Estimating Production Costs
by Tim Clymer
What does it cost your orchard to produce a bushel of apples, or a pint of blackberries?
Can the crop you wish to grow be profitable enough to support the operation and growth of your farm?
In this section we’ll answer those questions in order to help you plan your future orchard operation or to get a handle on the profitability of your existing operation.
Accounting for the Varied Costs of Producing Fruit
Profit = Revenue minus Costs
From the simple formula above we can get a picture of the financial viability of your orchard. How do you go about analyzing costs in the orchard when many of the costs are complex? To lessen the complexity, let’s use a systems approach and break it down into four components. This isn’t an exhaustive list and doesn’t figure in all of the overhead expenses (operating expenses) that will vary by farm, but it does do a good job of accounting for most activities involved in producing fruit.
Please note that there are a number of ways to go about this and I certainly don’t believe this is the way, just a way that has worked well for us.
Cost Component #1
Annualized Establishment Costs
The cost to put the planting in the ground plus the costs of bringing the plants to fruiting maturity spread over the reasonable life of the planting.
Cost Component #2
Asset Costs
The costs of owning, operating, and maintaining the portion of your assets (think tractors, mowers, sprayers, walk-in coolers, etc) that are directly used to maintain a planting.
Cost Component #3
Annual Labor and Supplies
Includes labor for things like pruning, trellising, fertilizing, mowing, weeding, planning, scouting, spraying and the material costs associated with those activities.
Cost Component #4
Harvest Costs
Those costs associated with the labor and supplies needed to pick, sort, and pack your fruit. Most of the harvest costs will be the same for organic as conventional fruit production however there must be separate dedicated organic harvest containers and the fruit must always be kept separate from fruit grown conventionally.
Therefore…
Total Annual Costs = Annualized Establishment Costs + Asset Costs + Annual Labor and Supplies + Harvest Costs
The total annual cost to produce your crop includes all the costs it requires within a season to grow the fruit plus the cost to establish the fruiting orchard broken down by year over the life of the orchard. I like to think of my costs per row because it’s relatively easy to wrap my mind around the amount of labor required for that unit, but you may be more comfortable thinking on a per-block or per-acre basis. Since the numbers are per-unit, the numbers will work out either way. Do the calculations that work the best for your context. If you have per-row data, that can be extrapolated out to the entire block or per acre since you have the dimensions of your row. Beware that extrapolating numbers from very small areas, like a test planting, to very large areas holds hazards of its own. Variations that naturally occur over large areas are not always represented in small areas. Bottom line: don’t stretch your numbers too far.
Now in the next section let’s look at production costs for one of the crops at Threefold Farm: raspberries.