Evaluating your Options for Growing Patented, Proprietary Varieties

Evaluating your Options Evaluating your Options for Growing Patented, for Growing Patented, Proprietary VarietiesProprietary Varieties

December 6, 2000

Washington State Hort Association

David Marshall

Bottom Line QuestionBottom Line Question

How much more money will this new variety have to return to me in order to JUSTIFY additional royalty costs?

Planning is NeededPlanning is Needed

1. Sharpen the MIND and

2. Sharpen the PENCIL

Supply Control SystemsSupply Control Systems

Base System

Royalty per tree $0.00

Royalty per box $0.00

Percent of sales 0.0%

Sales Charge $0.40


Base System System A

Royalty per tree $0.00 $0.50

Royalty per box $0.00 $0.50

Percent of sales 0.0% 0.0%

Sales Charge $0.40 $0.40


Base System System A System B

Royalty per tree $0.00 $0.50 $1.25

Royalty per box $0.00 $0.50 $1.25

Percent of sales 0.0% 0.0% 0.0%

Sales Charge $0.40 $0.40 $0.40


Base System System A System B System C

Royalty per tree $0.00 $0.50 $1.25 $2000

Per acre

Royalty per box $0.00 $0.50 $1.25 --

Percent of sales 0.0% 0.0% 0.0% 11.0%

Sales Charge $0.40 $0.40 $0.40 --

AssumptionsAssumptions

10 Acre plot – 20 year lifeLand Cost = $3000 per acre. – $210 per acre “rent” at 7%

System: 4-wire Vertical Trellis

Variety ‘X’ on M9 root

Spacing 12’ x 4’– 907.5 trees per acre

THE ORCHARD WORKS!

Assumptions: Yield CurveAssumptions: Yield Curve

0 0

15

25

35

45

05

10152025

3035404550

2001 2002 2003 2004 2005 2006+

Bin

s pe

r A

cre

2001 2002 2003 2004 2005 Land Prep: Remove old orchard 4,000 Discing and Ripping 1,250 Adjusting Nutrients 2,000 Vapam Fumigant 2,993 Applying Vapam 300 Trees 51,274 Trees, royalty 0 Irrigation Materials 10,000 Planting & Irrigation Labor 6,000 Mainlines 2,500 Trellis Materials 4,900 Trellis Labor 4,200 Wind Machine 17,500 Irrigation Frost / cooling System 6,000

Total Capital Costs $89,417 $0 $0 $23,500 $0

Establishment CostsEstablishment Costs

$5.65 per tree

Operating ExpensesOperating Expenses

2001 2002 2003 2004 2005 2006 + Prune & Train 300 1,400 2,000 4,500 3,500 3,500 Harvest ($18/bin) 0 0 2,700 4,500 6,300 8,100 Thinning ($12/bin) 0 0 1,800 3,000 4,200 5,400 Chemicals & Fertilizer 2,500 3,000 3,000 3,500 3,500 3,500 General oper.($2300/ac) 11,500 17,250 23,000 23,000 23,000 23,000 Equip Share ($430/ac) 4,300 2,150 3,225 4,300 4,300 4,300 Ranch Overhead ($350/ac) 3,500 3,500 3,500 3,500 3,500 3,500

Total Op Expenses $22,100 $27,300 $39,225 $46,300 $48,300 $51,300

Land Cost ($210/ac) $2,100 $2,100 $2,100 $2,100 $2,100 $2,100

Return Statement: Sales 100 binsReturn Statement: Sales 100 binsStyle Label Size Quantity Price Amount

% Culls 18% CULLS (box equivalents) 395.122 4.03 1,592.06

TP Grade A 56 59 20.00 1,170.00 TP Grade A 64 176 30.00 5,265.00 TP Grade A 72 234 30.00 7,020.00 TP Grade A 80 293 30.00 8,775.00 TP Grade A 88 234 30.00 7,020.00 TP Grade A 100 117 25.00 2,925.00 TP Grade A 113 59 20.00 1,170.00

Label Total: 1,170 33,345.00$

TP Grade B 64 90 15.00 1,350.00 TP Grade B 72 90 15.00 1,350.00 TP Grade B 80 113 15.00 1,687.50 TP Grade B 88 90 15.00 1,350.00 TP Grade B 100 45 12.00 540.00 TP Grade B 113 23 12.00 270.00

Label Total: 450 6,547.50$ Style Total: 1,620 39,892.50$

12/3# Grade A 2 1/2" 135 11.00 1,485.00 12/3# Grade B 2 1/2" 45 9.00 405.00

Style Total: 180 1,890.00$

Total Sales: 2,195 43,374.56$

•65% of packs Grade A

Return Statement: Net ReturnsReturn Statement: Net ReturnsCharges:Regular Storage--After 10/1 100 18.00 1,800.00 Wash & Sort 100 25.50 2,550.00 Tray Pack 1,620 3.85 6,237.00 Bag Carton 180 3.95 711.00 Stickers 1,620 0.25 405.00 Research on Culls 395.1 0.02 7.90 Cull Handling 395.1 0.40 158.05 Apple Inspection 1,800 0.06 111.60 Advertising & Research 1,800 0.44 792.00 Sales Charge 1,800 0.40 720.00 Total Charges: 13,492.55$

Net Sales Forwarded to Statement: 29,882.01$

Sales Based Royalty - Per-box Royalty -

Net to Orchard 29,882.01$

Return Royalty Net Return

Total Bins Received: 100 Net Return Per Bin: $298.82 $0.00 $298.82

•18 packs per bin

•41 lbs per pack

•900 lbs per bin

•18% culls

•65% of packs Grade A

Inflows and Outflows (Base)Inflows and Outflows (Base)

$0

$30

$60

$90

$120

$150

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Tho

usan

ds

OutFlowsInflows

Cash Flow (Base Scenario)Cash Flow (Base Scenario)

($150)

($100)

($50)

$0

$50

$100

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Tho

usan

ds

Internal Rate of Return: 20.0%

Results: Internal Rate of ReturnResults: Internal Rate of Return

Price for Top Grade


$30 / box 20.0% 18.8% 17.0% 14.6%

Compare the computed IRR with your Required Rate of Return


Price for Top Grade


$30 / box 20.0% 18.8% 17.0% 14.6%

$27 / box 15.6% 14.2% 12.2% 10.1%



Price for Top Grade


$30 / box 20.0% 18.8% 17.0% 14.6%

$27 / box 15.6% 14.2% 12.2% 10.1%

$24 / box 10.1% 8.6% 6.1% 4.3%


Results: Net Return per BinResults: Net Return per Bin

Price for Top Grade


$30 / box $299 $290 $276 $258

$27 / box $255 $246 $233 $220

$24 / box $212 $203 $190 $181

Required Rate of Return = 15%Required Rate of Return = 15%




Return / bin before any royalty

$251 $262 $280 $303

+$11 +$29 +$52




$251 $262 $280 $303

+$11 +$29 +$52

Top Grade f.o.b.

$26.66 $27.47 $28.68 $30.32

+0.81 +2.02 +3.66




$299 $312 $331 $363

+$13 +$32 +$64

Top Grade f.o.b.

$30.00 $30.89 $32.22 $34.46

+0.89 +2.22 +4.46

Contact InformationContact Information

FOR MORE INFO...

Copies of this material are available in the back. This Power Point presentation can be downloaded at:

David Marshall408 North First StreetYakima, WA [email protected]

http://www.agrimgt.com/newsletters.htm

Evaluating your Options for Growing Patented, Proprietary Varieties

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