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4 | ||||||||||||
| 2000 APPLE PRODUCTION BUDGET | |||||||||||||
| Mature Trees | |||||||||||||
| Years 4+ | |||||||||||||
| 1 Acre | |||||||||||||
| ITEM | EXPLANATION | PRICE PER | YOUR | ||||||||||
| UNIT | BUDGET | ||||||||||||
| INCOME | |||||||||||||
| Apples 1 | 19,200 | lbs | $0.24 | /lb | $4,608 | ||||||||
| VARIABLE COSTS | |||||||||||||
| Fertilizer 2 | |||||||||||||
| N | 20 | lb | 0.23 | /lb | 5 | ||||||||
| P2O5 | 30 | lb | 0.28 | /lb | 8 | ||||||||
| K2O | 30 | lb | 0.13 | /lb | 4 | ||||||||
| Calcium Chloride | 30 | lb | 0.25 | /lb | 8 | ||||||||
| Herbicides 3 | 15 | ||||||||||||
| Insecticides 3 | 110 | ||||||||||||
| Fungicides 3 | 220 | ||||||||||||
| Fuel, Oil, Grease | 20 | ||||||||||||
| Repairs | 15 | ||||||||||||
| Miscellaneous 4 | 15 | ||||||||||||
| Hired Labor 5 | |||||||||||||
| Pruning | 200 | trees | 2.00 | /tree | 400 | ||||||||
| Mowing and other | 10 | hours | 7.50 | /hr | 75 | ||||||||
| Harvesting | 400 | bu | 1.30 | /bu | 520 | ||||||||
| Marketing | |||||||||||||
| Cool Storage | 400 | bu | 0.25 | /bu | 100 | ||||||||
| Selling Charges | 6% | of gross receipts | 276 | ||||||||||
| Bee Rental and Maintenance | 70 | ||||||||||||
| Int. on Oper. Cap. 6 | 12 | mo. | 9.0% | 167 | |||||||||
| TOTAL VARIABLE COSTS | -Per Acre | 2028 | |||||||||||
| -Per Pound | 0.11 | ||||||||||||
| FIXED COSTS | |||||||||||||
| Operator Labor Charge 5 | 10 | hours | 7.50 | /hr | 75 | ||||||||
| Mach. And Equip. Charge | 38 | ||||||||||||
| Land Charge | 85 | ||||||||||||
| Facilities and Equipment 7 | $ 30,000 | 15% | 225 | ||||||||||
| Management Charge | 5% | of gross receipts | 230 | ||||||||||
| TOTAL FIXED COSTS | 653 | ||||||||||||
| TOTAL COSTS | -Per Acre | 2682 | |||||||||||
| -Per Pound | 0.14 | ||||||||||||
| RETURN ABOVE VARIABLE COSTS | 2580 | ||||||||||||
| RETURN ABOVE TOTAL COSTS | 1926 | ||||||||||||
| 1 | Price and yield based on historical yield and price received in Ohio. Yield will vary with age of trees. | ||||||||||||
| Yield and/or price may vary depending on variety and quality of fruit. Apple trees should reach | |||||||||||||
| maximum production by 7 years and if well maintained should sustain that for 15 to 20 years. | |||||||||||||
| 2 | Consult OSU Bulletin 458 "Fertilizing Fruit Crops" for specific recommendations | ||||||||||||
| 3 | Consult OSU Bulletin 506A2 "Commercial Tree Fruit Spray Guide" for specific recommendations | ||||||||||||
| 4 | Includes soil tests, small tools, utilities, harvesting equipment, etc… | ||||||||||||
| 5 | Hired and seasonal labor is considered a variable costs, salaried and operator/unpaid | ||||||||||||
| family labor is considered a fixed cost. | |||||||||||||
| 6 | Interest on all variable costs for 12 months at 9% interest rate | ||||||||||||
| 7 | Facilities and equipment valued at $30,000 expensed at 15% annually for 20 acres. | ||||||||||||
| Example: $30,000 x 15% / 20 acres = $225 | |||||||||||||
| Includes depreciation, interest, insurance, and repairs. | |||||||||||||
| Expenses and Returns Over Life of Trees | |||||||||||||
| Apple trees assumed to last 25 years. | |||||||||||||
| Since an apple orchard lasts as many as 25 years, it is important to examine the time value of money associated with the enterprise. Time value of money is based on the premise that $1 today is worth more than $1 in the future. This is basically because the $1 today can be invested and appreciate in value until some time in the future. Therefore in regards to the apple enterprise, $1 of return in year one would be worth more than $1 of return in year ten. Returns in future years need to be discounted to reflect the time value of money. The following table lists the future value and present value of returns from the enterprise. | |||||||||||||
| Returns Over Total Costs | Present Value | ||||||||||||
| Year | 0 | -$865 | -$865 | ||||||||||
| Year | 1 | -$2,729 | -$2,481 | Discount Rate = | 10% | ||||||||
| Year | 2 | -$1,074 | -$888 | The discount rate is the degree to which the future values are discounted to reflect current values. It is generally assumed to be equivalent to the amount you could earn in alternative investment opportunities. | |||||||||
| Year | 3 | -$1,074 | -$807 | ||||||||||
| Year | 4 | $1,926 | $1,315 | ||||||||||
| Year | 5 | $1,926 | $1,196 | ||||||||||
| Year | 6 | $1,926 | $1,087 | ||||||||||
| Year | 7 | $1,926 | $988 | ||||||||||
| Year | 8 | $1,926 | $898 | ||||||||||
| Year | 9 | $1,926 | $817 | ||||||||||
| Year | 10 | $1,926 | $743 | ||||||||||
| Year | 11 | $1,926 | $675 | ||||||||||
| Year | 12 | $1,926 | $614 | ||||||||||
| Year | 13 | $1,926 | $558 | ||||||||||
| Year | 14 | $1,926 | $507 | ||||||||||
| Year | 15 | $1,926 | $461 | ||||||||||
| Year | 16 | $1,926 | $419 | ||||||||||
| Year | 17 | $1,926 | $381 | ||||||||||
| Year | 18 | $1,926 | $346 | ||||||||||
| Year | 19 | $1,926 | $315 | ||||||||||
| Year | 20 | $1,926 | $286 | ||||||||||
| Year | 21 | $1,926 | $260 | ||||||||||
| Year | 22 | $1,926 | $237 | ||||||||||
| Year | 23 | $1,926 | $215 | ||||||||||
| Year | 24 | $1,926 | $196 | ||||||||||
| Year | 25 | $1,926 | $178 | ||||||||||
| Total | $36,630 | $7,652 | |||||||||||
| Over the life of the planting, the enterprise will generate $36,360 in returns. However, since much of the return comes in future years, it is not the same as having $36,360 in the operator's pocket today. The present value column indicates that if the operator was given the equivalent return in one lump sum today (present value), it would be worth $7,652. The difference of the total returns and the present value returns is a result of the time value of money. | |||||||||||||