What Does it Cost to Grow

Cherries?A Recent Grower

Based Study

R. Karina GallardoWSU-Tree Fruit Research and Extension Center,

School of Economic Sciences, Wenatchee

Content

1. Budget Process

2. Where to find these studies?

3. Assumptions made

4. Study components

5. Summary of findings

6. Use of budgets

Budget Process

• Convene a group of growers– The budgets are not a survey– Representation of location, size of operations, and experience

Budget Process (2)

• Determine the production scenario – Puts everyone on the same page when it comes to our assumptions

Budget Process (3)

• Costs depend on the assumptions

• Numbers are a reflection of expected costs under a strict set of assumptions

Where is it? 2009 Cost Estimates of Establishing and

Producing Sweet Cherries in Washington

http://extecon.wsu.edu/

2009 Cost Estimates of Establishing andProducing Sweet Cherries in Washington – In

Excel and PDF

http://extecon.wsu.edu/pages/Enterprise_Budgets

Assumptions for Sweet Cherry Study

• Sweetheart on Mazzard rootstock

• Block size: 10 acres

• Orchard size: 150 acres

• Irrigation system Overhead cooling and under tree drip

sprinklers Public irrigation district

• Architecture Two dimensional system (planar

canopy), randomly trained w/18 mm radius from tree center

In-row space: 10 feet Between row: 16 feet

• Life of planting: 25 years

• Density: 272 trees per acre

Capital RequirementSummary of Annual Capital Requirements for a 10-acre Sweet Cherry Block

  Establishment Years   Full Production

  Year 1 Year 2 Year 3 Year 4 Year 5   Years 6 to 25

Annual Requirements              

Land (11 acres) 71,500.00            

Trellis System 14,730.00            

Irrigation System 21,500.00            

Mainline & Pump 5,000.00            

Pond     9,000.00        

Wind Machine & Alarm System     26,000.00        

Operating Expenses 65,475.20 18,105.63 28,866.42 48,577.19 63,575.92  

331,388.86

Total Requirements 178,205.20 18,105.63 63,866.42 48,577.19 63,575.92   331,388.86

               

Receipts     28,000.00 112,000.00 168,000.00   224,000.00

               

Net Requirements 178,205.20 18,105.63 35,866.42 (63,422.81) (104,424.08)   107,388.86

Machinery and Building RequirementMachinery and Building Requirements for a 150-acre Orchard

 Purchase Price ($) Number of Units

Total Cost ($)

Mobile home 120,000 1 120,000

Machine shop 50,000 1 50,000

Tractor-70HP, 4WD 37,000 3 111,000

Tractor-40HP, 4WD 30,000 1 30,000

4 wheeler 5,000 2 10,000

Speed sprayer 20,000 3 60,000

Weed spray boom & tank

3,000 1 3,000

Mower-rotary 6,000 1 6,000

Mower-flail 8,500 1 8,500

Fork lift 20,000 1 20,000

Bin trailer 5,500 3 16,500

Ladder-10' 120 60 7,200

Total Cost     442,200

Interest Costs

Interest Costs per Acre for a 10-acre Sweet Cherry Block

 Total Purchase

Price ($)Salvage Value

($)Number of

AcresTotal Interest

Cost ($)Interest Cost Per Acre ($)

Land[1]71,500 71,500 11 6,078 552.50

Machinery & Buildings

442,200 44,220 150 20,673 137.82

Irrigation System21,500 2,150 10 1,005 100.51

Wind Machine & Alarm System

26,000 2,600 10 1,216 121.55

Pond9,000 900 10 421 42.08

Interest Rate 8.5%        

Salvage Value 10.0%        [1] Refer to Budget Assumption #1 in the Intro worksheet.

Total acres in block: 11Productive block acres: 10Total orchard acres:   150

Depreciation Costs Depreciation Costs per Acre for a 10-Acre Sweet Cherry Block

 

 

Total Purchase Price ($)

Number of Acres

Total Value Per Acre ($) Years of Use

Depreciation Cost Per Acre

($)

Trellis14,730 10 1,473.00 25 53.03

Irrigation System

21,500 10 2,150.00 25 77.40

Mainline & Pump

5,000 10 500.00 25 18.00

Wind Machine26,000 10 2,600.00 25 93.60

Pond9,000 10 900.00 25 32.40

Machinery & Building Annual

        

Replacement Cost [1]

        399.00

Summary of Costs By Categories (In $/acre)

Year 1

Year 2

Year 3

Year 4

Year 5

Years 6-25

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000

Establishment Orchard Activities Harvest Activities

Maintenance and Repairs Other Variable Costs (overhead, interest) Depreciation

Interest Other Fixed Costs (taxes, insurance)

Fixed Costs

Estimated Net Returns per Acre at Various Prices and Yield - Gala  Price ($/bin)

Yield (bins/acre)

200 225 250 275 300

35 -3,193 -2,318 -1,443 -568 306

40 -2,381 -1,381 -381 618 1,618

45 -1,569 -444 680 1,805 2,930

50 -757 492 1,742 2,992 4,242

55 55 1,430 2,805 4,180 5,555

60 867 2,367 3,867 5,367 6,867

[1] Includes amortized establishment costs.[2] Assumes pack-out of 20 packs/bin (all grades) and 925 lb/bin 

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

Photo from Northwest Cherries

Thank YouR. Karina Gallardo

Tree Fruit Research and Extension Center, School of Economic Sciences

Washington State University1100 N. Western Ave. Wenatchee, WA

E-mail: karina_gallardo@wsu.eduPhone: (509) 663 – 8181 x. 261