9
			2000 PEACH PRODUCTION BUDGET
			Fruit Bearing Trees (Years 4+) 1
			1 Acre
	ITEM				EXPLANATION		PRICE PER				YOUR
							UNIT				BUDGET
REVENUE
	Peaches				6500	lb	$0.42	/lb	$2,730
VARIABLE  COSTS
	Fertilizer 2
		N			25	lb	0.23	/lb	6
		P2O5			50	lb	0.28	/lb	14
		K2O			50	lb	0.13	/lb	7
	Herbicides 3								10
	Insecticides 3								100
	Fungicides 3								85
	Fuel, Oil, Grease								25
	Repairs								15
	Miscellaneous 4								20
	Hired Labor 5
		Mowing, harvesting, and other			90	hours	7.50	/hr	675
		Pruning					1.50	/tree	180
	Marketing Costs
		Picking Boxes			135	boxes	1.50	/box	203
		Cool Storage			135	bu	0.30	/bu	41
	Bee Rental and Maintenance								50
	Int. on Oper. Cap. 6				12	mo.	9.0%		86
TOTAL VARIABLE COSTS						- Per Acre			1516
						- Per Pound			0.23
FIXED COSTS
	Operator Labor Charge 5				10	hours	7.50	/hr	75
	Mach. And Equip. Charge								38
	Land Charge				Rent				85
	Facilities and Equipment 7				$   30,000		15%		225
	Management Charge				5%	of gross receipts			137
TOTAL FIXED COSTS									560
TOTAL COSTS						- Per Acre			2076
						- Per Pound			0.32
RETURN ABOVE VARIABLE COSTS									1214
RETURN ABOVE TOTAL COSTS									654
											10
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.
		Peach trees should reach a maximum production by 5-7 years but will decline after 10.
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, 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
	Peach trees assumed to last 12 years.
	Since a peach orchard lasts as many as 12 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 peach 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	-$934		-$934
		Year	1	-$1,678		-$1,525		Discount Rate =			10%
		Year	2	-$919		-$760		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	-$919		-$690
		Year	4	$654		$447
		Year	5	$654		$406
		Year	6	$654		$369
		Year	7	$654		$336
		Year	8	$654		$305
		Year	9	$654		$278
		Year	10	$654		$252
		Year	11	$654		$229
		Year	12	$654		$209
		Total		$1,440		-$1,078
	Over the life of the planting, the enterprise will generate $1,440 in returns.  However, since much of the return comes in future years, it is not the same as having $1,440 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, it would be worth -$1,078. The difference of the total returns and the present value returns is a result of the time value of money.