1. Cost of Establishing a Fruit Orchard and National Fruit Market Trends
4/2/2017
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
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2. Cost of Establishing a Fruit Orchard

3. Content Budget Process Where to find these studies? Assumptions made
Study components
Summary of findings
Use of budgets

4. Budget Process Convene a group of growers The budgets are not a survey
Representation of location, size of operations, and experience

5. Budget Process (2) Determine the production scenario
Puts everyone on the same page when it comes to our assumptions

6. Budget Process (3) Costs depend on the assumptions
Numbers are a reflection of expected costs under a strict set of assumptions

7. Where is it?

8. Cost Estimates of Establishing and Producing Gala apples are available in both Excel and PDF

9. 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

10. 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
36,000.00
Irrigation Water* & Electricity [2]
100.00
4,000.00
Pruning (dormant)
labor cost per tree
0.55
1,089
598.95
23,958.00
Green Fruit Thinning
0.60
653.40
26,136.00
General Farm Labor [3]
500.00
20,000.00
Machinery Repair, Fuel & Lube
325.00
13,000.00
Irrigation & Pump Repair
70.00
2,800.00
Wind Machine & Alarm System Repair
40.00
1,600.00
Pond Maintenance
50.00
2,000.00
Beehives
45.00 2
90.00
3,600.00
Harvest Costs (per bin)
picking (multiple picks)
23.00 50
1,150.00
1,700.00
68,000.00
checkers & tractor drivers
5.00
250.00
hauling [4]
6.00
300.00
Crop Insurance
86.52
3,460.80
Land and property taxes
75.00
3,000.00
Insurance (all farm)
Management salaries
400.00
16,000.00

11. Summary of Costs By Categories – Gala Apples ($/acre)
Fixed Costs

12. 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
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 

13. Cost Estimates of Establishing and Producing Sweetheart Cherries are available in both Excel and PDF

14. 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

15. Summary of Costs Sweetheart Cherries by Categories ($/acre)
Fixed Costs

16. 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.

17. Cost Estimates of Establishing and Producing Anjou Pears WILL SOON be available

18. 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)

19. Break-even Return per Bin
Break-even Return per Bin to Cover Production Cost – Anjou Pears
Cost per Acre
Break-even Return per Bin 1.
Total Variable Costs
$5,344.24
$167.01 2.
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.

20. 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
-84.13 40
-2,066.18
-1,066.18
-66.18
933.82
1,933.82 50
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.

21. 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

22. National Fruit Market Trends

23. U.S. Domestic Per Capita Consumption
4/2/2017
U.S. Domestic Per Capita Consumption
Lbs/person
Years
Source: USDA, cited by Desmond O’Rourke 2010
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24. 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

25. Competition from Manufactured Snack Foods and Beverages
ITEM
1997
2008
Change
Value of Shipments
($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

26. Source: USDA FAS, Outlook of the US Apple Industry

27. 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

28. RosBREED: Enabling Marker Assisted Breeding In Rosaceae
Socio-Economic Goals
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

29. RosBREED Household data analysis 2010 Breeder survey 2010
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 2010
Consumer survey 2012
I like tasty strawberries!
RosBREED

30. 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

31. Growth in Fresh Apple Imports, Key Regions, 1996-98 to 2006-08
Source: Adapted from Desmond O’Rourke, 2010

32. Thank You R. Karina Gallardo
4/2/2017
Thank You
R. Karina Gallardo
Washington State University Tree Fruit Research and Extension Center, School of Economic Sciences
1100 N. Western Ave. Wenatchee, WA
Phone: (509) 663–8181 x 261
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