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Determining the feasibility of organic apple production in the southern United States
Héctor Germán Rodríguez, Ph.D.Jennie Popp, Ph.D.Curt Rom, Ph.D. (Presenter) Heather Friedrich, M.S.Jason McAfee, M.S.
Innovation in Integrated & Organic Horticulture - ISHS Symposium Avignon University, France
June 8-12, 2015
Center for Agricultural and Rural SustainabilityDivision of Agriculture - University of Arkansas
Fruit Production Budgets
Tools used to assess costs and revenues associated with production
Traditionally paper based
Require large amount of information from producers to work
Interactive Sustainable Apple Budget
Interactive Budgeting: Computer based; User specifies input, tool
automatically makes calculations
User Friendly Little computer knowledge required Little data input needed
True Decision Support Assess costs, revenues as well as break-even points,
sensitivity analysis and risk analysis
Interactive Sustainable Apple BudgetVisit the Specialty Crop Section of the Center for
Agricultural and Rural Sustainability (CARS) website
www.cars.uark.edu
or
e-mail cars@uark.edu
For a free copy
Presentation Objective
Describe the benefits of the Interactive Sustainable Apple Budget
Walk through an example
Interactive Sustainable Apple BudgetBudgetTool/ Capability
Apple
Annual Calculations X
Multi Year Calculations X
Modification of inputs by year X
Breakeven Analysis X
Sensitivity Analysis X
Risk Analysis X
What does this mean?
Capabilities
Multi-year present value of net benefits In addition to giving annual return values,
the tools calculate what the value of all net revenues generated over all years are worth today
Input Modifications User can modify or enter new inputs
(activities, quantities and prices) each year. The budget will be updated automatically.
Breakeven Analysis
Breakeven Point Point at which cumulative total costs and
cumulative total revenues are equal
Can be calculated for Breakeven Price Breakeven Yield
Breakeven Price
Given yields and total costs, what price do I need (on average over time) to break even?
Total Cost Over Time
Expected Average Yield
Over Time
Breakeven Price
Breakeven Yield
Given market prices and total costs, what yield do I need (on average over time) to break even?
Total Cost Over Time
Expected Average
Market Price Over Time
Breakeven Yield
Sensitivity Analysis
“What if” analyses How different values of an input impact net
returns
“What if”: My yields over time are actually higher/lower
than I predict? The market price for the fresh/processing
market over time is higher/lower than I predict?
Risk Analysis
A technique that calculates the probability of obtaining a net present value of returns greater than a specific dollar target
What is the probability that I will earn a net present value greater than $90,000 during the life of the orchard?
Importance of The Tool
Allows the user to make more informed decisions by Comparing costs/revenues of different production
practices Estimating impacts of changes in yield/prices on
the solvency of the operation Assess the economic risk associated with a
particular production system Assessments can be made hypothetically;
without having to actually change practices
Example
Interactive Sustainable Apple Budget
Main Menu
Quick Start Menu
Quick Start Menu
Start Menu
Start Menu
Help Menu
Help Menu
User’s Guide
User’s Guide – PDF Version
This guide explains how to use the tool (step by step). It is linked to the tool so it can be accessed at any time.
User Input Userform opens without information. User needs to enter his/her own information or click
“Demo” to fill the grey boxes before running the model.
User Input: Run Once data are entered or selected, click “Run”
Summary The tool will generate gross returns, variable costs,
fixed costs, total costs and net returns for each year
Summary – Net Returns Calculator
The tool will generate, variable costs, fixed costs, total costs, gross returns and net returns for each year.
The “cumulative column” will show what year the enterprise starts to be profitable (in green).
How to Change Levels of Activity or Prices Here you can enter:
new activities new quantities new prices
Once changed, the tool will recalculate all costs and returns
Results Results are presented in graphical and tabular forms
Breakeven Analysis Click the Breakeven Analysis icon located in the
“economics screen” to see calculations in more detail. These calculations will be updated if initial inputs are
edited or new input is entered. Expected values are estimated by using the input
entered by the user
Breakeven Analysis Results
Sensitivity Analysis
“What if” analyses How different values of an input impact expected
net returns
“What if”: My yields over time are actually higher than I
expected? The market price for the fresh market over time is
higher than I expected?
Sensitivity Analysis
Click the Sensitivity Analysis icon located in the “economics screen” to change yield and price information.
Increase Fresh Market Price to $1.20/lb (before $1.00/lb)Increase Processed Market Price to $0.20/lb (before $0.15/lb)
BEFORE AFTER
Risk AnalysisThe tool also calculates the risk associated with this operation by entering some required information.
Risk Analysis
Risk AnalysisClick the Risk Analysis icon located in the “economics screen” to change yield and price information.
For instance, let’s change “Most Likely” yield each year From: 36 lbs/tree To: 40 lbs/tree
Risk Analysis
Risk Analysis
By increasing the “most likely” yield each year from 36 lbs/tree to 40 lbs/tree, the probability that the apple orchard generates at least $90,000 will increase from 60.2% to 72.7%.
The user can change yields and prices and compare scenarios against the baseline (default values).
Lots to this Tool! The capabilities of this tool are great
But at the same time it can be used to answer very simple questions alone
Built to be flexible, based on the needs of the user
Visit Our Website
Center for Agricultural and Rural Sustainabilitywww.cars.uark.edu
Fruit budgets can be found on the “Interactive Budgets for Fruit Crops” pagehttp://cars.uark.edu/ourwork/Specialty-Crop-Production-and-Marketing/fruit_budget.aspx
Thank You
For more information…
Jennie PoppJhpopp@uark.educars@uark.edu
Hector German Rodríguezhrodrig@uark.edu cars@uark.edu
Curt Romcrom@uark.educars@uark.edu
Center for Agricultural and Rural Sustainabilitywww.cars.uark.educars@uark.edu
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