Re-engineer post harvest processing for export: four processes
Pack intoExport Bins
Store Directly Into Reefer
Mechanize Tipping And Grading
Remove DPA
Post-harvest processing and shipping costs for export
Post-harvest processing and shipping costs for export $/kg
Cost to Remove DPT Residues From Facilities Negligible
Mechanized Cost to tip/grade/pack into export bins and reefer 0.05
Rental Cost of Collapsible Export Bins 0.10
Shipping CIF to Asia/Europe 0.40
Total 0.55
Class A Apples Delivered CIF Europe AUD 80c or USD 56c/kg;USD0.84/kg CIF (90t/ha @90% packout, net before juicing sales)
Traditional Packing in Cartons Pack Directly in Export Bins
$/kg Running Total Running Total $/kg
Capital 0.206 0.206 0.206 0.206
Fixed Op 0.266 0.472 0.472 0.266
Variable Op 0.178 0.650 0.650 0.178
Tipping & CA 0.44 1.090
0.800.15
Packing 0.45 1.540
CIF AUD 0.400 1.940 1.200 0.400
CIF USD 1.358 0.850
USD Cost Delivered to Asia or Europe
AUD Cost Packed in Export Bins but not
Shipped
Cost at Farmgate: Capital Intensive for
90% Packout
Post-harvest processing costs for export: from $89c to 15c/kg
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
Normal Export Pack
Packing
Tipping & CA
Export Bins
Traditional Packing Includes Tipping, CA, Packing Labor and Carton Costs
Direct, Mechanized Packing For Export Virtually Eliminates Packing, Carton and CA Costs
Combined post-harvest processing and export costs fall from $1.33 to $0.55/kg
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
Normal Export Pack
CIF AUD
Packing
Tipping & CA
Export Bins
Traditional Packing Includes Tipping, CA, Packing Labor and Carton Costs
Direct Packing For Export Cuts Packing, Carton and CA Costs, So Cost to Process and Deliver Apples to Importing Countries Falls from AUD $1.33 to AUD $0.55/kg
Total Costs to Deliver Grade A Apples to Europe/Asia CIF: AUD 1.90 falls to $1.20/kg: or only USD 0.84/kg @ AUDUSD 70c
$-
$0.50
$1.00
$1.50
$2.00
$2.50
Normal Export Pack
CIF AUD
Packing/Ex-Bin
Tipping & CA
Variable Op
Fixed Op
Capital
Traditional Packing Includes Tipping, CA and Packing Labor and Carton Costs
Direct Packing For Export Cuts Packing, Carton and CA Costs Reducing over AUD cost to deliver apples to importing countries from AUD $1.91 to AUD 1.20
Profit From Export: From $0.92 to $1.66/kg Based On Last Year’s Ave. CIF Export Price for Australian Apples of 2.86/kg
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Normal Export Pack
Profit
CIF AUD
Packing/Ex-Bin
Tipping & CA
Variable Op
Fixed Op
Capital
Appendix: Detailed Costs: Grading and Packing for Export
Packing for Export
Equipment 1,700,000 1,700,000
Lifetime 15 15
Depreciation 113,333 113,333
Interest: 5 vs 8% 85,000 136,000
Maintenance 20,000 20,000
Shed 600m2 @$40/m2 24,000 24,000
Subtotal Equip Costs 242,333 293,333
Shifts (6 day) 2 1
People/shift 7 7
hours/shift 48 48 apples/hr lanes rows/sec sec/hr apples/hr
Capacity/hr/lane 4 4 48,000 10 1 3600 36,000
Lanes 6 6
Production/week shift 2304 1152
Operating Weeks 20 20
Production tons 46,080 23,040
Labor Rate/hr 20 22
Labor Costs 268,800 147,840
Total Costs 511,133 441,173
Costs/ton 11.09 19.15
Overcome High Labor Costs by Investing Big in Best Practices
Per Hectare
Cap
Cost Life Interest Dep Cost/y $/kg Net USD
Capital 6%
Land 5000 -50 300 -100 200 0.002 0.002
Perm Water 12000 -20 720 -600 120 0.001 0.001
Irr Infra 3000 50 180 60 240 0.003 0.002
Irr Local 2000 20 120 100 220 0.003 0.002
Evap Cooling 2500 20 150 125 275 0.003 0.003
Trellis 15000 50 900 300 1200 0.015 0.011
Netting Infra 5000 40 300 125 425 0.005 0.004
Netting/Extend Day 12000 10 720 1200 1920 0.024 0.018
Extend Day 8000 10 480 800 1280 0.016 0.012
Trees 50000 40 3000 1250 4250 0.052 0.041
Bins 22500 10 1350 2250 3600 0.044 0.034
Incubation 20000 40 1200 500 1700 0.021 0.016
Equipment 8000 10 480 800 1280 0.016 0.012
Cap Costs Total 165,000 9,900 6,810 16,710 0.206 0.160
Conclusion: Australia Could Export Apples Competitively
• Invest in best practices both to increase labor productivity and to reduce unit production costs
• Improve export logistics to reduce costs further, e.g. by packing directly for export
• If production and exports are increased then economies of scale should reduce costs further
• Good Australian innovation can also help reduce costs
• Work with the local community to find and train cost-effective labor for both orchards and nurseries
Export Model: Double Click on Table to Change Values
Per Hectare Cap Cost Life Interest Dep Cost/y $/kg Net USD Total
Capital 6%
Land 5000 -50 300 -100 200 0.002 0.002
Perm Water 12000 -20 720 -600 120 0.001 0.001
Irr Infra 3000 50 180 60 240 0.003 0.002
Irr Local 2000 20 120 100 220 0.003 0.002
Evap Cooling 2500 20 150 125 275 0.003 0.003
Trellis 15000 50 900 300 1200 0.015 0.011
Netting Infra 5000 40 300 125 425 0.005 0.004
Netting/Extend Day 12000 10 720 1200 1920 0.024 0.018
Extend Day 8000 10 480 800 1280 0.016 0.012
Trees 50000 40 3000 1250 4250 0.052 0.041
Bins 22500 10 1350 2250 3600 0.044 0.034
Incubation 20000 40 1200 500 1700 0.021 0.016
Equipment 8000 10 480 800 1280 0.016 0.012
Cap Costs Total 165,000 9,900 6,810 16,710 0.206 0.160 0.160
Total Fixed Op 21,529 0.266 0.206 0.366
Total Variable 14,400 0.178 0.138 0.504
Pack Export Bin 28,350 0.350 0.271 0.775
Export CIF 32,400 0.400 0.310 1.085
Yield t/ha AUDUSD Tip $/kg Pack $/kg Packout
90 0.775 0.30 0.05 90%
30-50 times more income /export per 100 ha
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
Arable Dairy Orchard
Income/100ha
50-60 times more income per ML irrigation water used
0
5000
10000
15000
20000
25000
Arable Dairy Orchard
Income/Megaliter of Water
Summary Grower Metrics and Assumptions
Tons/Ha $/Ton Revenue/Ha ML/Ha $/ML H2O/Revenue Employ/Ha
Wheat 8 250 2000 8 200 80% 1
Dairy 8 400 3200 8 200 50% 1.5
Apple 80 1250 100,000 5 200 1.0% 30
Australian Apples Are on the Wrong Side of Trade (due to import of concentrate)
-150%
-100%
-50%
0%
50%
100%
150%
Beef Wheat Milk Apple Wool
Australian Exports as Share of Production
SWOT Analysis of Australian Pome Fruit Export Capability
SWOT ANALYSIS
Strengths:Widely Available Affordable LandPlenty Affordable Water for OrchardsMatching Grower ExpertiseIP and Branding Track RecordMatching Capital: Labor Productivity
Weaknesses:High Labor Costs to GrowHigh Packing CostsFruit FlyLack Critical Mass to Export ReliablyNursery Industry too Small for Growth
Opportunities:Improve Logistics/Costs to ExportSecure LT Export Contracts in North Local & Fed Seek Ag Employ/Export Demand for Clean Fruit (GV & TAS)Demand from Asia, Cider, Fresh Juice10x+ Income/Employ for Land/Water
Threats:More Countries Restrict DPAUnable to Control Fruit FlyUnwilling to Compete with NZUnwillingness to Grow for ExportDrought of Epic ProportionsWar or Trade Wars