NMSU Study Shows Onions New Mexico's Most Profitable Crop
Date: March 25, 1997
Editor: D'Lyn Ford (505) 646-6528, dlford@nmsu.edu
LAS CRUCES -- Hail to the unassuming onion. In a 10-year study by New Mexico State University's Agricultural Experiment Station, onions beat out flashier chile and the old standby alfalfa as the state's most profitable crop.
"Over the long haul, onions out performed everything," said Jim Libbin, an NMSU agricultural economist.
While their 10-year average came out the highest, onions are still a risky crop with profits going up and down "like a jagged mountain range" from year to year, he said.
In the study, Libbin looked at cost and return estimates from 1984 to 1993 of 56 modeled farms that represent actual operations found in 30 of New Mexico's 33 counties.
"We modeled the representative farms based on information from a group of farmers and agricultural specialists in each county," Libbin explained. "It might be a 200-acre farm in one county or a 500-acre one in another -- whatever is most representative."
Libbin and Jerry Hawkes, a research specialist, then evaluated the economics of each farm, including labor, equipment and financing costs, as well as the returns or profits at the end of each season.
"You don't have cycles in crop production like you do in livestock production, but we could see some of the trends -- the peaks and valleys over the years," Libbin said. "We could very easily identify the mid- to late-1980s crunch in agriculture as a very tough time for New Mexico."
He said it makes economic sense that risky, high-value vegetable crops like onions, as well as lettuce and chile, should do well over time. "The crop that has the most risk should have the most return, just like risky stocks should have better returns in the market," Libbin said.
He said onions bring a high value because of all the inputs -- like seed, water and fertilizer -- that are necessary to grow the crop. "It takes an awful lot of intense management," Libbin said. "Sometimes the capital outlay for an onion crop is five and 10 times that of a grain crop."
For the 10 years, green chile was the second most valuable crop. "On the other hand, everybody thinks red chile is a good crop. But it has gone through some cycles and has not been a great income producer for us over time," he said.
Alfalfa may not have come out on top in overall profit, but it was a very consistent income producer, Libbin said. Peanuts and long-staple cottons also did well.
Libbin was surprised that lettuce, often thought of as the "Las Vegas crop of all time," didn't end up on top.
Along with the top profit-makers, the research also revealed some consistent losers.
"Grain crops, traditionally, have never produced much of a profit," Libbin said. "For example, I don't think we've ever turned a profit with barley anywhere in New Mexico."
Other crops that came up short included wheat, grain sorghum, corn and short-staple cotton. Much of what little net income these crops did generate used to come from USDA price support programs, which are being phased out as a result of the of the 1996 farm bill. Libbin said prices for these crops are likely to increase over the next decade, but they'll be more variable than in the past.
He said the study also showed how some crops come and go in popularity. "Every 10 years it seems we have a two-year period where everybody is excited about sugar beets," Libbin said. "Then we lose our shirt on them, and we lay off them for another 10 years. Sugar beets never show a profit."
Libbin also makes crop forecasts each year. "Most of our projected prices seem to be fairly stable for the 1997 season," he said. "Overall, it looks pretty good for New Mexico. But that's before we see what happens with the weather, so it's all a guess."