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Cost of Establishing a Fruit Orchard and National Fruit Market Trends R. Karina Gallardo WSU-Tree Fruit Research and Extension Center, School of Economic.

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Presentation on theme: "Cost of Establishing a Fruit Orchard and National Fruit Market Trends R. Karina Gallardo WSU-Tree Fruit Research and Extension Center, School of Economic."— Presentation transcript:

1 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

2 Cost of Establishing a Fruit Orchard

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

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] , Irrigation Water* & Electricity [2] , Pruning (dormant) labor cost per tree 0.551, , Green Fruit Thinning labor cost per tree 0.601, , General Farm Labor [3] , Machinery Repair, Fuel & Lube , Irrigation & Pump Repair , Wind Machine & Alarm System Repair , Pond Maintenance , Beehives , Harvest Costs (per bin) picking (multiple picks) , , , checkers & tractor drivers hauling [4] Crop Insurance , Land and property taxes , Insurance (all farm) , Management salaries ,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) ,193-2,318-1, ,381-1, , , ,8052, ,7422,9924, ,4302,8054,1805, ,3673,8675,3676,867 [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) 8001,6002,4003,2004, ,379-4,779-3,179-1, ,060-2, ,5406, , ,8588,65813, , ,37613,77620, ,1062,89410,89418,89426, ,7884,81214,41224,01233,612 [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

20 Estimated Net Returns per Acre at Various Prices and Yield - Anjou Price ($/bin) Yield (bins/acre) , , , , , , , , , , , , , , , , , , [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 Source: USDA, cited by Desmond ORourke 2010 Lbs/person Years

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 ORourke, 2010

25 Competition from Manufactured Snack Foods and Beverages ITEM Change Value of Shipments($billion) (percent) Snack Foods (baked goods, cookies, crackers, nuts, ice cream, yogurt, chocolate and confectionery, etc.) Snack Beverages (coffee, tea, soft drinks, bottled water, beer, wine, brandy, etc.) Major Fruits (Apples, Oranges and Bananas) GRAND TOTAL, selected snacks Source: Desmond ORourke, 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 ORourke, 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.

29 What trait is my next breeding target? We like disease resistant apple trees! We like firm tart cherries that pit well! RosBREEDs 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!

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 ORourke, 2010

31 Growth in Fresh Apple Imports, Key Regions, to Source: Adapted from Desmond ORourke, 2010

32 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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