Embed Size (px)
Citation preview
Cost of Establishing a Fruit
Orchard and National Fruit Market Trends
R. Karina Gallardo
WSU-Tree Fruit Research and Extension Center, School of Economic Sciences, Wenatchee
Presentation at the WA Chapter of American Society of Farm Managers & Rural Appraisers
Leavenworth May 5, 2011
Cost of Establishing a Fruit Orchard
Content
1. Budget Process
2. Where to find these studies?
3. Assumptions made
4. Study components
5. Summary of findings
6. Use of budgets
Budget Process
• Convene a group of growers–The budgets are not a survey–Representation of location, size of operations, and
experience
Budget Process (2)
• Determine the production scenario – Puts everyone on the same page when it comes to our assumptions
Budget Process (3)
• Costs depend on the assumptions
• Numbers are a reflection of expected costs under a strict set of assumptions
Cost Estimates of Establishing andProducing Gala apples are available in both
Excel and PDF
http://extecon.wsu.edu/pages/Enterprise_Budgets
Assumptions for Gala Study
• Gala on 9 series Dwarf rootstock
• Block size: 40 acres
• Orchard size: 160 acres
• Irrigation system Overhead and under tree drip
sprinklers Public irrigation district
• Architecture Two dimensional system (planar
canopy), randomly trained w/18-in radius from tree center
In-row space: 4 feet Between row: 10 feet
• Life of planting: 15 years
• Density: 1,089 trees per acre
Data on Costs during a Full Production Year for a 40-Acre Gala Block
Cost per Unit ($)
Units per Acre
Cost per Acre ($)
Number of Acres
Total Cost Per Acre ($)
Total Cost for Block ($)
Chemicals & Fertilizer*[1] 900.00 40 900.00 36,000.00
Irrigation Water* & Electricity [2] 100.00 40 100.00 4,000.00
Pruning (dormant)
labor cost per tree 0.55 1,089 598.95 40 598.95 23,958.00
Green Fruit Thinning
labor cost per tree 0.60 1,089 653.40 40 653.40 26,136.00
General Farm Labor [3] 500.00 40 500.00 20,000.00
Machinery Repair, Fuel & Lube 325.00 40 325.00 13,000.00
Irrigation & Pump Repair 70.00 40 70.00 2,800.00Wind Machine & Alarm System Repair
40.00 40 40.00 1,600.00
Pond Maintenance 50.00 40 50.00 2,000.00
Beehives 45.00 2 90.00 40 90.00 3,600.00
Harvest Costs (per bin)
picking (multiple picks) 23.00 50 1,150.00 40 1,700.00 68,000.00
checkers & tractor drivers 5.00 50 250.00
hauling [4] 6.00 50 300.00
Crop Insurance 86.52 40 86.52 3,460.80
Land and property taxes 75.00 40 75.00 3,000.00
Insurance (all farm) 50.00 40 50.00 2,000.00
Management salaries 400.00 40 400.00 16,000.00
Summary of Costs By Categories – Gala Apples ($/acre)
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000
Year 1
Year 2
Year 3
Year 4
Years 5-20
Establishment Orchard ActivitiesHarvest Activities Maintenance and RepairsOther Variable Costs (overhead, interest) DepreciationInterest Other Fixed Costs (taxes, insurance)
Fixed Costs
Estimated Net Returns per Acre at Various Prices and Yield - Gala Price ($/bin)
Yield (bins/acre)
200 225 250 275 300
35 -3,193 -2,318 -1,443 -568 306
40 -2,381 -1,381 -381 618 1,618
45 -1,569 -444 680 1,805 2,930
50 -757 492 1,742 2,992 4,242
55 55 1,430 2,805 4,180 5,555
60 867 2,367 3,867 5,367 6,867
[1] Includes amortized establishment costs.[2] Assumes pack-out of 20 packs/bin (all grades) and 925 lb/bin
Cost Estimates of Establishing andProducing Sweetheart Cherries are available in both
Excel and PDF
http://extecon.wsu.edu/pages/Enterprise_Budgets
Assumptions for Sweet Cherry Study
• Sweetheart on Mazzard rootstock
• Block size: 10 acres
• Orchard size: 150 acres
• Irrigation system Overhead and under tree drip sprinklers Public irrigation district
• Architecture Two dimensional system (planar
canopy), randomly trained w/18-in radius from tree center
In-row space: 10 feet Between row: 16 feet
• Life of planting: 25 years
• Density: 272 trees per acre
Summary of Costs Sweetheart Cherries by Categories ($/acre) Fixed Costs
Estimated Net Returns per Acre at Various Prices and Yield – Sweetheart Cherries Price ($/ton)
Yield (tons/acre)
800 1,600 2,400 3,200 4,000
2 -6,379 -4,779 -3,179 -1,579 21
4 -6,060 -2,860 340 3,540 6,740
6 -5,742 -942 3,858 8,658 13,458
8 -5,424 976 7,376 13,776 20,176
10 -5,106 2,894 10,894 18,894 26,894
12 -4,788 4,812 14,412 24,012 33,612
[1] Includes amortized establishment costs.
Cost Estimates of Establishing andProducing
Anjou Pears WILL SOON be available
Assumptions for Anjou Study
• 12-year old pear orchard
• Orchard size: 40 acres
• Irrigation system Micro sprinkler on tubing on
every row and 14-ft spacing in the tree row
Public irrigation district
• Architecture In-row space: 7 feet Between row: 15 feet
• Operating period: 20 years
• Density: 350 trees per acre; 25% of the planted trees are pollenizer trees (Bartlett)
Break-even Return per Bin to Cover Production Cost – Anjou Pears
Cost per AcreBreak-even Return per
Bin1. Total Variable Costs $5,344.24 $167.012.
Total Cash Costs[1] = Total Variable Costs + Land and Property Taxes + Insurance + Fees and Dues
$6,175.24
$192.98
3. Total Cash Costs + Depreciation of Irrigation System, Machinery, Equipment and Building
$6,650.24 $207.82
4.
Total Cost = Total Cash Costs + Depreciation + Interest[2] + Management Cost
$9,684.13
$302.63
[1] If there are other cash costs on an individual's orchard, these costs must be identified and included in the cash cost break-even return calculation.
[2] Interest costs include some actual cash interest payments.
Estimated Net Returns per Acre at Various Prices and Yield - Anjou
Price ($/bin)
Yield (bins/acre)
200 225 250 275 300
20 -5,111.05 -4,611.05 -4,111.05 -3,611.05 -3,111.05
32 -3,284.13 -2,484.13 -1,684.13 -884.13 -84.13
40 -2,066.18 -1,066.18 -66.18 933.82 1,933.82
50 -543.75 706.25 1,956.25 3,206.25 4,456.25
60 978.68 2,478.68 3,978.68 5,478.68 6,978.68
[1] Assumes 1,100 lb/bin.
REMEMBER: Use of These Budgets• Growers
– Starting point for comparison and creation of own budgets
• Policy makers– Educational tool for
understanding the different cost centers in tree fruit production
• Lenders and investors – Illustration on operating loans
and projected costs and returns
• Other researchers – Financial feasibility of new
technologies
National Fruit Market Trends
U.S. Domestic Per Capita Consumption
1987-89 1997-99 2007-090
5
10
15
20
25
20.6
18.53
16.23
Source: USDA, cited by Desmond O’Rourke 2010
Lbs/person
Years
U.S. Consumer Trends
•Stagnant per capita consumption of major fruits: apples, oranges and bananas.Other fruits such as berries, table grapes and sweet cherries are gaining.
•Wider Consumer interest in super fruits, tropical fruits (like pineapples, mangos and papayas) and exotic fruits (like durians, ugly fruit, berries, etc.)
Source: Adapted from Desmond O’Rourke, 2010
Competition from Manufactured Snack Foods and Beverages
ITEM 1997 2008 Change
Value of Shipments ($billion) ($billion) (percent)
Snack Foods (baked goods, cookies, crackers, nuts, ice cream, yogurt, chocolate and confectionery, etc.)
65.8 95.5 + 45.1
Snack Beverages (coffee, tea, soft drinks, bottled water, beer, wine, brandy, etc.)
61.2 82.0 + 34.0
Major Fruits (Apples, Oranges and Bananas)
7.6 10.5 + 38.1
GRAND TOTAL, selected snacks 134.7 188.1 + 39.7
Source: Desmond O’Rourke, 2010
Source: USDA FAS, Outlook of the US Apple Industry
New Varieties
• New varieties to be released by breeding programs in Washington State, New York, Minnesota, Belgium, Holland, Germany, Italy, Australia, New Zealand, South Africa, and so on.
• Traditionally breeding programs have focused on “supply side” characteristics, and not too much on demand side characteristics.
Source: Adapted from Desmond O’Rourke, 2010
RosBREED: Enabling Marker Assisted Breeding In Rosaceae
Socio-Economic Goals
RosBREED
¨ The Socio-Economics Team will identify valuable breeding trait targets
¨ Based on knowledge of what industry sectors and consumers value to inform breeding decisions
¨ Accelerate and increase efficiency of cultivar development and adoption.
¨ New cultivars will have targeted appeal, be more quickly accepted, and have enhanced commercial impact.
RosBREED
What trait is my next breeding
target?
We like disease resistant apple
trees!
We like firm tart cherries that pit well!
RosBREED’s Socio-Economics Team will determine trait values
Breeder survey 2010 Producer survey Fall 2010/Winter
2011
Market Intermediary survey Fall 2010
Household data analysis
2010Consumer survey 2012
I like tasty strawberries!
Export Markets
Little growth expected in domestic markets because:
Slow growth expected in U.S. population.
Per capita consumption of fresh apples is stagnant.
With rising incomes, consumer tend to choose competing fruits and snacks.
Source: Adapted from Desmond O’Rourke, 2010
Growth in Fresh Apple Imports, Key Regions, 1996-98 to 2006-08
Southeast Asia
Western Asia Eastern Asia Mexico Southern Asia0
100000
200000
300000
400000
500000
600000
293956 296112
238106
96170
17187
541415
481535
280124
204212162798
1996-98 2006-08
Source: Adapted from Desmond O’Rourke, 2010
Thank You
R. Karina Gallardo
Washington State University Tree Fruit Research and Extension Center,
School of Economic Sciences
1100 N. Western Ave. Wenatchee, WA
E-mail: [email protected]: (509) 663–8181 x 261
