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: