Economics of production

OSU BLUEBERRY SCHOOL
March 16-17, 2015
held at
Oregon State University, Corvallis, Oregon
This two-day blueberry “school” was organized for new and experienced blueberry growers,
farm managers, crew leaders, advisors, packers/shippers, and consultants. Experts from Oregon
State University, USDA Agricultural Research Service, Washington State University, and the
blueberry industry were asked to address key issues of where the blueberry market is going; how
you might be more successful in tight labor or volume markets; which cultivars are easiest to
grow and are in most demand; how to establish new acreage using cutting-edge methods;
projected costs and the resources available to growers for selecting new planting sites; how to
best manage existing acreage to maximize returns of high-quality fruit; provide basic information
on blueberry plant physiology to help growers minimize environmental stresses and improve
yield potential; nutrient management programs for optimal growth and quality; irrigation and
fertigation practices for higher quality and better efficiency; use of organic amendments and
mulches; planning for and improving machine harvest efficiency; pruning for hand or machine
harvest (where can you cut corners….or not), maximizing pollination for good fruit and seed set;
overviews of the most important blueberry viruses, diseases, insects, weeds, and vertebrate pests;
and tools for good pest management. Information throughout the program addresses the needs of
conventional, transitional, and organic growers. Simultaneous interpretation to Spanish has been
provided. This proceedings book contains information provided on these topics by each speaker
and co-authors. The thumb drive provided in the registration packet for each attendee includes a
copy of each presentation. Thank you for attending. It is our sincere wish that this will be a very
useful meeting and that you find the accompanying materials a valuable reference! –
Bernadine Strik, Professor and Extension Berry Crops Specialist, OSU and the members of the
organizing committee
Organizing Committee
Bernadine Strik, Chair, Oregon State University (OSU)
Wei Yang, OSU. Co-chair (sponsorship coordinator), OSU
Donna Williams, Rachel Williams & team at OSU Conference Services
Dave Bryla, USDA-ARS HCRU
Chad Finn, USDA-ARS HCRU
Vaughn Walton - OSU
Steve Castagnoli - OSU
Steve Renquist - OSU
Bryan Ostlund – Oregon Blueberry Commission
Eric Pond - industry
Jon Umble – industry
Derek Peacock - industry
Steve Erickson - industry
Nancy Jensen - industry
i
Table of Contents
OSU Blueberry School
Title
Authors
Characteristics of production regions in the Pacific
Northwest
Lisa DeVetter, Pat Jones, Bernadine
Strik, Kathie Dello
1
Markets - what's the future for fresh, processed, and
organic markets? Things you MUST think about before
starting or expanding production
Rod Cook, Derek Peacock, Jeff
Malensky, David Granatstein
9
Cultivar choices- Tried and true to brand new
Chad Finn and Bernadine Strik
15
Economics of production – resources
Bernadine Strik and David Granatstein
29
Resources available for selecting a good blueberry site
Wei Q. Yang
37
Site selection and establishment of a blueberry field
Wei Q. Yang and Bernadine Strik
41
Organic soil amendments and mulches for blueberry:
the good, the bad and the ugly
Dan Sullivan (OSU)
47
On-farm irrigation system design and operation
David Bryla
53
Blueberry plant physiology - why it's important to
understand the plant to manage it well
Bernadine Strik
57
Irrigation scheduling: when, where, and how much?
David Bryla
63
Pruning - impact of plant age, cultivar, and harvest
method
Bernadine Strik
69
Harvesting - hand vs. machine
Bernadine Strik (moderator); Paul
Norris (Norris Farms); Frank Brown
(Littau Harvesters (Inc.); Doug
Krahmer (Berries Northwest)
75
Nutrient management of blueberry -- assessing plant
nutrient needs and designing good fertilizer programs
Bernadine Strik and David Bryla
79
Maximizing pollination in blueberry
Ramesh Sagili, Carolyn Breece, John
Borden
95
Blueberry viruses present in the Pacific Northwest and
suggestions for their management
Robert Martin
99
Blueberry bacterial and fungal diseases
Jay Pscheidt and Jerry Weiland
107
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Page
Title
Authors
Page
Weed management for blueberry fields in the Pacific
Northwest
Tim Miller
115
Getting hit high and low: Options for managing bird
and vole damage
Dana Sanchez (OSU
125
Management of arthropods, insect, and plant-parasitic
nematodes in blueberries
Vaughn Walton,Nik Wiman, Inga
Zasada, Joe DeFrancesco, Daniel
Dalton, Amy Dreves, Jana Lee, Lynell
Tanigoshi, Wei Yang
129
iii
Economics of production – resources
1
Bernadine Strik1 and David Granatstein2
Department of Horticulture, Oregon State University; 2Center for Sustaining Agriculture and
Natural Resources, Washington State University
OREGON
There are two cost of production publications available for growers in Oregon, one for
conventional production and one for certified organic production. These are available to growers
for free on line at: 1) Blueberry Economics: The Costs of Establishing and Producing Blueberries
in the Willamette Valley, AEB0022. http://arec.oregonstate.edu/oaeb/files/pdf/AEB0022.pdf; and
2) Blueberry Economics: The Costs of Establishing and Producing Organic Blueberries in the
Willamette Valley. AEB0023. http://arec.oregonstate.edu/oaeb/files/pdf/AEB0023.pdf.
Unfortunately, there are no work sheets associated with either of these publications – this would
be helpful for entering your own cost of production numbers. Regardless, these publications are a
great resource for new growers who need to be made aware of the typical activities associated
with establishing and maintaining a blueberry farm (and the associated labor needs and costs).
Established growers should use these as a guide and modify numbers based on changes in their
farm establishment and management practices relative to what is assumed and published in these
guides. Some of these key issues are addressed here for each guide.
Conventional production guide:
Production guides such as this one are always developed for a “typical, well-managed farm”. It’s
important to understand that the model farm used, with the particular combinations of irrigation,
land-size, cultivar, yields, cultural management, may not exist. Thus to make this useful you
need to be aware of the key assumptions used to develop the cost study and how your costs may
differ.
Key assumptions made in the published cost study:
o 20-acre blueberry field on a 100-acre farm (affects overall costs, sharedequipment, etc.)
o Cost budgets are based on a 25-year life of planting, although many fields in Oregon are
much older
o Plant spacing: 3 ft in the row; 10 ft between rows (1,452 plants/acre)
o Plant cost: $3.50
o Planted in early October
o Soil is uniform and is well-suited to blueberry
o Sawdust is incorporated as a pre-plant amendment (expensive)
o All pre-plant work is contracted
o Raised beds are used (custom work)
o Sawdust is used as a mulch and is replenished every 3 years
o A grass cover crop is planted between rows. This is mowed during the season.
o Yield progression is (in tons/acre):
o 0.5 in year 2; 1.8 in year 3; 3.6 in year 4; 5.4 in year 5; 7.2 in year 6 and 9 in year
7 and onwards for hand harvested and 8 t/acre when machine harvested.
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o Machine harvest for processing is assumed to start in year 7
o 10% of production that is predominantly hand harvested for fresh fruit is machine
harvested for processing
o 100% of machine-harvested field is marketed for processing
o Fresh price is $1.34/lb; processed is $0.75/lb [an average of the three years prior to
publication (in 2011)]
o $1000 per year is allocated for bird control
o Pruning time increases as the planting ages:
o 15 hr/acre in year 2; 30 in year 3; 50 in year 4; 70 in year 5; 85 in year 6; and 85
hr/acre for hand-picked mature field and 60 hr/acre for machine-picked field
o Grower owns shed and all machinery to manage planting (see list in publication)
o General labor is valued at $13.50/hr and equipment operator labor at $19/hour including
all overhead expenses
o Drip irrigation is installed in year 1 at a value of $50,000 including pump, filter, injector,
manifold, lines, and emitters – 15 year expected life
o Trellis is installed in year 2 ($1700/acre)
o Management costs for SWD are included in the budget
o Interest rate on operating funds is 8.5% and is treated as a cash expense
o Machinery and land owned are assessed 8.5% and 5% interest as a return on grower
investment. Land is valued at $10,000/acre (5% is equivalent lease rate)
Based on the above assumptions, a positive cash flow begins in year 3 (see table from the cost
study below) with gross income exceeding cash costs by $279/acre. The planting returns
sufficient gross income to pay all previous years’ cash costs in year 7, the first year of full
production, with a projected cash surplus of $5,206 per acre for hand harvested, fresh market and
$1,834 per acre for machine harvested for processing.
….. various production practices not shown
Some key things to be aware of when estimating your costs include:
o It’s less expensive to establish plantings without pre-plant soil amendment, but plantings
may not yield as well, particularly on heavy soil.
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o If you establish plantings on flat ground, then yields will likely be lower even on good
soil (23% lower cumulative yield on good soil when comparing flat to raised in Oregon’s
Willamette Valley).
o Yield may be lower, particularly with some cultivars and in some production regions.
Good management and pruning are required to achieve these yields!
o Yield may be higher, especially for some cultivars – e.g. Legacy may achieve double the
yields reported in this cost study. However, this cultivar also requires higher pruning
costs (at least 30% more time) and hand-pick costs are higher (per pound) as fruit may be
more difficult to find in the more dense canopy. This cultivar is also less adapted to
machine harvest (and is thus limited to hand pick).
o Higher yields reported for cultivars like ‘Liberty’ and ‘Draper’ are also associated with
higher pruning costs (estimate 25 to 30% more labor cost).
o Price received for fruit destined for fresh or processed markets varies with year, fruiting
season/cultivar. It is important to check price trends to make a reasonable estimate of
future profitability – even then it’s hard to predict how costs will change in the future!
o Since harvest costs are the largest share of cash costs, it’s easy to look at these budgets
and “take the money to the bank” by just planning to machine pick for fresh (lowest
harvest costs and highest income) – this is unrealistic for many reasons. Presently, not
many cultivars are adapted to machine harvest for fresh; this is a relatively new practice
with experience rather limited; pruning for machine harvest for fresh market is different
than pruning for machine harvest for processing (with greater cost); pest management is
often more expensive when machine harvesting for fresh; not all of the machineharvested fruit may be marketed fresh; there are often more losses of fruit when machine
picking for fresh than for processing (related to stage at which machine starts first
harvest); and some packing companies pay differential prices for hand-picked versus
machine-picked fresh at this time.
o Money may be saved by not using a trellis; however, many cultivars require a trellis to
prevent wind damage (e.g. Liberty) or to keep the bush upright (e.g. Legacy). Trellises
have also been shown to improve machine harvest recovery (reduce ground loss) by 8%
of total yield (Strik and Buller, 2002). Many growers have indicated that trellises improve
hand-harvest efficiency and reduce fruit drop during spraying events (e.g. for SWD).
o If weed mat (porous, polyethylene ground cover) is used in the row, instead of sawdust
then the cost of materials and installation must be amortized for the expected life of the
weed mat. While herbicide costs could be significantly reduced, there would be added
costs for maintaining the edges of the weed mat and for opening and closing to add any
granular fertilizer products or for rodent control. Drip irrigation would then be required
(under weed mat).
Organic production guide:
This is the first organic production guide developed in Oregon. There are only two others in the
U.S. that we are aware of and both are for very small scale growers (atypical of our production in
the PNW). Considering this was our first guide, some key assumptions were made – we plan to
update this cost study using information learned from our 9-year research trial on certified
organic production systems. It’s important to understand that the model farm used, with the
particularly combinations of irrigation, land-size, cultivar, yields, cultural management, may not
31
exist. Thus to make this useful you need to be aware of the key assumptions used to develop the
cost study and how your costs may differ.
Key assumptions made in the published cost study:
o 20-acre blueberry field on a 100-acre farm (affects overall costs and equipment shared
etc.)
o Cost budgets are based on a 25-year life (little industry experience on this)
o Plant spacing: 3 ft in the row; 10 ft between rows (1,452 plants/acre)
o Plant cost: $3.50
o Planted in early October
o Soil is uniform and is well-suited to blueberry
o Field is tiled ($1,200/acre)
o Field is free of weeds (ready to plant - see comments below)
o Sawdust and chicken compost are incorporated as a pre-plant amendment (expensive)
o All pre-plant work is contracted
o Raised beds are used (custom work) and are established just prior to planting
o Weed mat (porous, polyethylene ground cover) is used as a mulch and has an expected
life of 5 years. A split or “zippered” system is used.
o Sawdust is placed around plants in the “planting hole” area
o A grass cover crop is planted between rows. This is mowed during the season.
o A string trimmer is used to keep the edges of the cover crop from encroaching on the
weed mat.
o Fish emulsion fertilizer is applied through the drip irrigation at rates of 25 lb N/ac in year
1 and 2; 50 lb N/ac in year 3; 100 lb N/ac in year 4 and 120 lb N/ac in year 5 and onward
o Chicken compost along with any other needed nutrients are is applied in a broadcast band
in the row and under the weed mat every two years starting in fall of year 3.
o Yield progression is (in tons/acre):
o 0.5 in year 2; 1.8 in year 3; 3.6 in year 4; 5.4 in year 5; 7.2 in year 6 and 9 in year
7 and onwards for hand harvested and 8 t/acre when machine harvested.
o Machine harvest for processing is assumed to start in year 7
o 10% of production that is predominantly hand harvested for fresh fruit is machine
harvested for processing
o 100% of machine-harvested field is marketed for processing
o Fresh price is $1.75/lb; processed is $1.00/lb [an average of the three years prior to
publication (in 2011)]
o $50 per acre per year is allocated for bird control when plants are fruiting
o Management costs for SWD are included in the budget
o Costs of organic certification are included
o Pruning time increases as the planting ages:
o 15 hr/acre in year 2; 30 in year 3; 50 in year 4; 70 in year 5; 85 in year 6; and 85
hr/acre for hand-picked mature field and 60 hr/acre for machine-picked field
o Grower owns shed and all machinery to manage planting (see list in publication)
o General labor is valued at $13.50/hr and equipment operator labor at $19/hour including
all overhead expenses
o Drip irrigation is installed in year 1 at a value of $50,000 including pump, filter, injector,
manifold, lines, and emitters – 15 year expected life
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o Trellis is installed in year 2 ($1700/acre)
o Interest rate on operating funds is 8.5% and is treated as cash expense
o Machinery and land owned are assessed 8.5% and 5% interest as a return on grower
investment. Land is valued at $10,000/acre (5% is equivalent lease rate)
Based on the above assumptions, a positive cash flow begins in year 4 (see table from the cost
study below) with gross income exceeding cash costs by $4,455/acre. The planting returns
sufficient gross income to pay all previous years’ cash costs in year 6 with a projected cash
surplus of $2,866 per acre for hand harvested, fresh market and $1,834 per acre for machine
harvested for processing. In full production (starting in year 7), gross income exceeds variable
costs by $14,422 per acre for hand harvested, fresh market and $8,123 per acre for machine
harvested for processing.
….. various production practices not shown
Some key things to be aware of when estimating your costs include:
Note: some comments are similar to the conventional production costs above. This will be
noted.
o This budget does not include pre-plant preparation including judicious weed management
and use of cover cropping. This often requires more “time out of production” and is thus
an added cost. Without this careful preparation, the planting may suffer with poor plant
growth and yield.
o Plantings are less expensive to establish on flat ground or without soil amendments – see
comments for conventional production above
o See comments regarding plant cost above
o In this cost study, we assume yields will be similar to conventional. We have had this
experience in a well-managed organic trial (for the best treatments). However, yield may
be much more variable in organic fields than in conventional – greater risk associated
with organic (e.g. pests and fewer control options). Good management and pruning are
required to achieve these yields!
o See comments regarding differences in yield and pruning costs for cultivars in
conventional above.
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o Not all cultivars are equally adapted to organic production. For example, ‘Duke’ is very
particular with regard to soil pH and type of organic fertilizer used.
o See comments above regarding costs. While prices paid to organic growers for certified
processed and fresh fruit have been higher the last couple of years (than those used in the
cost study), prices fluctuate!
o While fish emulsion and fertigation are used in this cost study, we have found similar
yield and growth and often better results (depending on cultivar) when using granular
applications of feather meal – this would be a less expensive option, but would require
opening and closing the weed mat for each application.
o See comments regarding hand vs. machine harvest costs above.
o See comments regarding trellising above.
o SWD may be more difficult to manage in organic production due to limited availability
of effective OMRI-approved products.
o If you have a producing field that is being transitioned to organic production your costs
may be quite different than those presented in the guide. For example, your management
costs during the transition period would be those of organically-approved
methods/products but you will receive a conventional price for fruit for two years. In
addition, there may be a transition period when transitioning to organic fertilizer products
and a ‘learning curve’ leading to a risk of lower yields and more financial risk. Also,
organic production typically takes greater attention to management, in terms of timing of
operations, preventative practices, and understanding the system; growers must be
vigilant with their own decisions and their workers to avoid accidental use of a prohibited
material that might jeopardize their organic status (especially on mixed operations).
WASHINGTON
There are currently no enterprise budgets for Washington blueberries, either for conventional or
organic, or for western Washington versus eastern Washington. The Oregon budgets for the
Willamette Valley (Julian et al., 2011a,b) are likely more representative of conditions and costs
for production in western Washington. In eastern Washington, disease and pest problems are
probably less and thus costs for control lower. Spotted Wing Drosophila is present in both
environments, but comparative data on pest pressure and damage are not available. Blueberries
in eastern Washington require full-season irrigation, which will add cost. Also, most soils have a
pH above the optimal range, and growers incur an expense in acidifying the soil before planting
and keeping it low over time. Certain irrigation water sources are also high pH, and water must
be treated with acid prior to field use.
The Oregon budgets found organic production to be 10-12% more expensive than conventional
during years 0-7. It is unclear whether this would be the case in western Washington (it may be
higher), while production costs between the two management systems might be quite similar in
eastern Washington, as it is for apples (Taylor and Granatstein, 2013). Organic options for soil
amendments (both for fertility and for pH adjustments) and water treatment are generally more
expensive than their conventional counterparts. While yields were similar between the two
systems in Oregon, that may not be the case in Washington, based on grower data from the
Washington State Dept. of Agriculture and the USDA-National Agricultural Statistics Service
(NASS). In a recent study (Brady et al., 2015), nearly 60% of the yields in western Washington
34
were between 1,000 and 5,000 lb per acre, with another 30% below 1,000 lb per acre. In eastern
Washington, over 40% of yields were between 5,000 and 10,000 lb per acre, 12% were 10,000 to
16,000 lb per acre, and 6% between 16,000 and 20,000 lb per acre. None of the yield data could
be adjusted for the age of the planting, which likely skews the data downward given the large
acreage of young blueberries. But these results were compared with a data set from USDA-RMA
where age of planting was attached to yield, and similar trends were observed. The WSDA
values suggest that there is a higher potential yield for organic growers in eastern Washington
(Table 1). The NASS average yield for Washington blueberry (2009-2012) was 8,417 lb per
acre, slightly higher than the eastern Washington organic average and much higher than that for
western Washington.
Organic growers in western Washington received a higher average price than in eastern
Washington, due to more growers selling into direct and high-value markets. Organic prices
were higher than the NASS average price (2009-2012) for all Washington blueberries ($1.32/lb),
which combines both fresh and processed sales. Limited data from organic growers suggest that
a greater share of that crop goes to fresh markets. About 30% of organic prices reported were
above $3/lb, and 12% were above $4/lb. Despite the higher prices, western Washington organic
growers realized a low gross revenue per acre, less than eastern Washington growers (Table 1)
and less than NASS data for all Washington blueberries ($11,243/ac for 2009-2012). With total
production costs of $12,000-20,000/ac as fields come into full production (Julian et al., 2011a), it
is unclear how western Washington organic revenues will cover these.
Table 1. Price, yield, and gross revenue per acre as reported by Washington organic blueberry
growers, by geographic area.
Year
2009
2010
2011
2012
4 Year Average
Price ($/lb)
East West
2.28 2.77
2.03 2.90
2.17 3.39
2.51 2.34
2.27 2.88
Yield (lb/ac)
East West
6,648 4,404
6,381 2,840
7,131 1,644
7,790 2,704
7,093 2,783
Revenue ($/ac)
East
West
15,399 10,007
12,362 7,531
15,323 4,940
17,431 5,130
15,296 6,684
Source: Brady et al., 2015
Overall, organic blueberry production appears to be a profitable option for growers in certain
locations, with minimal to no yield sacrifice and considerably higher average prices. Western
Washington organic growers will need to boost yields, as they are already receiving prices on the
high end of the organic market. Further details can be found in “Trends and Economics of
Washington State Organic Blueberry Production” (Brady et al., 2015).
SUMMARY
It is important to be realistic and often conservative when estimating costs. Do your homework
as prices and returns may change considerably. Keep good records of your costs, yields, and
prices received. This will allow you to look at price and yield ‘sensitivity’ and understand how
much room you have for prices and/or yields to drop for you to still breakeven. Tables of these
values can be found in the Oregon cost of production studies.
35
For more information on markets online:
The Agricultural Marketing Resource Center:
http://www.agmrc.org/commodities__products/fruits/blueberries/
US Market News (prices for conventional and organic):
https://www.marketnews.usda.gov/mnp/fv-nav-byCom?navClass=FRUITS&navType=byComm
References
Brady, M., Kirby, E., Granatstein, D. 2015. Trends and Economics of Washington State Organic
Blueberry Production. FS154E, Washington State University Extension, Pullman, WA. In press.
Julian, J., Strik, B., Pond, E. and Yang, W. 2011a. Blueberry Economics: The Costs of
Establishing and Producing Organic Blueberries in the Willamette Valley. Oregon State
University Extension AEB0023. http://arec.oregonstate.edu/oaeb/files/pdf/AEB0023.pdf.
Julian, J., Strik, B., and Yang, W. 2011b. Blueberry Economics: The Costs of Establishing and
Producing Blueberries in the Willamette Valley. Oregon State University Extension AEB0022.
http://arec.oregonstate.edu/oaeb/files/pdf/AEB0022.pdf.
Strik, B. and G. Buller. 2002. Improving yield and machine harvest efficiency of ‘Bluecrop’
through high-density planting and trellising. Acta Hort. 574:227-231.
Taylor, M., and Granatstein, D. 2013. A cost comparison of organic and conventional apple
production in the state of Washington. Crop Management doi:10.1094/CM-2013-0429-05-RS.
https://www.agronomy.org/publications/cm/pdfs/12/1/2013-0429-05-RS
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