1. What Does it Cost to Grow Cherries? A Recent Grower Based Study R. Karina Gallardo WSU-Tree Fruit Research and Extension Center, School of Economic Sciences, Wenatchee

2. Content 1.Budget Process 2.Where to find these studies? 3.Assumptions made 4.Study components 5.Summary of findings 6.Use of budgets

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

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

5. Budget Process (3)

6. Where is it? 2009 Cost Estimates of Establishing and Producing Sweet Cherries in Washington http://extecon.wsu.edu/

7. 2009 Cost Estimates of Establishing and Producing Sweet Cherries in Washington – In Excel and PDF http://extecon.wsu.edu/pages/Enterprise_Budgets

8. Assumptions for Sweet Cherry Study Sweetheart on Mazzard rootstock Block size: 10 acres Orchard size: 150 acres Irrigation system  Overhead cooling and under tree drip sprinklers  Public irrigation district Architecture  Two dimensional system (planar canopy), randomly trained w/18 mm radius from tree center  In-row space: 10 feet  Between row: 16 feet Life of planting: 25 years Density: 272 trees per acre

9. Capital Requirement Summary of Annual Capital Requirements for a 10-acre Sweet Cherry Block Establishment Years Full Production Year 1Year 2Year 3Year 4Year 5 Years 6 to 25 Annual Requirements Land (11 acres) 71,500.00 Trellis System 14,730.00 Irrigation System 21,500.00 Mainline & Pump 5,000.00 Pond 9,000.00 Wind Machine & Alarm System 26,000.00 Operating Expenses 65,475.20 18,105.63 28,866.42 48,577.19 63,575.92 331,388.86 Total Requirements 178,205.2018,105.6363,866.4248,577.1963,575.92 331,388.86 Receipts 28,000.00112,000.00168,000.00 224,000.00 Net Requirements 178,205.2018,105.6335,866.42(63,422.81)(104,424.08) 107,388.86

10. Machinery and Building Requirement Machinery and Building Requirements for a 150-acre Orchard Purchase Price ($)Number of Units Total Cost ($) Mobile home 120,0001 Machine shop 50,0001 Tractor-70HP, 4WD 37,0003111,000 Tractor-40HP, 4WD 30,0001 4 wheeler 5,000210,000 Speed sprayer 20,000360,000 Weed spray boom & tank 3,0001 Mower-rotary 6,0001 Mower-flail 8,5001 Fork lift 20,0001 Bin trailer 5,500316,500 Ladder-10' 120607,200 Total Cost 442,200

11. Interest Costs Interest Costs per Acre for a 10-acre Sweet Cherry Block Total Purchase Price ($) Salvage Value ($) Number of Acres Total Interest Cost ($) Interest Cost Per Acre ($) Land [1] 71,500 116,078552.50 Machinery & Buildings 442,20044,22015020,673137.82 Irrigation System 21,5002,150101,005100.51 Wind Machine & Alarm System 26,0002,600101,216121.55 Pond 9,0009001042142.08 Interest Rate8.5% Salvage Value10.0% [1] Refer to Budget Assumption #1 in the Intro worksheet. Total acres in block:11 Productive block acres:10 Total orchard acres: 150

12. Depreciation Costs Depreciation Costs per Acre for a 10-Acre Sweet Cherry Block Total Purchase Price ($) Number of Acres Total Value Per Acre ($)Years of Use Depreciation Cost Per Acre ($) Trellis 14,730101,473.002553.03 Irrigation System 21,500102,150.002577.40 Mainline & Pump 5,00010500.002518.00 Wind Machine 26,000102,600.002593.60 Pond 9,00010900.002532.40 Machinery & Building Annual Replacement Cost [1] 399.00

13. Summary of Costs By Categories (In $/acre) Fixed Costs

14. Estimated Net Returns per Acre at Various Prices and Yield - Gala Price ($/bin) Yield (bins/acre) 200225250275300 35 -3,193-2,318-1,443-568306 40 -2,381-1,381-3816181,618 45 -1,569-4446801,8052,930 50 -7574921,7422,9924,242 55 1,4302,8054,1805,555 60 8672,3673,8675,3676,867 [1] Includes amortized establishment costs. [2] Assumes pack-out of 20 packs/bin (all grades) and 925 lb/bin

15. 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 Photo from Northwest Cherries

16. Thank You R. Karina Gallardo Tree Fruit Research and Extension Center, School of Economic Sciences Washington State University 1100 N. Western Ave. Wenatchee, WA E-mail: karina_gallardo@wsu.edukarina_gallardo@wsu.edu Phone: (509) 663 – 8181 x. 261