Presentation on theme: "Making Cents of Greenhouse Production Cost Ben Beale Extension Educator-MCE St. Mary’s County."— Presentation transcript:
Making Cents of Greenhouse Production Cost Ben Beale Extension Educator-MCE St. Mary’s County
Why do we care? Rising population base of affluent suburbanites in reach of Maryland growers Source: Census 2000 analyzed by the Social Science Data Analysis Network (SSDAN).Census 2000Social Science Data Analysis Network (SSDAN)
ERS Data. $ in 1000. Greenhouse and Nursery Crops
Now for the Bad News! The majority of small businesses fail within the first 2 years. Most folks starting a greenhouse do so because they enjoy growing, not the business side.
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Net Income: Net income is the money left after subtracting variable and fixed cost. This is the bottom line. NET INCOME = Revenue – (Variable + Fixed Costs) Variable Cost: Cost items that vary with production volume. Examples of such items include fertilizer, seed, fuel, electricity, piece-work labor charges, pesticides, packaging cost, and custom charges. Fixed Cost: Those cost that you will incur regardless of whether you produce any output.. These cost are determined using the DIRTI 5 method which includes Depreciation, Interest, Repairs, Taxes, and Insurance. Often a piece of equipment or building will be used for more than one enterprise. In these cases it is important to estimate the percentage of use for each enterprise and allocate the cost accordingly. Gross Revenue: The total sales of product or services from the enterprises. Revenue can be calculated with the following formula: Price x Units Sold= Gross Revenue Example Budget
Space Utilization/Flats per House 30ft. * 100ft: 3000 sq. ft. Isle ways are: 408 sq. ft. Usable space is:2592 sq. ft 86% space efficiency ratio
Flats per House Standard 1020 flats are 11 x 22 inches, or 1.7 sq. feet 2592 available sq. ft. divided by 1.7 sq. ft. per flat = 1520 flats Considering a plan for 2 rounds of plants, we will estimate total production at 3040 flats
Flats and Inserts Standard 1020 flats –Sold by case of 100 –$51.00 per case or 51 cents a piece Inserts: –Available in multiple size combinations –Size description: 606, 806, 1206- First #: # of trays; Second #: Cells per tray –$27.20 per case or 27 cents a piece
Substrate High quality soil-less substrate is critical Using peat base potting soil with Bacillus subtilis for increased root rot protection Bedding Plant type potting soil will contain: –Peat Moss –Perlite –Vermiculite –Wetting Agent –Bacillus subtilis –Macro and micro nutrients –Lime
Determining Amount of Potting Soil Needed Using the chart, 3.8 cu ft bag will fill 53 806 flats 3040 flats will require 58 bags (3040 / 53 = 57.3 bags)
Fertilizer Cost Using a constant feed 100 ppm N program Will use a standard 20-20-20 at rate of 6.7 ozs. per 100 gallons water Estimate 4 applications per week over 12 weeks Estimate water use at ½ gallon water per square foot
Fertilizer Cost ½ gallon per sq ft times 2600 sq ft = 1300 gallons per watering 1300 gallons applied 4 times a week for 12 weeks is (1300x4x12) 62,400 gallons At a rate of 6.7 ozs per 100 gallons, you will need 4180 ozs. (62,400/100 x 6.7) or 261 lbs or 11 bags of 20-20-20 fertilizer
Greenhouse Plastic Assuming 4 year plastic replacement value. Using Tufflite IV 6 mil fro top Using Tufflite IV 6 mil infrared for bottom 30 ft wide house will need 40 wide foot plastic Total cost $640.00 over 3 years=213.00 year
Crop Management Products Will vary for each operation, depending upon season, management, climate, luck, etc… Estimates provided are for an average season with average problems.
Crop Management Products Disease Control –Clearys 3336 –Heritage –Daconil Insect Control –Marathon
Heating Expenses Most accurate estimates are from past experience in each house. Seasonal variation will change fuel usage dramatically Example uses LP gas through 1 heater Assume seasonal use of 800 gallons total
Fixed Cost Those items that do not change with level of production Often Calculated with DIRTI-5 Method –Depreciation –Interest –Repairs –Taxes –Insurance
Depreciation $18,000 greenhouse construction cost Expected life of 10 years Value at 10 years: 2,000 16,000 / 10 = $1600
$600.00 for general liability and hazard policy for equipment Insurance Taxes Includes property tax rate of $300 and license fee of $100 for total of $400
Repairs Can be significant, especially in an emergency Plan for at least 10% construction cost each year $1800 per year
Interest Include interest on total money invested In this example, assume an interest payment of 7% times $20,000 investment= $1400
Enterprise Budgets: Determine profitability of one enterprise versus another. Understand breakeven cost and pricing points for that enterprise Understand input structure such as labor inputs, shelf space pricing structure, raw material inputs, fixed equipment cost per dollar returned. Plan crop rotation schedules and product mix
Profit Enterprise Budget Variable Costs Fixed Costs Price (Revenue) Contribution Break-even Slide Adapted from: Dr. Wen-fei Uva Department of Applied Economics and Management Cornell University
Break Even Analysis Unit Costs ($) = Fixed Costs ($)Variable Costs ($) + Units Produced (lbs, dozens, bag) Slide Adapted from: Dr. Wen-fei Uva Department of Applied Economics and Management Cornell University
Breakeven Analysis Slide Adapted from: Dr. Wen-fei Uva Department of Applied Economics and Management Cornell University