Costs of Production of Apple, Cherry and Pear

Karina GallardoWSU-TFREC-CPAAS

WA State Horticultural Association Annual Meetings – Dec 4, 2012

Content

• Cost of production of apple, cherry, and pear Two apple cultivars: Honeycrisp, and Red delicious Two pear cultivars: Anjou and Barlett One cherry cultivar: Sweetheart

• Assumptions

• Distribution of cost centers

• Summary of findings

• Estimated net returns at various prices and yields

Cost of production of apple

Honeycrisp and Red delicious

Assumptions - Apples

Honeycrisp

• 10-acre block • 3 by 10 feet• 1,452 trees/acre• Two dimensional, planar canopy, randomly trained

• Dwarf-9 series

Red delicious

• 25-acre block• 4 by 12 feet• 900 trees/acre• Three dimensional, planar canopy, randomly trained

• M-106

Percentage distribution of cost centers during a full production year – Honeycrisp (2011)

Or-chard opera-tions14%

Harvest12%

Warehouse packing charges

47%

Ma-chinery main-ten-ance and

repairs2%

Over-head

and in-terest (VC)6%

Fixed costs20%

Chart Title

Percentage distribution of cost centers on a full production year – Red delicious (2012)

Orchard operations

13%Harvest

8%

Warehouse packing charges

58%

Machinery mainte-

nance and repairs

2%

Overhead and interest

(VC)7%

Fixed cost13%

Chart Title

Estimated Net Returns at Various Prices and Yields – Honeycrisp Full Production [1]

 Net Yield (bins/acre)[2]

FOB Price ($/bin)[3]

400 450 500 550 600

20 (6,169.51) (5,169.51) (4,169.51) (3,169.51) (2,169.51)

25 (5,770.03) (4,520.03) (3,270.03) (2,020.03) (770.03)

30 (5,370.56) (3,870.56) (2,370.56) (870.56) 629.44

35 (4,971.08) (3,221.08) (1,471.08) 278.92 2,028.92

40 (4,571.61) (2,571.61) (571.61) 1,428.39 3,428.39

45 (4,172.13) (1,922.13) 327.87 2,577.87 4,827.87

Overhead cost 5%      

Interest cost 5%      

[1] Includes amortized establishment costs.[2] Assumes an 825-pound bin. Takes into account an average pack out of 72%. [3] Price represents gross FOB price (no warehouse charges deduction). 

Estimated Net Returns at Various Prices and Yields – Red delicious Full Production [1]

Net Yield (bins/acr

e)[2]

FOB Price ($/bin)[3]

250 300 350 400 450

20 (6,585.34) (5,585.34) (4,585.34) (3,585.34) (2,585.34)

30 (6,747.77) (5,247.77) (3,747.77) (2,247.77) (747.77)

40 (6,910.19) (4,910.19) (2,910.19) (910.19) 1,089.81

50 (7,072.61) (4,572.61) (2,072.61) 427.39 2,927.39

60 (7,235.03) (4,235.03) (1,235.03) 1,764.97 4,764.97

70 (7,397.45) (3,897.45) (397.45) 3,102.55 6,602.55

Overhead cost 5%      

Interest cost 5%      

[1] Includes amortized establishment costs.

[2] Assumes an 850-pound bin. Takes into account an average pack out of 85%. 

[3] Price represents gross FOB price (no warehouse charges deduction). 

Cost of production of cherry

Sweetheart

Assumptions - Cherry

Sweetheart

•10-acre block•10 by 16 feet•272 trees/acre•Two dimensional, planar canopy, randomly trained

•Mazzard rootstock

Orchard operations

21%

Harvest39%

Machinery main-

teinance and repairs

7%

Overhead and in-terest (VC)7%

Fixed costs26%

Distribution of cost centers during a full production year – Sweetheart

Cost centers Sweetheart ($/acre)2009

Orchard activities

Pruning and training 748

Green fruit thinning 163

Chemicals 925

Fertilizer 61

Beehives 45

General farm labor 368

Irrigation/electric charges 150

Harvest

Picking labor 4,240

Checkers, tractor, drivers, hauling. 400

Cost centers - Cherry

Cost centers Sweetheart ($/acre)2009

Maintenance/repairs

Machinery repair + fuel/lube 700

Wind machine and alarm repair 40

Mainline, pump, and pond 50

Overhead 395

Interest 435

Total variable costs 8,719

Cost centers - Cherries

Cost centers Sweetheart ($/acre) 2009

Fixed costs

Depreciation 685

Interest 1,034

Other fixed costs

Land and property taxes 150

Insurance 50

Management 300

Amortized establishment costs 964

Total fixed costs 3,106

Cost centers - Cherry

Summary of Costs and Returns – Full Production Year - Cherry

Sweetheart($/acre)

2009

Variable cost 8,719

Fixed cost 3,106

Total costs 11,824

Total returns 19,200(8 tons/acre @ $2,400/ton)

Net returns 7,376

CultivarCost ($/acre)

 Yield (tons/acre)

Price ($/ton)[2]

800 1,600 2,400 3,200 4,000

2 -6,378.54 -4,778.54 -3,178.54 -1,578.54 21.46

4 -6,060.49 -2,860.49 339.51 3,539.51 6,739.51

6 -5,742.43 -942.43 3,857.57 8,657.57 13,457.57

8 -5,424.38 975.62 7,375.62 13,775.62 20,175.62

10 -5,106.32 2,893.68 10,893.68 18,893.68 26,893.68

12 -4,788.27 4,811.73 14,411.73 24,011.73 33,611.73

[1] Includes amortized establishment costs [2] Price represents FOB discounted price (FOB minus packinghouse charges). 

Estimated net returns at various prices and yields – Sweetheart cherry full production [1]

Cost of production of pear

Anjou and Bartlett

Assumptions - Pears

Anjou

• 40-acre block• 7 by 15 feet• 350 trees/acre (25% of planted trees are pollinizers – Bartlett)

Bartlett

• 10-acre block• 8 by 15 feet• 389 trees/acre (10% of planted trees are pollinizers – Anjou)

• Modified central leader, freestanding

Percentage distribution of cost centers during a full production year – Anjou (2010)

Orchard opera-tions33%

Harvest12%

Machinery main-teinance and repairs

5%

Overhead and interest (VC)5%

Fixed costs45%

Percentage distribution of cost centers during a full production year – Bartlett (2010)

Orchard operations26%

Harvest15%

Machinery mainteinance and repairs

6%

Overhead and interest (VC)5%

Fixed costs48%

Chart Title

Cost centers Anjou ($/acre)

2010

Bartlett ($/acre)

2010

Orchard activities

Pruning 600 600

Green fruit thinning 3001,020

Chemicals and fertilizer 1,200

Beehives 100 90

General farm labor 850 350

Irrigation/electric charges 107 215

Harvest

Picking labor 699 771

Checkers, tractor, drivers, etc. 352551

Hauling 100

Cost centers - Pears

Cost centers Anjou ($/acre)

2010

Bartlett ($/acre)

2010

Maintenance/repairs

Machinery repair 293 170

Fuel/lube 140 215

Wind machine and alarm repair 45

150Mainline, pump, and pond 50

Overhead 242 207

Interest 267 228

Total variable costs 5,344 4,566

Cost centers - Pears

Cost centers Anjou ($/acre) Bartlett ($/acre)

Fixed costs

Depreciation 475 635

Interest 2,314 651

Other fixed costs

Land and property taxes 50 117

Insurance 420 85

Management 720 500

Other (assessment fee, etc.) 361 252

Amortized establishment costs 1,980

Total fixed costs 4,340 4,220

Cost centers - Pears

Summary of Costs and Returns – Full Production Year - Pears

Anjou($/acre)

2010

Bartlett($/acre)

2010

Variable cost 5,344 4,566

Fixed cost 4,340 4,220

Total costs 9,684 8,875

Total returns 8,000(32 bins @ $250/acre)

7,714(30.25 tons @

$255/acre)

Net returns -1,684 -1,072

CultivarCost ($/acre)

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

  Price (per bin)Yield (bins per acre) [1] $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] Refers to total yield per acre of Anjou and Bartlett Pears. Assumes a bin size of 1,100 pounds. 

Estimated Net Returns at Various Prices and Yields – Anjou Full Production [1]

Break-Even Return per Bin to Cover Production Costs – Bartlett Pears

    Cost per AcreBreak-even Return

per Bin1. Total Variable Costs $4,565.63 $150.832.  

Total Cash Costs[1] = Total Variable Costs + Land and Property Taxes + Insurance + Fees and Dues

$5,019.38

 

$165.93 

3. Total Cash Costs + Depreciation of Irrigation System, Machinery, Equipment and Building

$5,654.63 $186.93

4. 

Total Cost = Total Cash Costs + Depreciation + Interest[2] + Management Cost

$8,785.28

 

$290.42 

[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 at Various Prices and Yields – Bartlett Full Production [1]

 Yield (tons per acre)

Price (per ton)

$250 $275 $300 $325 $350

10 -5,166.03 -4,916.03 -4,666.03 -4,416.03 -4,166.03

20 -3,218.75 -2,718.75 -2,218.75 -1,718.75 -1,218.75

30 -1,271.46 -521.46 228.54 978.54 1,728.54

40 675.82 1,675.82 2,675.82 3,675.82 4,675.82

50 2,623.10 3,873.10 5,123.10 6,373.10 7,623.10

[1] Includes amortized establishment costs. 

Where is it?

http://extecon.wsu.edu/pages/Enterprise_Budgets

THANK YOU

Karina Gallardo SES – TFREC – CPAAS

Washington State UniversityWenatchee, WA. Email:

karina_gallardo@wsu.edu