Mature Grapefruit Orchard Production
Costs and Returns - Years 8 to 10
Merritt J. Taylor*
Grapefruit groves planted after the 1989 freeze are in a state of increasing production with accompanying increases in production costs. These trees have not reached maturity or maximum production potential.
Two Extension fact sheets, Grapefruit Orchard Establishment Costs - Years 1 to 3 (L-2327) and Young Grapefruit Orchard Production Costs and Returns - Years 4 to 7, (L-2321) evaluate the land preparation costs and the associated costs of establishing and developing the orchard through the seventh year. A positive net return occurs during the sixth year after planting. A summary of the first 7 years' budgets is developed in Table 1.
Table 1. Grapefruit Orchard Establishment and Development (Years 1-7) Lower Rio Grande Valley of Texas; Summary of 1994 Projected Costs and Returns Under Commercial Grove Care Management (145 Trees Per Acre).
|Year 1||Year 2||Year 3||Year 4||Year 5||Year 6||Year 7|
|Tons Production Per Year||0||0.2||3||6||9||14||18|
|Price Per Ton||NA||$125.00||$125.00||$125.00||$125.00||$125.00||$125.00|
|Gross Revenue Per Acre||$0.00||$25.00||$375.00||$750.00||$1,125.00||$1,750.00||$2,250.00|
|Variable Costs Per Acre||$1,808.00||$723.36||$696.86||$760.56||$930.19||$930.19||$930.19|
|Fixed Costs Per Acre||264.51||451.04||451.04||451.04||451.04||451.04||451.04|
|Total Costs Per Acre||$2,072.51||$1,174.40||$1,147.90||$1,211.60||$1,381.23||$1,381.23||$1,381.23|
|Net Projected Returns to Risk and Ownership Per Acre||($2,072.51)||($1,174.40)||($772.90)||($461.60)||($256.23)||$368.77||$868.77|
|Breakeven Price for Variable Costs Per Ton of Grapefruit||NA||$3,616.80||$232.29||$126.76||$103.35||$66.44||$51.68|
|Breakeven Price for All Costs Per Ton of Grapefruit||NA||$5,872.00||$382.63||$201.93||$153.47||$98.66||$76.74|
|Breakeven Production in Tons Per Acre to Cover Total Costs at $125/ton||NA||9.4||9.18||9.69||11.05||11.05||11.05|
This paper discusses the expected costs and returns for the specific case of a small-acreage, high-technology commercial operation with professional management. The paper focuses on the latter years after grove establishment and development when the grove is in full production and considered to be mature. Since new tree groves planted after the 1989 freeze are currently in their fifth year after planting, estimates of expected costs and yields for the eighth, ninth and tenth years must necessarily come from extrapolations of current cultural operations and costs, historical yields from groves planted after the 1983 freeze, and expectations of scientists, grove owners and grove care managers. The case of a large commercial scale farm will not be addressed in this paper.
Data used to support this publication were collected from orchard managers, research scientists, agribusinessmen, Texas A&M-Kingsville Citrus Center at Weslaco personnel and Texas A&M University Extension and Research specialists.
The three most common types of citrus operations in the Lower Rio Grande area are:
- complete management services for investor-owned orchards;
- owner-managed with major equipment operations performed by use of custom services; and
- complete owner/operator-managed orchards.
This paper concentrates on the first category where equipment and services are provided by the grove care company with major spray operations and services charged at a custom rate. This approach will more closely reflect the costs associated with absentee ownership contracting professional management of the grove. It is understood that costs of owner management would vary considerably based on size of grove and skill of management.
Returns are to ownership and risk.
A hypothetical 20-acre model is used throughout this study, but the costs are discussed on a cost-per-acre basis. It was necessary to select an historically economic unit because high management and equipment requirements and operation size substantially influence establishment and subsequent year operating costs. It is understood that a larger tract of land probably would reduce the cost-per-acre charges for equipment and cultural operations. A tree density of 145 trees per acre is used.
Soil and Irrigation
It is assumed that the orchard is established on alluvial soil that needs no drainage system. Rio Grande River water supplied through existing water districts will be used as a primary source of water, applied through a permanent valve system.
Costs and Prices
Costs are based on fall 1993 and spring 1994 costs. Costs for maintaining the grove are held constant for years 8 through 10 under the assumption that the relative sizes of the trees are such that no distinction would be made in the cultural practices nor the costs. Grapefruit sale prices are estimated to average $125 per ton. Grapefruit tree insurance costs are based on the zone 2 rate structure (September 1994 schedule).
The study assumes that equipment, labor and supplies will be obtained specifically for the establishment and operation of the orchard by the grove care company and will be charged out at acceptable custom rates. Harvesting will be conducted and paid for by the buyer.
This study does not address income tax issues. Tax implications should be addressed in the context of the total business and with specialized professional assistance.
Grapefruit Orchard Operational Costs and Returns
Table 2 provides an estimate of the costs and returns to maintain a citrus orchard during three mature years of production (years 8 to 10). The values provided in these budgets represent an average of the costs and returns obtained from growers. They do not represent the costs and returns of any particular orchard. Potential investors should modify these estimates and adapt them to more accurately describe a specific operation.
Table 2. Mature Grapefruit Orchard (Years 8 to 10) Lower Rio Grande Valley of Texas; 1994 Projected Costs and Returns Under Commercial Grove Care Management (145 Trees Per Acre).
|Year 8||Year 9||Year 10|
|Gross Income Description||Quantity||Unit||$/Unit||Total||Quantity||Unit||$/Unit||Total||Quantity||Unit||$/Unit||Total|
|Total Gross Income||$2,500.00||$2,750.00||$2,875.00|
|Variable Cost Description|
|Average Year-Mature Grove|
|Nitrogen (Actual N)||150.00||lb.||0.37||55.50||150.00||lb.||0.37||55.50||150.00||lb.||0.37||55.50|
|Preemerge Herbicide Application||2.00||appl||20.00||40.00||2.00||appl||20.00||40.00||2.00||appl||20.00||40.00|
|Spot Spray Application||2.00||appl||15.00||30.00||2.00||appl||15.00||30.00||2.00||appl||15.00||30.00|
|Total Variable Cost||$930.19||$930.19||$930.19|
|Breakeven Price-Total Variable Cost||$46.51||$42.28||$40.44|
|Gross Income minus Variable Cost||$1,569.81||$1,819.81||$1,944.81|
|Fixed Cost Description||Unit||Total||Unit||Total||Unit||Total|
|Misc Admin & Overhead||1.00||Acre||$35.00||$35.00||1.00||Acre||$35.00||$35.00||1.00||Acre||$35.00||$35.00|
|Interest Rate for Amortized Investments||9%||9%||9%|
|Irrigation System (Permanent Valve)||$350.00||Acre||15 yr Recov||43.42||$350.00||Acre||15 yr Recov||43.42||$350.00||Acre||15 yr Recov||43.42|
|Land||1,500.00||Acre||15 yr Recov||186.09||1,500.00||Acre||15 yr Recov||186.09||1,500.00||Acre||15 yr Recov||186.09|
(1st Year Establishment Costs)
|$2,072.51||Acre||Annual Interest||186.53||$2,072.51||Acre||Annual Interest||186.53||$2,072.51||Acre||Annual Interest||186.53|
|Total Fixed Cost||$451.04||$451.04||$451.04|
|Total of All Cost||$1,381.22||$1,381.22||$1,381.22|
|Net Projected Returns to Risk and Ownership Per Acre||$1,118.78||$1,368.78||$1,493.78|
|Breakeven Price-Total Costs Per Ton of Grapefruit||$69.06||$62.78||$60.05|
Returns to Risk and Ownership
In the eighth year after planting, the citrus grove is considered mature even through yields continue to increase. Variable costs are about $930, with fixed costs leveling off at $451 per acre. Total costs are $ 1 381 per acre with a breakeven selling price of $69.05 per ton, assuming 20 tons per acre yield. Net return to ownership and risk is approximately $1,119 per acre.
The ninth year after planting has the same variable and total costs of $930 and $451, respectively, as in the eighth year. With the increased expected yields of 22 tons per acre, the expected returns to risk and ownership are $1,369 per acre. The break-even selling price at this level of production is $62.78 per ton.
In the tenth year after planting, and those years following, production is expected to rise to 23 tons per acre, stabilizing at that level for subsequent years. With an expected total cost of production of about $1,381 per acre, the gross income would be expected to be $2,875 with a net return per acre of $1,494. The break-even selling price for 23 tons of grapefruit costing $1,381 per acre is $60.04 per ton.
*Professor and Extension economist-management, Texas -Agricultural Extension Service, The Texas A&M University System.
The information given herein is for educational purposes only. Reference to commercial products or trade names is made with the understanding that no discrimination is intended and no endorsement by the Cooperative Extension Service is implied.
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