, as we just mentioned, forage production is going to be critical in order to, in order to really be thinking about how much we harvest or how much we get into the animal from a grazing perspective, as well as, and then third one is going to be cost control. You know, this isn't, this is something we want it to be. We want to get that establishment done right. By the same time, we want to be conservative and not provide the plant with with more nutrients or more cost than that plant can take or really afford. So those are kind of what we're thinking about in terms of our keys. Just we want to focus on useful life. We also want to have, you know, high levels of forage production are obviously going to help make this economical and then cost control. So think about with me just a little bit in terms of the economics of establishing alfalfa, think about this prorated establishment costs. You know, if it's costing me $424 per acre to establish alfalfa, and you know, if in, and you know, in the, in the first year, you know, if I only have a one year useful life, that prorated establishment costs all occurs in that first year. So we have additional annual expenditures other than our prorated establishment costs, like after the first cutting, the additional fertilizer is not included in an establishment costs. So we have those establishment costs plus any annual costs the first year. Just for one year is a very expensive crop to grow. Now, when you start getting two, three, four, even five or six years out of an alfalfa stand, it makes it extremely economical. These are the scenarios where, hey, this alfalfa stand is is easily paying for itself. I'm looking at that three to four year time period there being a very successful alfalfa stand for us. Two years is a little tough on us. One year is just, we have to be, it has to be a very, very productive stand, we, or we have to have done it for extremely cheap to that potentially, for us to potentially make that work. So I've done just a little bit in terms of looking at alfalfa bermudagrass stands here and whenever we're doing an economic analysis of alfalfa bermudagrass, in terms of forage pasture costs per dry matter ton consumed. So this is for grazing alfalfa. You know, just if I have an alfalfa bermudagrass stand and I'm looking at comparing that to other feedstuffs, looking at break even costs here in terms of, you know, $200 a ton for some very high quality feedstuffs. If we were making a comparison between this, this forage quality and some feedstuffs, then this forage production of 4,000 pounds per acre consumption of 2,000, so 50% in the animal. In that first scenario, there are about $200 a ton in terms of growing and grazing per dry matter ton consumed. We feel like that's an economical level. That would be a scenario which we could move forward. So obviously, you know, if we can control our annual alfalfa bermudagrass forage production costs in that $300 range and we get more than 6,000 pounds of production between alfalfa and bermudagrass. For that mixture, then we're going to get very economical results in this scenario. But again, it's focused on the agronomy side of things. We can have that cost control and cost control of growing this stand of alfalfa bermudagrass or alfalfa by itself, but we have to get the production and we have to get the stand longevity here in order to really make this work. So, I'll switch over just a second. So we're going to talk a little bit about utilizing a computerized budget spreadsheet to help aid us in the development of alfalfa bermudagrass, developing an alfalfa bermudagrass budget that's tailored more to your specific scenario. And we can, this spreadsheet I'm about to share with you is available at the Range Scale REC economics page. And that's just something that it can really be a really good resource for us as we're thinking about establishing our own alfalfa bermudagrass stand. So let's look now at our alfalfa establishment budget. So what we're looking at here is, we'll call it table one, estimated cost of establishment for alfalfa. And this is just a general budget for the Southeast United States. And what we're looking at here is establishing alfalfa, pure stand of alfalfa. And these are, you know, easily we can change any of these scenarios if we're just looking at 50 acres in this scenario. And hopefully let's look at a three year useful life of alfalfa. You know, so some of the costs here. We have our soil tests, we have seed, different types of fertilizer, whether it be animal manure or commercial fertilizer. Other expenditures will have a lime, custom lime spread, weed control, management and equipment, hired labor, forage tests, if we want to start testing some of the product that we're producing. Some miscellaneous expenses. Everyone's going to have a little bit different expenses for their operation and then interest on one half of operating costs. So those are just some of the variable costs that we're going to get into here. Fixed costs wise, obviously it's going to be machinery and equipment, those ownership costs. We have general overhead, that management fee that we discussed and then land rent. OK, so going back to our soil tests, you know, we're going to want a soil test to evaluate what nutrients are out there in our soil and what we might need to apply. You know, here we're looking at one sample for 20 acres. So in terms of a unit of an acre, that's going to be 0.05. Seven dollars per soil test. So, you know, it's going to contribute very little on a cost per acre basis. You know, seed is going to be something that's a that's going to be a major cost for us here. So seed is, you know, it's in that 475 right now is kind of what we've we've averaged a bunch of seeds together in terms of some of the seed costs that we're looking at 25 pounds per acre. So work with your agronomist to to think about exactly what you're staying, depending on what your goals are in terms of getting this alfalfa planted. But, you know, that's $118 per acre, or just under 28 percent of total cost is just going to be tied up in seed. So this is something, you know, 28 percent of cost is something we have to get done right the first time. So we're not looking just when we get down to the fertilizer. We're not looking at applying any nitrogen. Again, if your specific scenario requires some, that's just something we're going to have to add here. Phosphorus here of 130 pounds per per acre at 36 cents per pound. So approximately 10 percent of our total cost of establishing alfalfa is just going to be in terms of phosphorus. As we know, potassium as our agronomist and animal scientists have mentioned to us, potassium is going to be a high requirement for alfalfa. Looking at 200 pounds per acre at 44 cents a pound. Potassium prices have increased, you know, over the last year. So that's, we got a little bit higher potassium costs. Up to 20 percent now of our total costs for alfalfa are going to just be alfalfa or potassium costs. We've got a micro nutrient package here that we're including. Again, that's going to be based on evaluating your soil tests and what you might be missing. You know, I like to include some fertilizer procurement because, you know, unless you're getting it delivered into the farm and that fertilizer procurement is already included into the price, then it's going to take some time and there's going to be some variable costs related to procuring fertilizer. Commercial fertilizer application. We're looking at one application. This could easily be two if you split these into multiple applications, but $8 an acre on fertilizer procurement there. Lime, we're looking at two tons per acre, prorated over five years here on our line at $35 a ton on our line. That's $14 an acre. Again, we got to have that lime spread. This is just a product here on our line. So custom lime spread, additional $1.60 an acre. We've got to have a burn down here for for burning down in the fall, regardless of whether you use Cromoxon or if you're looking at or if you're looking at a roundup or glyphosate. So, you know, we're going to have to have some some type of chemical here that we're going to make things dormant, most likely just depending on your individual situation, going from a prepared seed bed, maybe you don't need that. But there would definitely be some additional machinery equipment included and this is looking at just no tilling it into a dormant seed bed here and that's $13.53 and that's just going to be the variable cost of the machinery equipment and getting this no tilled into our our dormant stand. You know, these are some costs I like to include in there. If you've got additional hired labor, it's important to get those costs covered. In terms of forage tests, one sample per 10 acres, $7 an acre that's 70 cents per acre, not a big cost, very important. If you're if you're marketing a pure standard of alfalfa to to some horse producers or or anything such as that, it's important to be able to share with them what that potential, the quality that forage is and everyone's got different costs. So I kind of leave this up to producers to figure out, you know, what additional miscellaneous expenses, no matter what they are for them to be able to include those here include about $15 an acre. Interest on operating expense, even as interest rates have went down in terms of what the Federal Reserve lends to banks, they went up for our for through our farm credit systems. We're looking at operating interest right now 625 on a lot of loans. We're in a high risk environment here. So easily you can see our total cost of alfalfa establishment is easily already $350 an acre here on 50 acres. If we're looking at establishing 50, 50 acres of alfalfa, but pure stand, we're looking at close to $17,472 here. So 80% of our costs in terms of this alfalfa stand are going to be variable costs. That's very important for us to recognize. You know, we talk about estimated fixed costs, machinery equipment. Again, this is going to be some of those fixed costs that are associated with our no till drill, as well as that fertilizer procurement that we have above. So $11 and 80 and 89 cents per acre in terms of additional machinery equipment just owning the equipment. So these costs would occur regardless of whether we plan alfalfa that year. So these costs, but they're real. They're still real. We have to replace this machinery equipment over its long run. And we've already, this includes that purchase price. And we're just spreading it out over the crop or the commodity. General overhead, you know, paying for things like barn, as well as some of our administrative expenses there. Just general overhead. We include about 7% of kind of what we do in terms of variable costs as general overhead. And so general overhead of those variable costs is going to be about $25. So, you know, there's additional expenses that we could have, you know, broken it out, but just in a general overhead manner here in terms of our barn, as well as some other piece of machinery equipment that we that we might use from year to year in terms of this alfalfa stand is included there for general overhead. I like to include a management fee in terms of our estimated fixed costs. So we have a management fee here of 6% of our variable costs, which is about $20. Again, this alfalfa, it's a very, you know, high management crop that we really have to be focused on in terms of managing this alfalfa crop to really get good levels of longevity and production here. It's going to take a lot of time, not just managing it, but studying it and and learning how we can make our alfalfa crops even better. Again, land rent, we want to be paid if whether we own it or you have to pay a cash rent, we want to be we want to include this cost as a business cost, and we want to get paid for our resources and make sure that we're evaluating this correctly. So total fixed costs here $82 per acre, $4,115 in fixed costs. So whenever you combine our variable costs and fixed costs here over $331 per acre and variable and fixed costs. And then on the other side of things you also have for 50 acres, we'd be looking at about $21,587 here. So whenever we're thinking about establishing a large track like 50 acres for alfalfa, it's important to know what those potential cash obligations could be in terms of variable costs, as well as what some of those fixed costs what we're what we're sending some of these fixed costs to this that are establishing our alfalfa stand. So again, and again, this is just getting established later in the year, we may have some additional costs. And those would be on our annual cost budget for the first year of an alfalfa stand. So right now, if we're looking at potentially, we had 50 acres at a three year useful life, you know, potentially out there we had, we had, you know, $21,000 invested, just to get this stand established. If we're able to spread that out over three years, that becomes $7,195 or $143 per acre. So again, this potential useful life here, you know, it can be very valuable to us, in terms of reducing this establishment cost and not having such a high number on our annual alfalfa budget each year. So again, this is just looking at this is available to producers, looking at it in terms of cost of establishment of alfalfa. We also have one that's focused a little bit on establishing alfalfa into Bermuda grass. Again, this could easily be utilized for behave grass or fescue, but this is kind of what we're focused on right now in terms of of getting this alfalfa established. So with that, we'll switch back to our PowerPoint. Just wanted to share with you one more time. The economics of establishing alfalfa, again, that was our computerized budget spreadsheet. And as we as we move forward here, we'll continue to put more tools and more spreadsheets available on our range gal research, range gal research and education center economics page. And this is available at this website below here. You can just Google range gal research and education center, Chris pervat and or economics, and it'll bring you right to this page. And it'll just be alfalfa in the south or alfalfa establishment budget. So with that, I just like to wish you good luck establishing alfalfa in fall 2020. And if you have any questions, be sure to contact you can contact me, or you can contact your your state of agronomists, animal scientists or economists. So with that, good luck. And we'll talk with you soon. Thank you.