1. Costs of Production of Apple, Cherry and Pear Karina Gallardo WSU-TFREC-CPAAS WA State Horticultural Association Annual Meetings – Dec 4, 2012

2. 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

3. Cost of production of apple Honeycrisp and Red delicious

4. 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

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

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

7. Estimated Net Returns at Various Prices and Yields – Honeycrisp Full Production [1] Net Yield (bins/acr e) [2] FOB Price ($/bin) [3] 400450500550600 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)278.922,028.92 40 (4,571.61)(2,571.61)(571.61)1,428.393,428.39 45 (4,172.13)(1,922.13)327.872,577.874,827.87 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).

8. Estimated Net Returns at Various Prices and Yields – Red delicious Full Production [1] Net Yield (bins/acr e) [2] FOB Price ($/bin) [3] 250300350400450 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)427.392,927.39 60 (7,235.03)(4,235.03)(1,235.03)1,764.974,764.97 70 (7,397.45)(3,897.45)(397.45)3,102.556,602.55 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).

9. Cost of production of cherry Sweetheart

10. Assumptions - Cherry Sweetheart 10-acre block 10 by 16 feet 272 trees/acre Two dimensional, planar canopy, randomly trained Mazzard rootstock

11. Distribution of cost centers during a full production year – Sweetheart

12. Cost centersSweetheart ($/acre) 2009 Orchard activities Pruning and training748 Green fruit thinning163 Chemicals925 Fertilizer61 Beehives45 General farm labor368 Irrigation/electric charges150 Harvest Picking labor4,240 Checkers, tractor, drivers, hauling.400 Cost centers - Cherry

13. Cost centersSweetheart ($/acre) 2009 Maintenance/repairs Machinery repair + fuel/lube700 Wind machine and alarm repair40 Mainline, pump, and pond50 Overhead395 Interest435 Total variable costs 8,719 Cost centers - Cherries

14. Cost centersSweetheart ($/acre) 2009 Fixed costs Depreciation685 Interest1,034 Other fixed costs Land and property taxes150 Insurance50 Management300 Amortized establishment costs964 Total fixed costs3,106 Cost centers - Cherry

15. Summary of Costs and Returns – Full Production Year - Cherry Sweetheart ($/acre) 2009 Variable cost8,719 Fixed cost3,106 Total costs11,824 Total returns19,200 (8 tons/acre @ $2,400/ton) Net returns7,376 Cultivar Cost ($/acre)

16. Yield (tons/acre) Price ($/ton) [2] 8001,6002,4003,2004,000 2 -6,378.54-4,778.54-3,178.54-1,578.5421.46 4 -6,060.49-2,860.49339.513,539.516,739.51 6 -5,742.43-942.433,857.578,657.5713,457.57 8 -5,424.38975.627,375.6213,775.6220,175.62 10 -5,106.322,893.6810,893.6818,893.6826,893.68 12 -4,788.274,811.7314,411.7324,011.7333,611.73 [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]

17. Cost of production of pear Anjou and Bartlett

18. 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

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

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

21. Cost centersAnjou ($/acre) 2010 Bartlett ($/acre) 2010 Orchard activities Pruning600 Green fruit thinning300 1,020 Chemicals and fertilizer1,200 Beehives10090 General farm labor850350 Irrigation/electric charges107215 Harvest Picking labor699771 Checkers, tractor, drivers, etc.352 551 Hauling100 Cost centers - Pears

22. Cost centersAnjou ($/acre) 2010 Bartlett ($/acre) 2010 Maintenance/repairs Machinery repair293170 Fuel/lube140215 Wind machine and alarm repair45 150 Mainline, pump, and pond50 Overhead242207 Interest267228 Total variable costs5,3444,566 Cost centers - Pears

23. Cost centersAnjou ($/acre)Bartlett ($/acre) Fixed costs Depreciation475635 Interest2,314651 Other fixed costs Land and property taxes50117 Insurance42085 Management720500 Other (assessment fee, etc.)361252 Amortized establishment costs1,980 Total fixed costs4,3404,220 Cost centers - Pears

24. Summary of Costs and Returns – Full Production Year - Pears Anjou ($/acre) 2010 Bartlett ($/acre) 2010 Variable cost5,3444,566 Fixed cost4,3404,220 Total costs9,6848,875 Total returns8,000 (32 bins @ $250/acre) 7,714 (30.25 tons @ $255/acre) Net returns-1,684-1,072 Cultivar Cost ($/acre)

25. 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

26. 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 -2,066.18-1,066.18-66.18933.821,933.82 50 -543.75706.251,956.253,206.254,456.25 60 978.682,478.683,978.685,478.686,978.68 [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]

27. Break-Even Return per Bin to Cover Production Costs – Bartlett Pears Cost per Acre Break-even Return per Bin 1.Total Variable Costs$4,565.63$150.83 2. 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

28. 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 -1,271.46-521.46228.54978.541,728.54 40 675.821,675.822,675.823,675.824,675.82 50 2,623.103,873.105,123.106,373.107,623.10 [1] Includes amortized establishment costs.

29. Where is it? http://extecon.wsu.edu/pages/Enterprise_Budgets

30. THANK YOU Karina Gallardo SES – TFREC – CPAAS Washington State University Wenatchee, WA. Email: karina_gallardo@wsu.edu karina_gallardo@wsu.edu