AP422
Apple gross margins by variety in
Tasmania
Ingrid van Putten
Tasmanian Department of Primary
Industry & Fisheries
AP422
This report is published by the Horticultural Research and
Development Corporation to pass on information
concerning horticultural research and development
undertaken for the Apple & Pear Industry.
The research contained in this report was funded by the
Horticultural Research and Development Corporation with
the financial support of the Apple & Pear Industry.
All expressions of opinion are not to be regarded as
expressing the opinion of the Horticultural Research and
Development Corporation or any authority of the
Australian Government.
The Corporation and the Australian Government accept
no responsibility for any of the opinions or the accuracy
of the information contained in this Report and readers
should rely upon their own inquiries in making decisions
concerning their own interests.
Cover Price $20.00
HRDC ISBN 1 86423 309 5
Published and Distributed by:
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© Copyright 1996
DISCLAIMER
This report has been prepared by officers of the Department of Primary
Industry and Fisheries for the information of apple growers in Tasmania.
Neither its authors nor the Crown in right of the State of Tasmania warrants
its accuracy, or accept responsibility for the consequences of reliance upon it.
Persons using the information do so at their own risk absolutely.
The gross margins presented in this booklet are based on likely yields, costs
and prices for 1994-95. Costs used in these budgets are intended to reflect
current commercial practice. They do not necessarily coincide with
recommendations of the DPIF.
The inclusion of a brand name does not mean that it is specifically
recommended. Omission of a brand name does not mean that it is unsuitable.
Most of the information provided in this report was obtained from
Departmental sources, due to the nature of the apple industry in Tasmania.
The details of the analysis are therefore likely to differ for each grower in
Tasmania. It has however been attempted to obtain accurate industry
averages representing most orchardists.
The labour cost of the owner or operator of the orchard (which may be valued
around $30,000 per annum) is in this analysis treated as an overhead cost and
is not included in the gross margin analysis.
Enquiries in relation to this publication and the computer model used in this
study should be directed to
Ingrid van Putten
Economist
GPO Box 192
HOB ART TAS 7001
ph (002) 33 3724
©
Copyright is claimed by the Crown in right of the State of Tasmania
acting through the Department of Primary Industry and Fisheries.
ACKNOWLEDGMENTS
The authors of this report would like to thank all those who have supported
this project and have provided current cost, price and other information.
In particular thanks have to be extended to:
•
Ron Gordon of NSW agriculture;
•
Sam Walker and Kevin Dodds of the Batlow Fruit Co-operative;
•
Julie Ingram and Amanda Moses of the Meyers Strategy Group in Sydney;
•
Carl and Howard Hanssen;
•
DPEF employees, Keith Jones, Sally Bound, Paul Rapley, Kat Saltmarch
and Les Baxter of the New Town laboratory;
•
Predo Jotic and Mike Oakford of Grove Research Station, and
•
Christine Williams, Christine Miller and Ruth Foster of Economics and
Policy Research Branch.
SUMMARY
The gross margin analysis of four different apple varieties undertaken in this
report is intended to investigate major production cost and revenue
differences between four apple varieties (Democrats, Golden & Red
Delicious, and Fuji).
This report aims to assess the difference in gross margins between the four
varieties named above assuming a semi intensive production system for each
variety.
This study is not intended to serve as a guide for orchard management
decisions but rather to illustrate differences between the mentioned varieties.
The decision making process in relation to planting and growing of different
varieties can be facilitated through entering ones own variable cost figures in
the spaces supplied in the final gross margin spreadsheets included in Sections
7 through 10 of this report. Figures estimating establishment, capital and
overhead costs that are not part of a gross margin are supplied in Appendix 1
(parts A, B, and C).
Other potential guides for variety management decision making processes for
orchardists in Tasmania may be found in publications for other States, such as
"The Bottom Line" by Ron Gordon of the NSW Department of Agriculture.
Much of the analysis in this report is based on, and related to the work of
Gordon, for example the variable cost structure set up.
However, this work is in essence different from the work of Gordon as it
compares the gross margins for four different apple varieties (Democrats,
Fujis, Golden and Red Delicious-Hi-Early) as opposed to comparing different
production systems (intensive and semi-intensive).
It is not feasible to assess all variations in production systems and
management systems for a particular industry in this gross margin analysis.
The pome fruit industry in particular, shows high variability between growers
at all levels of production. It is therefore important to point out that the gross
margin analysis represented here is a model of one particular situation which
in reality is infinitely variable.
The gross margins and other results obtained in this report can vary
significantly over relatively short time periods. For instance a period of
favourable climatic conditions may lead to substantial price falls on the local
and mainland markets, whereas a shortage of apples due to unfavourable
weather conditions may lead to price increases. A second potential source of
varying prices may be determined by the time of year of sale. Late or early
season apples may obtain higher prices.
A discussion and a description of definitions and cost factors is undertaken in
Section 1.
A historical overview and a description of the current situation and production
status of the Tasmanian apple industry is given in Section 2 and 3.
Section 4 discusses the management variables such as tree planting densities,
yield, packout and count. Section 5 gives an overview of average local,
interstate and overseas prices for the four varieties.
Section 6 discusses all cost variables associated with the growing, picking,
handling, and marketing of the four apple varieties.
Section 7 to 10 details the cost structure and lists sensitivity analyses for the
four varieties.
Section 11 compares the cost and revenue structure between the four
varieties.
A reference list is provided with recent and relevant publications on the
economics of the pome fruit industry.
At the time of writing this report an apple benchmarking study was being
carried out by the Meyers Strategy Group in Sydney. As the results of this
benchmarking study had not yet been released, they could not be taken into
consideration in this gross margin analysis.
TABLE OF CONTENTS
ABBREVIATIONS AND UNITS
1
3
GROSS MARGIN ANALYSIS - DISCUSSION OF DIFFERENT COST ELEMENTS
1.1
1.2
1.3
Establishment, capital, and overhead cost
Labour cost
Variable cost and different management regimes
4
4
4
5
2
PRODUCTION LEVELS OF DEMOCRATS, GOLDEN DELICIOUS, RED DELICIOUS,
AND FUJIS IN TASMANIA
6
3
THE TASMANIAN APPLE INDUSTRY nsr PERSPECTIVE
8
3.1
3.2
3.3
9
10
10
4
5
6
7
Tasmanian apple industry exports
Apple growers
Packing, storage and transport
MANAGEMENT VARIABLES
12
4.1
4.2
4.3
4.4
4.5
4.6
12
14
14
15
16
17
Tree planting density
Age of the orchard
Yield per tree and per carton
Planting system
Packout
Expected count - Apple size
PRICES
18
5.1
5.2
5.3
5.4
5.5
18
18
19
21
21
Market destination of apple crop
Local market prices
Interstate market prices
Overseas market prices
Processing and juicing prices
COST VARIABLES
22
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
22
23
24
25
25
25
26
26
26
26
27
Fertiliser cost
Chemical cost
Thinning cost
Pruning cost
Harvesting cost
Insurance cost
Pollination cost
Irrigation cost
Mowing cost
Handling costs
Marketing costs
GROSS MARGIN - FUJI
29
7.1
7.2
7.3
7.4
7.5
7.6
7.7
29
30
32
33
33
34
34
Variable cost structure - Fuji
Sensitivity analysis of Fuji gross margins
Growing cost to packing shed door for Fuji
Picking cost to packing shed door for Fuji
Marketing cost for Fuji
Variable handling cost for Fuji
Expected revenue for Fuji
1
8
9
10
11
GROSS MARGIN-Hi EARLY RED DELICIOUS
35
8.1
8.2
8.3
8.4
8.5
8.6
8.7
35
36
38
39
39
40
40
Variable cost for Red Delicious
Sensitivity analysis of Red Delicious gross margins
Growing cost to packing shed door for Red Delicious
Picking cost to packing shed door for Red Delicious
Marketing cost for Red Delicious
Variable handling cost for Red Delicious
Expected revenue for Red Delicious
GROSS MARGIN-GOLDEN DELICIOUS
41
9.1
9.2
9.3
9.4
9.5
9.6
9.7
41
42
44
45
45
46
46
Variable cost for Golden Delicious
Sensitivity analysis of Golden Delicious gross margins
Growing cost to packing shed door for Golden Delicious
Picking cost to packing shed door for Golden Delicious
Marketing cost for Golden Delicious
Variable handling cost for Golden Delicious
Expected revenue for Golden Delicious
GROSS MARGIN - DEMOCRATS
47
10.1
10.2
10.3
10.4
10.5
10.6
10.7
47
48
50
51
51
52
52
Variable cost breakup for Democrat
Sensitivity analysis of Democrats gross margins
Growing cost to packing shed door for Democrats
Picking cost to packing shed door for Democrats
Marketing cost for Democrats
Variable handling cost for Democrats
Expected revenue for Democrats
COMPARISON OF VARIABLE COST BETWEEN VARIETIES
11.1 Comparison of revenue between varieties
11.2 Comparison of gross margin between varieties
53
53
54
REFERENCES
55
PERSONAL COMMUNICATIONS
57
APPENDIX 1 -PART A
58
APPENDIX 1 -PARTB
59
APPENDIX 1 -PARTC
60
APPENDIX 2
61
2
ABBREVIATIONS AND UNITS
Cartons (standard size - 18kg)
Department of Primary Industry and Fisheries
Hectare
Hour
Internal Rate of Return
Metre
Mega litre
Net Present Value
ctn
DPIF
ha
hr
IRR
m
Ml
NPV
GROSS MARGIN ANALYSIS - DISCUSSION OF DIFFERENT
COST ELEMENTS
The aim of a gross margin analysis for a particular product is to assess the
relative production cost and the potential revenue received for the product.
A gross margin is defined by Gordon (1994) as the difference "between the
gross income earned and the variable costs incurred in achieving it".
A gross margin is therefore not profit as it does not take establishment,
overhead, and capital costs into consideration.
Establishment, capital, and overhead cost
The first 6 operational years of an orchard is generally referred to as the
establishment phase. After 6 years the orchard is assumed to be in full
production. The profitable production life of the orchard varies from
approximately 20 to 30 years depending on the planting system.
Documented cash flow development budgets (Gordon 1994) usually
review a period of around 12 years. In reality all existing orchards last
much longer than 12 years (pers comm K. Jones).
The establishment costs associated with developing an orchard are
generally incurred in the first year. These include soil preparation and tree
planting. Appendix 1 - Part A shows estimates of establishment costs per
hectare.
Capital costs are comprised of the cost of equipment such as a tractor and
pruning equipment, plus the cost of fruit trees and irrigation materials.
Direct capital costs are mainly incurred in the establishment phase but a
small proportion will be incurred after the 6 year establishment period (e.g.
picking bins). Estimates are given in Appendix 1 - Part B.
The return from capital is usually expressed in terms of interest or
depreciation as a capital cost, and will be incurred throughout the
operation of an orchard.
Overhead costs are fixed costs that do not vary with the size of the
orchard or the year of operation (eg. establishment phase or mature
orchard). Examples of overhead costs include: rates, materials, and phone
costs. Appendix 1 - Part C shows yearly averages.
Labour cost
.
THE LABOUR COST OF THE OWNER OR OPERATOR OF THE
ORCHARD (WHICH MAY BE VALUED AROUND $ 3 0 , 0 0 0 PER
ANNUM) IS IN THIS ANALYSIS TREATED AS AN OVERHEAD COST
AND IS NOT INCLUDED IN THE GROSS MARGIN ANALYSIS.
The labour cost incurred for pruning, hand thinning, and picking are
considered to be variable, and are therefore included in the gross margins.
These labour costs are valued at $8.70 per hour, which is the hourly casual
4
wage rate for a general hand - class 1 (Federal Fruit Growing Industry
Award, DPIF Farm Budget Guide 1995).
1.3
Variable cost and different management regimes
Differences are observed in the overall accuracy of determining a gross
margin for different agricultural products. For instance the variable costs
associated with growing one hectare of feed barley may vary less than the
variable costs involved in growing one hectare of Fuji apples. The different
management approaches of the orchardists in growing Fuji apples may
result in a high variability in gross margin levels achieved. The variable
costs associated with growing feed barley may not be as sensitive to
different management practices as the variable costs of growing apples.
Taking the above into consideration it has to be emphasised that there are
several other issues related to gross margin analysis that will be the source
of gross margin discrepancies between different growers. For instance
natural climatic variation or pest and disease incidence may have significant
effects on the gross margins obtained. The latter may not be the result of a
certain management practice but determined by other exogenous factors.
Also the particulars of the orchard in question has to be considered, such
as tree age, tree planting density and rootstock.
It is unlikely that any orchard in Tasmania is accurately represented by the
gross margin analysis in this report. For instance, the omission of the
assessment of the different production systems may lead to significantly
under or over estimated gross margins. The necessity of assuming
constants and simplification of the real situation is, however, a problem
inherent in any form of economic analysis.
The constants used in the model on which these gross margin analysis are
based, such as price, yield, packout, and the number of trees per hectare,
are set at a level aimed at representing the industry averages. Sensitivity
analyses are included illustrating the change in gross margin resulting from
a change observed in any of the above constants.
5
2
PRODUCTION
LEVELS
OF
DEMOCRATS,
GOLDEN
DELICIOUS, RED DELICIOUS, AND FUJIS IN TASMANIA
The relative contribution of Fujis, Golden Delicious, Red Delicious, and
Democrats, to the total production in Tasmania is substantial. In 1994 Red
Delicious made up 46% of the total production, Golden Delicious 15%,
Fuji 4%, and Democrats 12%.
Figure 2.1 below shows the number of mature trees (6 years and over) for
the above mentioned varieties.
Number of trees of 6 years and over (ABS 1980-1994)
S
o >
- ^ f N T O ' ^ i O t D I ^ C O O T O ' - C N t O S
c o c o < o a ) c g c o c o c o c o o ) a > 3 > g ? Q >
o > o > o 5 a > a > a } C T > o > c > a > o > a > o > a i
Figure 2.1: Number of Golden Delicious, Democrats, Red
Delicious, and Fuji trees of six years and over from 1980 to 1994
(Agriculture Tasmania, ABS Catalogue No. 7114.6).
The number of mature Red Delicious trees has increased by 133% from
1985 to 1994 whereas the number of mature Golden Delicious only
increased by 28%. The number of mature Fujis has increased by 372%
over the past 4 years although the actual number of trees is small (20,100
in 1994). The number of mature Democrat trees has decreased to 53% of
the 1985 figure.
35% of all trees are between 1 and 5 years old. The relatively small
contribution of Fuji apples is likely to increase in the future due to the high
proportion of Fuji trees between 1 and 5 years old that will come into
production. Red Delicious are however still the main plantings. In 1994
33% of trees between 1-5 years were Red Delicious, 23% Fuji, 9% Golden
Delicious, 6.9% Braeburn, 6.4% Gala and 4% Pink Lady.
6
Number of trees between 1 and S years (ABS 1980-1994)
Figure 2.2: Number of Golden Delicious, Democrats, Red
Delicious, and Fuji trees between one and five years from 1980 to
1994 (Agriculture Tasmania, ABS Catalogue No. 7114.6).
In 1994 the new plantings of Fuji trees has declined in favour of other
varieties such as Braeburn, Gala, Jonagold, and Sturmer Pippin although
the actual number of Fuji plantings has still increased in 1994 (see Figures
2.2 and 2.3).
Sturmer Pippins were mainly planted by Clements & Marshall for
processing, it has limited opportunities for sale on the fresh fruit market.
In 1994 20% of the new plantings were Braeburn, 19% Red Delicious,
17% Fuji, 16% Jonagold, 8% Pink Lady, 4% Golden Delicious, and 3%
Gala (ABS Agricultural Statistics 1993/94).
Number of trees of less than one year (ABS 1991-1994)
40
35
30
Golden Delicious
|
25
• Red Delicious
^20
.a
§ 15
Democrat
- Fuji
Z
10
5
0
91
Figure 2.3: Number of Golden Delicious, Democrats, Red
Delicious, and Fuji trees less than one year from 1991 to 1994
(Agriculture Tasmania, ABS Catalogue No. 7114.6).
7
3
THE TASMAN1AN APPLE INDUSTRY IN PERSPECTIVE
Production levels fell dramatically from 1966 to 1976 (Figure 3.1) after
which production levelled off to around the 60,000 tonne mark.
Total apple production in Tasmania from 1966 to 1994
160000
Figure 3.1: Total apple production in tonnes in Tasmania from
1966 to 1994 (Agriculture Tasmania, ABS Catalogue No. 7114.6).
From Figure 3.2 below it can be observed that the gross value of the
industry has increase in a steady manner over the past 14 years and levelled
off in 1994. The unit price per apple has therefore increased as Figure 3.1
above shows that production has remained relatively stable.
gross value of apple production in Tasmania from 1979 to 1994
Figure 3.2: Gross value of apple production in Tasmania from
1979 to 1994 (Agriculture Tasmania, ABS Catalogue No. 7114.6).
The current optimism observed in the industry with expanding exports to
Asian markets suggests that no further decreases in production quantities
are to be expected in the near future. Rather, an increase in the number of
8
orchard trees under 6 years over the past 12 years from 151,000 trees in
1981 to 573,000 trees in 1993 indicates production growth can be
expected over the coming decade.
3.1
Tasmanian apple industry exports
Since 1985 industry exports show renewed vigour with changing markets
and new varieties to suit these markets. Table 3.1.1 below shows the
development of the apple industry and the relative exports from 1982 until
1993.
Period
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
Total Production
(tonnes)
Export
(tonnes)
Export
(%)
67,376
69,421
56,800
61,624
56,983
48,088
52,857
52,637
57,279
45,287
50,439
56,213
12,841
13,345
6,558
10,744
11,534
14,128
9,333
9,879
12,865
10,851
19,227
21,395
19.1
19.2
11.5
17.4
20.2
29.4
17.7
18.8
22.5
24.0
38.1
38.1
Table 3.1.1: Total apple production (tonnes) with total exports
(tonnes) and exports as a percentage of total production for the
period 1985-1993.
There has been a steady increase in exports to all Asian destinations over
the period 1982-1993. Compared to exports to Europe and other
countries over the period 1982-1993 (shown in Figure 3.1.1 below),
exports to Malaysia, Singapore, and the Philippines (Referred to as Asia)
have increased most, both in relative and absolute terms.
9
Exports to Europe, Asia and other countries of Tasmanian apples from 1982
to 1993.
16000
CM
S9
O)
o
co
o>
•»
co
S
in
(O
co
o>
co
o>
c~
co
co
CO
c
o
01
c
o
CO
O)
s
0)
I
-
0>
en
CM
8
co
e
n
01
Figure 3.1.1: Export of Tasmanian apples to Europe, Asia and
other countries from 1982 to 1993 (Agriculture Tasmania, ABS
Catalogue No. 7114.6).
The latest figures indicate a 14 per cent increase in the total apple exports
from Tasmania in 1994 compared to 1992/1993 (Pome Fruits Newsletter,
1994, p. 139). Of the total number of cartons (986,772), 30 per cent was
exported to Malaysia, 27 per cent to Singapore, and 21 percent to the
Philippines. A further 15 per cent was exported to various other Asian
countries. Only 0.1 per cent of the total was exported to the United
Kingdom and 4.1 per cent to other west European countries (Pome Fruits
Newsletter, 1994, p. 139).
Apple growers
The total number of apple growers in Tasmania has declined over the past
25 years. The reduction was greatest in the years of the "tree pull scheme"
(1972-75). A trend towards a concentration of larger orchards has been
observed over the past 8 years.
In 1986 the processing sector absorbed approximately 35% of the crop
(Tasmanian Apple and Pear Industry, situation statement 1986). Statistical
information available for Australia as a whole indicates that in 1994 31% of
the total apple crop was juiced. Only 9% of the total crop in Australia is
canned or dried (ABARE, 1994).
In 1994 only 7% of the total available supply of apple juice in Australia
was imported (ABARE, 1994).
Packing, storage and transport
There are relatively few large packing sheds in Tasmania. A significant
proportion of growers with a production of less than 20,000 cartons
deliver fruit directly after harvest to the larger pack houses.
10
The smaller growers are paid the market prices less commission, transport,
storage, packaging and handling costs.
"In many instance the packed fruit is pooled with that from other growers
and sold under the packer's name. Other growers insist on maintaining the
identification of their fruit" (Tasmanian Apple and Pear Industry, situation
statement, 1986).
Some growers sell their fruit ungraded in bins to packers in Victoria.
11
MANAGEMENT VARIABLES
In order to undertake a gross margin analysis several assumptions were
made regarding the general structure of an orchard, such as the tree
planting density, yield and packout, here referred to as management
variables. These are variables that are exogenous to the actual cost of
growing, marketing and handling the fruit.
The financial returns to the farmer are determined partly by the
management variables and also the prices obtained in the market place for
different varieties.
Prices are discussed separately in Section 5. Prices are set by economic
processes such as demand and supply but also depend on management
variables, for instance the size of the fruit.
These management variables have to be fixed at a level at which most
orchardists in Tasmania will be represented and are discussed in this
Section.
Tree planting density
Current trends are indicating that orchards are being planted more
intensively, i.e. with denser tree plantings having less distance between the
trees and rows.
The Orchard Adjustment Scheme supported this trend by giving
"... financial impetus to an already well developed trend towards orchard
restructuring. Within four years its grant aided the removal of almost 650
hectares of old orchards and its replacement by 220 hectares of new high
density orchards" (Thompson 1986).
"The traditional orchard was planted on a square pattern at distance of
5.0m x 5.0m, with 400 trees per hectare" (pers comm O'Loughlin). Late in
the 1980's young orchards were
"... planted on the high density or hedgerow system with trees 2.5m apart
in rows 5.0m apart, which is 800 trees per hectare" (pers comm
O'Loughlin).
Plantings have since become even more dense.
Consequently, older varieties such as Democrats will have lower average
planting densities than the newer varieties such as Fujis.
Recent trends in planting systems in the U.K. show even higher densities
than those mentioned above. Gunn (1992) mentioned at the "Get it right
and appeal to the bite" seminar that in the late 1940's and through the
1950's planting densities were at 300 trees per hectare in the U.K. In the
1980's intensive orchards were planted starting at 2700 trees per hectare
and quickly stabilising at approximately 3500 trees per hectare. With the
recent introduction of the super spindles, some plantings are now at 11,000
trees per hectare.
It has become evident with the maturation of the very high density
orchards that management problems can occur with poor yields, poor fruit
12
size and poor colour development. This has resulted in many of the
plantings in Italy going from multi rows back to single rows (pers comm K.
Jones).
Research undertaken in the U.K. (Gunn 1992) has shown that higher
planting density does not increase actual growing cost per hectare when
compared to lower planting density.
"Generally this is because the more intensive orchards are far easier to
manage, they produce less growth and generally all operations, such as
hand thinning, are much quicker. This is offset by the greater number of
trees so that, for all practical purposes, the costs per hectare are the same,
but the cost per kilo of fruit reduces as the planting intensity increases"
(Gunn 1992). However,
"... the cost per bushel for the higher density system is more responsive to
changes in yield" (Castaldi 1993) as it has a higher percentage of fixed cost
compared to lower density plantings.
Obviously the establishment cost per hectare increases as the tree planting
density increases.
High density plantings show
"... improved profitability results despite the greatly increased cost in trees
and trellis, and higher tree management required in tree training and
pruning in the initial years" (Gordon 1994). The NPV and IRR over a 12
year time frame are positive and significantly higher for intensive Red
Delicious orchards compared to semi intensive orchards.
The different planting densities incorporated in this gross margin analysis
are set at a level believed to be most common for the variety in question
(Table 4.1.1). The distances between the trees mentioned in the table may
not be used in their conventional manner as in reality the orchard will
consist of various planting densities over one hectare. For instance some
5m by 5m and 2.5m by 5m plantings of one variety may occur in the same
hectare of orchard, as the planting occurred at different times.
The total number of trees per hectare shown in column 1 of Table 4.1.1 are
conservative estimates. The distances between trees for the four varieties
for an average orchard are shown in column 2.
Variety
Tree density
distance between trees
(trees/ha)
(metres)
Rounded to nearest 100
Golden Deliciousi
Red Delicious
Fuji
Democrat
2.5 by 5
2.5 by 5
2.5 by 5
5 by 5
800
800
800
600
Table 4.1.1: Tree density and distance between trees for
Golden Delicious, Red Delicious, Fujis and Democrats.
13
Age of the orchard
An orchard of average size in Tasmania will most likely be made up of
trees of different ages and varieties spread through the orchard. The
planting of popular new varieties will occur alongside existing stands of
older varieties. This means that the average age of the orchard
continuously changes.
It is not feasible to incorporate this time element into the gross margin
analysis. For this gross margin analysis the orchard is assumed to be
mature and in full production (which occurs on average 6 years after
establishment).
The gross margin calculations are per hectare and persons using the model
can vary the total production or yield to accommodate young orchard
production.
For more information regarding establishment costs and gross margins in
the establishment phase, see the publication the "Bottom Line" by Gordon
(1994).
Yield per tree and per carton
The assumed number of trees per hectare and the number of apples per tree
will determine the yield which will affect the gross margin outcome. ABS
(Agricultural Statistics, ABS Catalogue No. 7114.6, 1992/93) figures in
relation to yield per tree are shown in Table 4.3.1.
The ABS figures include trees under 6 years of age which may for some
varieties result in an under estimation of the averages for mature trees
(Fujis in particular).
Variety
Golden Delicious
Red Delicious
Fuji
Democrat
Total Production
(tonnes)
Average per tree
(kg)
7,911.3
24,522.1
1,628.5
8,303.2
46.6
33.9
11.0
85.8
Table 4.3.1: Average yield per tree for four different apple varieties
(Agricultural statistics, ABS Catalogue No. 7114.6, 1992/93).
The average yield per tree in Tasmania has increased from 33.6 kg per tree
in 1991, to 34.7 kg per tree in 1992, and to 37.3 kg per tree in 1993
(Agricultural Statistics, ABS Catalogue No. 7114.6, 1992/93).
For the purpose of calculating gross margins for the four apple varieties,
the yields per tree shown in Table 4.3.2 have been adopted.
14
Variety
Average per tree
(kg)
50
40
40
80
Golden Delicious
Red Delicious
Fuji
Democrat
Table 4.3.2: Expected average yield per
tree for four different apple varieties
used in this report.
An apple orchard study carried out in the U.K. shows that the yield in
kilograms per tree is lower in an orchard with high planting densities,
whereas the yield in tonnes per hectare is significantly higher. A tree
planting density of 500 per hectare returns 32 kilograms per tree while
3500 trees per hectare produce 11 kilograms per tree (for mature trees).
In a low density orchard 17 tonnes per hectare is produced and in a high
density orchard 39 tonnes per hectare is produced (Gunn 1992).
A 300 hectare super spindle orchard in Germany produced 17 kilos of
Jonagold and Gloster per tree resulting in 80 tonnes per hectare (FAST
1993).
The figures in Table 4.3.2. are estimated industry averages. They take into
consideration the lower average production per tree (in kilograms) of high
density plantings.
If an approximate weight of 20 kg per carton (Department of Agriculture
1993) is assumed, the number of cartons per hectare can be deduced from
the above table and the tree planting density. The results of these
calculations are shown in Table 4.3.3.
Variety
Golden Delicious
Red Delicious
Fuji
Democrat
Tree
Yield
Density
Trees/ha kg/tree
800
800
800
600
50
40
40
80
Production
kg/ha
Carton
weight
kg
40,000
32,000
32,000
48,000
20
20
20
20
Yield
Yield
cartons/ha bins/ha
2000
1600
1600
2400
100
80
80
120
Table 4.3.3: Tree planting density, average yield (kg/tree), production (kg/ha),
carton weight (kg) and average yield per carton and bin for Golden and Red
Delicious, Fujis, and Democrats.
4.4
Planting system
Several alternative planting systems other than those involving free
standing trees are used in Tasmania, including trellis and hedgerow systems
Other systems that operate in other parts of the world include the slender
15
(super) spindle and spindle bush. One of the differences between the
various planting systems is the tree planting density, discussed in Section
4.1.
The rootstock used is directly related to the planting system. Higher
density plantings are usually compromised of plantings using dwarfing
clonal rootstock. M 26 and M9 (Flemings 1991) are examples of dwarfing
rootstock.
The above two factors, although crucial on a orchard management level,
are not an essential input variable for gross margin analysis. The
vigorousness of the tree and the planting system are expressed in terms of
yield per tree and tree planting density.
Packout
The packout is that percentage of fruit that is of sufficient quality for fresh
fruit sale. The remaining percentage will be processed, juiced or dumped.
As a result of market requirements some varieties have higher quality
standards than others.
The coverage ratio of russet that is accepted for Democrats may be higher
than the coverage ratio for Fujis. If the incidence of russet is similar for the
two varieties then the packout for Fujis will be lower.
The packouts used in this report are those shown in Table 4.5.1. These
packout figures are the result of the compellation of information obtained
from interviews with orchardists, scientists and other persons involved in
the industry.
Variety
Golden Delicious
Red Delicious
Fuji
Democrat
Packout
70
80
60
75
Table 4.5.1:
Estimated
packout for Golden and Red
Delicious,
Fujis
and
Democrats.
An important factor in relation to the level of packout achieved is orchard
management. Much research is currently carried out with the aim of
increasing packout levels through improved fruit quality. The average size
of the crop also determines packout to a certain extent, as small fruit may
not be accepted for fresh fruit sale. The latter indicates that the packout
levels for the different varieties are indirectly the result of market demands.
16
4.6
Expected count - Apple size
The size of the apples determines the price that can be realised in the
market. The size is usually expressed in terms of counts, i.e. the number of
apples per carton. A low count therefore indicates large apples.
The count range for a variety is important in relation to the resultant gross
margin. If a relatively large part of the total crop consists of large apples a
higher gross margin may be expected.
The maximum and minimum counts desirable for a certain variety is
referred to as the count range. For some varieties, such as Fujis, smaller
apples cannot be sold on the market. This therefore reduces the count
range. If a variety has a wide count range, as is the case for Democrats, a
larger range of production will be sold than if the range is narrow as is the
case for Fujis.
Those apples that fall outside the count range will either be processed or
juiced. Processing opportunities are not equal for all varieties. For
example Red Delicious is not a preferred variety for processing, so that
smaller Red Delicious fruit may not be sold at all in some cases.
The size of the fruit is mainly dependent on orchard management and other
issues such as climatological chance events like droughts or excessive rain.
Studies have shown that several distribution curves showing the percentage
of apples falling within a size range can be derived if the expected count for
a variety is known (Table 4.6.1).
Count
70
80
90
100
110
120
135
150
165
Distribution at
Expected count
100 (%)
7
11
14
22
18
12
8
6
2
Distribution at
Expected count
Distribution at
Expected count
110 (%)
120 (%)
4
8
11
14
20
16
13
9
5
2
4
8
11
15
21
16
13
10
Table 4.6.1: Distribution of apples of different sizes at an expected
count of 100, 110 and 120 (Pers. Comm J. O'Loughlin).
17
PRICES
Of the three main factors affecting gross margins (price, yield and packout)
the price effect is largest (Gordon and Walker 1991).
There are substantial differences in prices for the various apple varieties.
Prices for the newer varieties such as Fujis are generally higher than the
prices for older varieties such as Democrats. The prices that can be
obtained for fruit is generally the principal factor determining which variety
is used for new plantings.
For a particular apple variety prices vary depending on which market they
are sold: i.e. local, interstate, or overseas. There may be a $10.00 premium
for Fujis on the Asian market compared to interstate sales.
The price effect on gross margin results is significant and it is therefore
important to distinguish between these markets.
The returns for the four varieties discussed in this report were determined
on the basis of the market in which they were sold. The destinations for
the four varieties were assessed, and the percentage of the crop sold
locally, interstate and overseas was estimated. The relative prices range for
the variety in question was determined for each market.
Market destination of apple crop
The overseas market is mainly centered around red varieties such as Red
Delicious and Fujis. Table 5.1.1 shows the percentage of the apple crop
and the respective market destination.
Variety
Local market
Interstate market
Overseas market
Golden delicious
50%
45%
5%
Red delicious
15%
25%
60%
Fuji
15%
40%
45%
Democrat
75%
0%
25%
Table 5.1.1: Assumed market destination for Golden Delicious, Red Delicious,
Fujis, and Democrats.
Local market prices
The average prices obtained on the Tasmanian market for the 1994/95
season were as follows:
18
Variety
Average price (S/ctn)
Golden Delicious
18
Red Delicious
20
Fuji
25
Democrat
12
Table 5.2.1: Average local (Tasmania) market prices
for Golden Delicious, Red Delicious, Fujis, and
Democrat.
Interstate market prices
Prices for different apple varieties at various count ranges, obtained from
the Victoria market in Melbourne, are published on a weekly basis. A
compilation of these prices is published annually (VIC Department of
Agriculture 1993).
For Red and Golden Delicious and Fujis the following price ranges were
obtained for the seasons of 1994 and 1995 on the Melbourne market.
Minimum price Maximum price
($/ctn)*
($/ctn)"
Average price
Most sales ($/ctn)
GOLDEN DELICIOUS
80 -110
22
38
24
120 -140
14
25
18
90 - 110
20
40
22
120-140
16
22
18
80 - 120
30
50 #
37
120 - 140
25
38
31
RED DELICIOUS
FUJI
Table 5.3.1: Minimum and maximum prices obtained at the Victoria market,
Melbourne for Red and Golden Delicious, and Fujis. Few Democrats were
sold at the Melbourne market.
u
Received in April and May 1994
Received in December 1994
Received in September 1994
It is assumed that Democrats were not sold on the interstate market.
19
Figures 5.3.1 to 5.3.3 show the average sale price from March 1994 to
December 1995 on the Victoria market in Melbourne.
Golden Delicious tale price - Melbourne Fruit & Vegetable Wholesale market
Count range
-60-120
- 120-MO
I
IIHlllillllSHIIIlHllII
Figure 5.3.1: Sale prices (per carton) obtained at the Victoria market,
Melbourne for Golden Delicious from March 1994 to December 1995.
#
No data for the 21st February 1995.
Fuji sale price - Melbourne Fruit a Vegetable Wholesale market
Count range
- 120-140
-80-120
mi.M3.l...Hn..H!Hi3.!H
Figure 5.3.2: Sale prices (per carton) obtained at the Victoria market,
Melbourne for Fuji from March 1994 to December 1995.
Red Delicious sate price • Melbourne Fruit A Vegetable Wholesale market
- 120-140
-90-110
llilliiilPlIIIiilHif!!!
Figure 5.3.3: Sale prices (per carton) obtained at the Victoria market,
Melbourne for Red Delicious from March 1994 to December 1995.
No data for the 14th & 21st March 1995.
20
The prices used in the gross margin analysis are $20/carton for Golden
Delicious, $22/carton for Red Delicious, and $33/carton for Fuji.
5.4
Overseas market prices
Overseas market prices obviously vary between different destinations in
Asia.
An average price is assumed for all overseas destinations on the basis of a
premium of $10 per carton over the interstate market price for the red
varieties. For Democrats and Golden Delicious a $10 premium over the
local market price is assumed.
Variety
Average price (S/ctn)
Golden Delicious
28
Red Delicious
32
Fuji
43
Democrats
22
Table 5.4.1: Overseas market average prices for
Golden Delicious, Red Delicious, Fujis, and
Democrats.
Democrats are mainly sold in the Philippines.
5.5
Processing and juicing prices
The average price for processed fruit was $125 to $150/tonne (average of
$2.55/ctn), and for juicing $30/tonne ($0.55/ctn) for the 1993/94 season
and around $200/tonne in the 1994/95 season. The juicing price varies
considerably per year and therefore an average price of $115/tonne has
been assumed for all varieties except Golden Delicious for which
$125/tonne is assumed.
Of Fujis V3 is juiced and 2/3 is processed. Of Golden Delicious 2/3 is
juiced and V3 is processed. Red Delicious are only juiced and Democrats
are V3 juiced and 2/3 processed.
21
COST VARIABLES
In the gross margin analyses undertaken here, variables have to be
determined on three levels. On the first level are the variable costs, which
are the costs associated with the growing, marketing and handling of fruit.
This group is referred to in the gross margin analyses as the cost variable.
The costs incurred in the running of a mature orchard (trees of more than 6
years old) consist partly of capital costs and partly of variable costs. The
definition of variable costs is as follows:
"Costs which vary as output changes. They include the cost of labour, raw
materials, power, and fees for services rendered. They are only incurred
when something is produced. Variable costs would be zero if the company
produced nothing" (Penguin Macquarie 1988).
Variable costs of apple growing include the following;
•
•
•
•
•
•
•
•
chemical and fertiliser cost,
thinning cost,
tractor running cost,
harvesting cost,
pruning cost,
pollination, irrigation, and insurance cost,
marketing cost and
variable handling cost.
These costs will also vary according to the following;
•
•
•
•
•
•
quantities of fertilisers used,
quantities of pesticides used,
the thinning regime (ratio chemical to hand thinning),
pruning regime,
pollination regime and
irrigation regime.
The most crucial elements that determine the gross margin outcome are the
management variables discussed in Section 4; price, yield and packout.
The cost variable is discussed in detail below.
Fertiliser cost
Fertiliser costs (and nutritional sprays) make up a small proportion of total
variable costs (see the results of the gross margin analysis). Table 6.1.1
shows the fertilisers used. All varieties are assumed to have the same
fertiliser and nutritional spray program.
22
Fertilisers &
Quantities
Nutritional sprays
Lime
N:P:K 8:4:10
Nitram
Urea
1 t/ha
0.2t/ha
0.1 t/ha
0.2 t/ha
Price
$/tonne
$35
$317
$477
$472
Applications
number
1 per year
1 per year
1 per year
1 per year
Table 6.1.1: Price and quantities of fertilisers and nutritional
sprays used per hectare (pers comm Mike Oakford, prices
obtained from DPIF Farm Budget Guide 1995/1996)
Superphosphate would be applied in the first year of orchard establishment
at 0.375 tonne per hectare along the tree line.
The spreading of the fertiliser is estimated to take 1 hour per hectare using
a small tractor. The cost is the estimated running cost for a small tractor
which is $6.87 per hour (DPIF Cash Crop Gross Margin - Northern
Tasmania 1994).
Chemical cost
Chemicals used in apple production are categorised under "insecticides",
"fungicides", "miticides" and "herbicides". Table 6.2.1 shows the estimated
quantities of insecticides/fungicides/miticides and herbicides used. Core rot
spays were only applied to Fuji and Red Delicious.
Chemical
sprays
Nustar
Lorsban
Omite
Calcium Nitrate
Calcium Chloride
Rovral
Benlate
Citowett
Roundup
Sprayseed
Simazine
Amitrole T
Control
Quantities
1 g/100 1
100 g/100 1
30 g/100 1
1 g/100 1
1 g/100 1
100 g/100 1
50 g/100 1
10 g/100 1
11/ha
11/ha
lyha
11/ha
Black spot/mildew
Codling moth
Red spider
Bitter pit
ll
Core rot
ii
H
Couch&other grass
Grass/clover/weeds
Pre-emergent
Willow herb
Price
Applications
number/ha
$240/kg
$5.50/1001
$38.00 /kg
$4.52 /kg
$4.52 /kg
$79.35 /kg
$78.00 /kg
$8.00 /kg
$25.00 /l
$8.25 /l
$6.80 /l
$11.04/1
8
6
2
6
6
2
1
1
2
2
2
2
Table 6.2.1: Price, quantities and number of applications of chemicals used per
hectare (pers comm Mike Oakford) (prices from DPIF Farm Budget Guide 1995/1996).
For bitter pit calcium chloride was applied to Fuji and Red Delicious and
calcium nitrate was applied to Golden Delicious and Democrats.
The cost of chemical application varies, depending on whether several
chemicals can be combined and spread in one application. The application
cost is equal to a small tractor running cost of $6.87 per hour (DPIF Cash
Crop Gross Margin - Northern Tasmania 1994).
23
Thinning cost
Thinning costs can be incurred through either chemical or hand thinning.
See Jones (1989) for a comprehensive study on the thinning of apple trees
in Tasmania. The relative contribution of chemical and hand thinning
depends on several aspects, one of which is variety.
Some varieties are easy to thin chemically. Democrats fall into this
category. Others such as Golden Delicious and Fujis are difficult to thin
chemically (Jones 1989).
If chemical thinning is successful, less hand thinning is necessary. This will
reduce costs, as hand thinning is more costly than chemical thinning.
Successful chemical thinning reduces fruit numbers and increases fruit size
early. The latter results in larger and better quality fruit than those hand
thinned later (Jones et al 1992 and Oakford et at 1994). Fruit size usually
affects the price obtained for the fruit as discussed in Section 5. Chemical
thinning also successfully reduces the occurrence of biennial bearing caused
by overcropping (Jones 1989).
The degree to which chemical thinning is successful in a particular orchard
will affect revenue and costs incurred from subsequent hand thinning. The
latter will vary significantly between growers who usually experience
different levels of success. Unfortunately this variation cannot be
incorporated into this model.
The amount of chemical and hand thinning that has been assumed in this
model is based on estimates made by several experts in this field in the
Department of Primary Industry and Fisheries, Hobart. Prices of the
chemicals are shown in Table 6.3.1.
Thinning
sprays
Price
($)
NAA (primary)
Ethrel (primary)
Carbaryl (secondary)
Thiram (secondary)
Wetting agent - Tween 20
$16.50 /l
$40/1
$189/9 kg
$165/20 kg
$47.00 /5 1
Table 6.3.1: Price of thinners (Jones 1989 and
pers comm Mike Oakford).
The hand thinning cost will be divided into three categories: "minimal",
"average", and "heavy". The average time spent hand thinning per tree is
approximately 7 minutes (Red Delicious and Fuji). Even though Fujis
generally require more hand thinning than Red Delicious, it is assumed that
since the trees are smaller and fruit is easier to reach, the time required will
be fairly similar.
24
For minimal thinning it has been assumed that not all the trees on one
hectare are hand thinned. The overall average is therefore assumed to be
around 3 minutes per tree (Democrats).
Heavy thinning can take around 45 minutes per tree (pers comm Mike
Oakford). The structure of the orchard is the main determinant in relation
to the time required for thinning and is generally highly variable. The
maximum average (heavy) thinning time is assumed to be 10 minutes per
tree. This thinning time is applicable for Golden Delicious.
A casual general hand - class 1 is awarded $8.70 per hour (Federal Fruit
Growing Industry Award, DPIF Farm Budget Guide 1995/1996).
AS MENTIONED ABOVE, THINNING COSTS ARE LIKELY TO
VARY SUBSTANTIALLY FROM ONE GROWER TO ANOTHER.
UNFORTUNATELY ONLY ONE SCENARIO FOR EACH
VARIETY CAN BE INCORPORATED INTO THE GROSS
MARGIN MODEL.
6.4
Pruning cost
The amount of pruning required also differs between the four varieties
discussed in this analysis. Only the red varieties (excluding Democrats) are
summer pruned. Fujis and Red Delicious are both assumed to have the
same amount summer pruning; i.e 5 days per hectare.
For winter pruning it has been assumed that 8 days per hectare are required
for Democrats and 9 days per hectare for Golden Delicious.
For both Fujis and Red Delicious the winter pruning time is assumed to be
less than for the green varieties, as summer pruning has already taken
place. For the red varieties 5 days of pruning in summer and 7 days in
winter has been assumed.
$8.70 is the hourly casual wage rate for a general hand - class 1 (Federal
Fruit Growing Industry Award, DPIF Farm Budget Guide 1995/1996).
6.5
Harvesting cost
Harvesting costs are divided into picking and transport to the shed cost.
Two bin sizes are used, each with its own picking rates. The picking rate
for the smaller sized bin (20 carton bin) was approximately $17.20 and the
larger bin the picking rate was $18.50 per bin in the 1994/95 season. The
first rate will be used in this analysis. The Federal Fruit Growing Award
defines the piece rate as 12.5% on top of the hourly rate.
Transport to the shed is costed at 10 cents per bin. These rates apply to all
varieties discussed in this report.
6.6
Insurance cost
Insurance cost, which applies to 90% of the total packable yield, is 16
cents per carton at 1994/95 rates (Pers comm C. Bannister, F. Bright).
25
6.7
Pollination cost
The price per hive is approximately $25, and 2 hives per hectare are used
for pollination (pers comm Mike Oakford).
6.8
Irrigation cost
A yearly average of 1.9 Ml of water per hectare for irrigation is assumed
for all varieties. The cost is assumed to be $93.68/Ml.
The costs associated with irrigation and the cost per Ml are described in
Appendix 2. They were extracted from the Cash Crop Gross Margin for
Northern Tasmania publication (DPIF 1994).
6.9
Mowing cost
Mowing between the rows is estimated to take 4 hours per hectare. It is
assumed that each hectare is mowed approximately 2 times per year for all
varieties. The cost has been set equal to the estimated running cost for a
small tractor at $6.87 per hour (DPIF Cash Crop Gross Margin - Northern
Tasmania 1994).
6.10
Handling costs
If the apples are packed and stored the following costs have to be taken
into consideration.
The post harvest dipping cost varys according to variety due to the
differences in relative sensitivity to post harvest diseases and other factors.
For Golden Delicious the dipping cost is estimated to be $4.50 per bin. For
Red Delicious this cost is estimated to be $6.10 per bin. For Fuji the
estimated cost is $5 and for Democrats the cost is $4 per bin.
The post harvest handling cost from shed to wholesale coolstore, including
waxing, is estimated to be $5.70 per carton for all varieties with local or
interstate destinations (pers comm J. O'Loughlin).
The packing material cost consists of the cost of the cartons and trays.
The "Australian Tray Carton" (18 kg) is used for packing in this analysis.
Apples with overseas destinations are usually packed in the "Heavy Pack"
(21-23 kg). The cost is estimated at $6.05.
The cool storage cost is composed of two separate elements; ordinary cool
storage and controlled atmosphere (CA) storage. The cost varies from
$14.80 per bin ($0.74 per carton) for ordinary storage to $25 per bin
($1.50 per carton) for CA storage (pers comm J. O'Loughlin). It has been
assumed that 80% of the packable yield is kept in CA storage and the
remaining 20% in ordinary storage.
The relative storage life differs per cultivar. The storage of Golden
Delicious has been described as "good", and for Red Delicious as
"excellent", for Fuji as "excellent cold storage cultivar" (Flemings 1991).
26
6.11
Marketing costs
The marketing costs, in particular the freight cost, for apples sold on the
local, interstate and overseas markets will vary substantially depending on
their final destination. The relative percentage of the total production sold
on these respective markets varys. For example more Fujis and Red
Delicious are sold internationally than Golden Delicious or Democrats,
whereas a substantial proportion of Democrats are sold on the local
market.
In order to obtain an average freight cost per variety it is important to
determine the relative percentages of apples sold interstate, overseas or on
the local market. A breakdown of the freight cost for local, interstate
(Melbourne, Adelaide and Sydney) and international sale is discussed in
this section.
The marketing costs and other relevant information has been obtained from
several Tasmanian exporters.
The cost of transport to local markets has been given for transport by road
to three different geographical areas in Tasmania. Hobart, which is in the
south of Tasmania, is the most likely destination for the majority of apples.
Bell Bay in the north and Burnie in the north-west are the other two
possible destinations considered in this analysis.
LOCAL
Marketing COSt
Road transport to Hobart
Road transport to Bell Bay
Road transport to Burnie
S/carton
$0.50
$1.20
$1.40
$/bin
$10.00
$24.00
$28.00
Table 6.11.1: Marketing cost for sale on the local market;
Hobart, Bell Bay and Burnie.
An average transport cost of $1.03/ctn ($20.60/bin) is assumed in the
model.
The interstate marketing costs have been calculated for three major
destinations; Melbourne, Sydney and Brisbane.
INTERSTATE
Marketing COSt
Transport plus loading - Melbourne
Transport plus loading - Sydney
Transport plus loading - Brisbane
S/carton
S/bin
$2.37
$3.37
$4.25
$47.40
$67.40
$85.00
Table 6.11.2: Marketing cost for sale on the interstate
market; Melbourne, Sydney and Brisbane.
The interstate transport cost is assumed to be $3.33/ctn ($66.60/bin).
27
The cost of interstate freight is compensated for to some extent by the
Tasmanian Freight Equalisation Scheme (TFES), which is assumed to
return $0.85 per carton or $17.00 per bin on average.
An estimate of local freight costs has been made, and used to calculate
overseas marketing costs. No further distinction has been made in relation
to the exact export destination as this would over complicate the
calculation of the gross margins.
OVERSEAS
Marketing cost
$/carton
Overseas freight
Bank charges
Overseas commission
Exporters commission
Miscellaneous
Average local freight
$7.85
$0.40
$0.75
$1.78
$0.12
$1.10
$/bin
$157.00
$8.00
$15.00
$35.60
$2.40
$22.00
Table 6.11.3: Overseas marketing costs.
Quarantine costs apply to the interstate and overseas export of apples. A
quality inspection is carried out on all apples with overseas destinations, at
a cost of $33 per half hour.
An increasing number of markets require apples to undergo this quality
inspection. It has therefore been assumed that all apples (whether destined
for interstate or for overseas markets) require this quality inspection.
Approximately 22 bins can be inspected in a half hour.
All quarantine charges other than the quality inspection are federal rather
than State charges. The federal charges apply only to overseas freight. An
average per hectare has been assumed as these charges are highly variable
depending on the country of destination.
OVERSEAS
Federal Quarantine charges
Assumed
Actual charges Average cost/ha
Export permit
Inspection
Phyto inspection
Phyto certificate
$30/load
$78 first half hour
$35 first half hour
$30
$54.60
$78.00
$35.00
$30.00
Table 6.11.4: Federal quarantine charges for exports.
The Apple and Pear Levy at $0.22/ctn ($4.40/bin) is included in the gross
margin analysis under marketing cost.
28
GROSS MARGIN - FUJI
The management variables and prices used in the gross margin analysis for
Fujis are summarised below.
800 trees per hectare
1600 cartons per hectare
60% (12 out of 20)
$25 per carton
$33 per carton
$43 per carton
$41 per bin
$51 per bin
Planting
Yield
Packout
Local market price
Interstate market price
Overseas market price
Juicing price
Processing fruit
15% of packable yield
40% of packable yield
45% of packable yield
Using these input variables, the gross margin for Fujis is $17,475 per
hectare ($18.20 per carton).
Variable cost structure - Fuji
The average gross margin for Fujis is obtained through the subtraction of
costs from revenue. The cost structure for Fujis is shown in Figure 7.1.1.
Variable cost breakup for Fuji - Tasmania
w
JB^^.7%
w^^^^^^':--.
—
__'
\ *%
2%
•
CHEMCALS i. FERTILISER COST
•
THINNING COST
•
TRACTOR RUNNING COST
•
HARVESTING COST
S3 PRUNING COST
DO POLLINATION. IRRIGATION & INSURANCE
COST
S MARKETING COST
[11 VARIABLE HANDLING COST
Figure 7.1.1: Average variable cost breakup for Fuji - Tasmania 1995.
Marketing and variable handling costs make up a little more than two
thirds of the total variable cost, with the remainder of the costs, such as
chemicals, thinning (hand and chemical thinning cost), and harvesting cost
etc. making up the remainder of the cost. The smallest cost element is the
tractor running cost, which comprises only 1% of the total.
29
TAKE NOTE:
THE LABOUR COST OF THE OWNER OR OPERATOR OF THE
ORCHARD (WHICH MAY BE VALUED AT AROUND $ 3 0 , 0 0 0 PER
ANNUM) IS IN THIS ANALYSIS TREATED AS AN OVERHEAD COST
AND IS NOT INCLUDED IN THE GROSS MARGIN ANALYSIS.
TAKE NOTE:
THE VARIABLE COST DIFFERENCES BETWEEN THE FOUR
VARIETIES CANNOT BE DEDUCED FROM FIGURES 7 . 1 . 1 , 8 . 1 . 1 ,
9 . 1 . 1 , AND 10.1.1 I N S E C T I O N 7 T O 1 0 .
A COMPARISON OF THE VARIABLE COST DIFFERENCE BETWEEN
THE VARIETIES IN TERMS OF ACTUAL NUMBERS IS SHOWN IN
SECTION 11.
Sensitivity analysis of Fuji gross margins
The gross margins for all varieties will vary with yield, packout and prices.
The sensitivity of the gross margin to changes in packout, yield and prices
for all varieties is shown in this section.
Table 7.2.1. below shows a sensitivity analysis for changes in export,
interstate and local prices (at 1600 cartons/ha yield) and the resultant gross
margin for Fujis.
Export market
Interstate Market
Price
Gross margin
Price
$56
$52
$47
$43
$39
$34
$30
$24.01/ctn
$22.07/ctn
$20.14/ctn
$18.20/ctn
$16.27/ctn
$14.33/ctn
$12.40/ctn
$43
$40
$36
$33
$30
$26
$23
Local Market
Gross margin
Price
Gross margin
$22.16/ctn
$20.84/ctn
$19.52/ctn
$18.20/ctn
$16.88/ctn
$15.56/ctn
$14.24/ctn
$33
$30
$28
$25
$23
$20
$18
$19.33/ctn
$18.95/ctn
$18.58/ctn
$18.20/ctn
$17.83/ctn
$17.45/ctn
$17.08/ctn
Table 7.2.1: Gross margin sensitivity for Fujis to export, interstate, and local market
price changes (yield = 1600).
A 30% price increase on the export market from $43 to $56 will result in a
32% gross margin increase. A 30% price increase on the interstate market
will result in a 22% gross margin increase. A 30% price increase on the
local market will only increase the gross margin by 6%.
The difference in the effect of a 30% price increase on the gross margin on
the local, interstate, and overseas markets is the result of both the initial
price level which is highest overseas, and the assumption that the majority
of the packable yield of Fujis has an overseas destination.
30
Table 7.2.2 below shows the sensitivity of the gross margin for Fujis per
hectare to both yield and packout. Table 7.2.3 shows this gross margin
sensitivity per carton.
Yield (ctn/ha)
50%
55%
60%
65%
70%
1400
$12,106
$13,469
$14,833
$16,197
$17,560
1500
$13,232
$14,693
$16,154
$17,615
$19,076
1600
$14,359
$15,917
$17,476
$19,034
$20,592
1700
$15,485
$17,141
$18,797
$20,453
$22,109
1800
$16,612
$18,365
$20,118
$21,871
$23,625
Table 7.2.2: Gross margin sensitivity (S/hectare) for Fujis to
both yield and packout.
Yield (ctn/ha)
50%
55%
60%
65%
70%
1400
$12.61
$14.03
$15.45
$16.87
$18.29
1500
$13.78
$15.31
$16.83
$18.35
$19.87
1600
$14.96
$16.58
$18.20
$19.83
$21.45
1700
$16.13
$17.86
$19.58
$21.30
$23.03
1800
$17.30
$19.13
$20.96
$22.78
$24.61
Table 7.2.3: Gross margin sensitivity (S/carton) for Fujis to both
yield and packout.
The gross margin for the highest yield and packout combination (1800
ctn/ha yield and 70% packout, row 5 column 5 of Table 7.2.3) is 95%
higher than for the lowest yield and packout combination (1400 ctn/ha
yield and 50% packout, row 1 column 1 of Table 7.2.3).
The gross margin for the highest yield and packout combination is 35%
higher than for the average of 1600 cartons per hectare yield and a 60%
packout.
A 5% increase in packout level will increase the gross margin by between
8% and 11.3%. Increasing yield levels by 100 cartons per hectare will
result in a gross margin increase of between 6.9% and 9.3%.
31
7.3
Growing cost to packing shed door for Fuji
FERTILISER COST
Lime
N:P:K 6:5:5
Nitram
Urea
Application cost
$/ha
1 t/ha
0.2 t/ha
0.1 t/ha
0.2 t/ha
4 hours
$35/t
$317/t
$477/t
$472/t
$6.87/hr
INSECTICIDE, FUNGICIDE & HERBICIDE COST
Nustar
1 g/100 I
Lorsban 100 g/100 I
Omite
30 g/1001
Calc. Chi. 1 g/100 I
Rovrol
100 g/1001
Benlate 50 g/100 I
Citowett 10 g/100 I
12 hours
Roundup
Sprayseed
Surflan/Simazine
Willow herb
Application cost
1
1
1
Amotrole 1
8 hours
(2 appl)
(2 appl)
(2 appl)
(2 appl)
@
@
@
@
l/ha
l/ha
l/ha
l/ha
$240.00/kg
$5.50/100 I
$38.00/kg
$4.52/kg
$79.35/kg
$78.00/kg
$8.00/kg
$6.87/hr
$25.00/1
$8.25/1
$6.80/1
$11.04/1
$6.87/hr
PRIMARY THINNING COST
50 ml/100 I
20 g/100 I
@
@
$16.50/1
8.95/1
SECONDARY THINNING COST
Secondary spray volume 4000 l/ha
Carbaryl (1000ppm)
(2 appl)
Application cost
@
$21.00/1
$6.87/hr
HAND THINNING COST
@
7 minutes/tree
$8.70/hr
@
@
$69.60/day
$69.60/day
OTHER COST
Mowing btwn rows (twice)
Irrigation
@
@
@
TOTAL GROWING COST PER HECTARE
TOTAL GROWING COST PER BIN
$6.87/hr
$25.00/hive
$93.68/MI
Your budget
$812.00
Your budget
$348.00
$487.20
$/ha
4 hrs/ha
2 hives
1.9 Ml/ha
Your budget
$210.00
$20.61
$/ha
5 days
7 days
Your budget
$33.00
$7.16
$/ha
PRUNING COST
Summer
$50.00
$16.50
$13.60
$22.08
$54.96
$/ha
125 ml/100 I
3 hours
Your budget
$48.00
$82.50
$57.00
$0.68
$396.75
$195.00
$4.00
82.44
$/ha
Primary spray volume 4000 l/ha
NAA(6-10ppm)
(1 appl)
Wetting agent
Average
$35.00
$63.40
$47.70
$94.40
$27.48
$/ha
Spray volume 2500 l/ha
Black Spot/Mildew (8 appl)
Grubs
(6 appl)
Red spider
(2 appl)
Bitter pit
(6 appl)
Core rot
(2 appl)
Core rot
(2 appl)
Core rot
(2 appl)
Application cost
Your budget
Your budget
$54.96
$50.00
$177.99
$3,492.41
$43.66
The growing and picking costs are not expressed in $/carton as this is not considered relevant until the apples have been packed.
32
7.4
Picking cost to packing shed door for Fuji
PICKING COST
$/ha
Picking
Transport to shed
80 bins/ha
80 bins/ha
@
@
$17.20/bin
$0.10/bin
TOTAL PICKING COS T PER HECTARE
$1,376.00
$8.00
$1,384.00
$17.30
TOTAI PIPKIMi^ r«nc T PER BIN
7.5
Your budget
Marketing cost for Fuji
LOCAL FREIGHT COST
$/ha
Average local transport cost for 15% (144 cartons) of packable yield
Hobart, Bell Bay, and Burnie
$1.03/ctn
$20.60/bin
$148.32
$/ha
INTERSTATE FREIGHT COST
Your budget
Your budget
Average interstate transport cost for 40% (384 cartons) of packable yield
Melbourne, Sydney, and Brisbane
$3.33/ctn
$66.60/bin
$1,278.72
Less TFES
$0.85/dn
$17.00/bin
($326.40)
$/ha
INTERNATIONAL FREIGHT COST
Average international transport cost for 45% (432 cartons)
Overseas freight
$7.85/ctn
Bank charges
$0.40/ctn
Overseas commission
$0.75/ctn
Exporter commission
$1.78/ctn
Miscellaneous
$0.12/ctn
Average local freight
$1.10/ctn
of packable yield
$157.00/bin $3,391.20
$8.00/bin
$172.80
$15.00/bin
$324.00
$35.60/bin
$768.96
$2.40/bin
$51.84
$22.00/bin
$475.20
QUARANTINE COST
$/ha
Interstate and overseas only (816 cartons)
$1.50/bin
Quality inspection (State charge)
$33.00/hr
Export permit (Federal charge)
$30.00/load
Inspection (Federal charge)
$78.00 first half hour
Phyto insp & cert (Federal charge)
$35.00/first half hour + $30.00
$61.20
$30.00
$78.00
$65.00
$6,518.84
$135.81
TOTAL MARKETING COST PER HECTARE
TOTAL MARKETING COST PER BIN
TOTAL MARKETING COST PER CARTON
$6.79
33
Your budget
Your budget
7.6
Variable handling cost for Fuji
VARIABLE HANDLING COST
$/ha
Dipping
$0.25/ctn
Grading & packing (standard)
$5.70/ctn
Grading & packing (heavy - overseas only) $6.05/ctn
Ordinary cool storage
$0.74/ctn
CA storage
$1.50/ctn
$5.00/bin
$114.00/bin
$121.00/bin
$14.80/bin
$30.00/bin
OTHER COST
$0.22/ctn
$0.16/ctn
$4.40/bin
$3.20/bin
Expected revenue for Fuji
JUICING AND PROCESSING
Processing
Juicing
21 bins
11 bins
revenue/ha
427 ctn
213 ctn
@ $51.00/bin
@ $41.00/bin
LOCAL SALES
Local revenue
7.2 bins
144 ctn
@ $25.00/ctn
384 ctn
revenue/ha
432 ctn
$43.00/ctn
$18,576
TOTAL REVENUE PER HECTARE
TOTAL REVENUE PER BIN
TOTAL REVENUE PER CARTON
$36,377.61
$757.87
$37.89
GROSS MARGIN PER HECTARE
GROSS MARGIN PER BIN
GROSS MARGIN PER CARTON
$17,475.64
$364.08
$18.20
34
Your budget
@ $33.00/ctn $12,672
INTERNATIONAL SALES
21.6 bins
Your budget
$3,600
revenue/ha
19.2 bins
Your budget
$1,088.00
$441.61
revenue/ha
INTERSTATE SALES
Interstate revenue
$211.20
$138.24
$18,901.97
$393.79
$19.69
TOTAL VARIABLE COST PER HECTARE
TOTAL VARIABLE COST PER BIN
TOTAL VARIABLE COST PER CARTON
7.7
Your budget
$7,506.72
$156.39
$7.82
TOTAL VARIABLE HANDLING COST PER HECTARE
TOTAL VARIABLE HANDLING COST PER BIN
TOTAL VARIABLE HANDLING COST PER CARTON
Overseas revenue
$240.00
$3,009.60
$2,613.60
$134.40
$1,152.00
$/ha
Apple and Pear Levy
Crop insurance (90% of packable yield)
Your budget
Your budget
GROSS MARGIN - HI EARLY RED DELICIOUS
The management variables and prices used in the gross margin analysis for
Hi Early Red Delicious are summarised below.
800 trees per hectare
1600 cartons per hectare
80% (16 out of 20)
$20 per carton
$22 per carton
$32 per carton
$41 per bin
$51 per bin
Planting
Yield
Packout
Local market price
Interstate market price
Overseas market price
Juicing price
Processing fruit
15% of packable yield
25% of packable yield
60% of packable yield
Using these input variables a gross margin of $10,513 per hectare ($8.21
per carton) for Red Delicious has been obtained.
Variable cost for Red Delicious
The average gross margin for Red Delicious is obtained through the
subtraction of costs from revenue. The cost structure for Red Delicious is
shown in Figure 8.1.1.
Variable cost breakup for Red Delicious - Tasmania
*%
•
CHEMICALS & FERTILISER COST
D THINNING COST
•
TRACTOR RUNNING COST
•
HARVESTING COST
ES PRUNING COST
•
POLLINATION, IRRIGATION & INSURANCE
COST
B MARKETING COST
ID VARIABLE HANDLING COST
Figure 8.1.1: Average variable cost breakup for Red Delicious - Tasmania
1995.
Marketing cost is the largest variable cost for Red Delicious making up
42% of the total variable cost. Variable handling cost accounts for slightly
more than one third of the total cost. The remaining costs add up to
slightly less than one quarter of the total variable cost.
35
TAKE NOTE:
THE LABOUR COST OF THE OWNER OR OPERATOR OF THE
ORCHARD (WHICH MAY BE VALUED AT AROUND $ 3 0 , 0 0 0 PER
ANNUM) IS IN THIS ANALYSIS TREATED AS AN OVERHEAD COST
AND IS NOT INCLUDED IN THE GROSS MARGIN ANALYSIS.
TAKE NOTE:
THE VARIABLE COST DIFFERENCES BETWEEN THE FOUR
VARIETIES CANNOT BE DEDUCED FROM FIGURES 7.1.1, 8.1.1,
9.1.1, AND 10.1.1 IN SECTION 7 TO 10.
A COMPARISON OF THE VARIABLE COST DIFFERENCE BETWEEN
THE VARIETIES IN TERMS OF ACTUAL NUMBERS IS SHOWN IN
SECTION 11.
8.2
Sensitivity analysis of Red Delicious gross margins
The gross margins for all varieties will vary with yield, packout and prices.
The sensitivity of the gross margin to changes in packout, yield and prices
for all varieties is shown in this section.
Table 8.2.1. below shows a sensitivity analysis for changes in export,
interstate and local prices (at 1600 cartons/ha yield) and the resultant gross
margin for Red Delicious.
Export market
Interstate Market
Price
Gross margin
Price
Gross margin
$42
$38
$35
$32
$29
$26
$22
$13.97/ctn
$12.05/ctn
$10.13/ctn
$8.21/ctn
$6.29/ctn
$4.37/ctn
$2.45/ctn
$29
$26
$24
$22
$20
$18
$15
$9.86/ctn
$9.31/ctn
$8.76/ctn
$8.21/ctn
$7.66/ctn
$7.11/ctn
$6.56/ctn
Local Market
Price
$26
$24
$22
$20
$18
$16
$14
Gross margin
$9.11/ctn
$8.81/ctn
$8.51/ctn
$8.21/ctn
$7.91/ctn
$7.61/ctn
$7.31/ctn
Table 8.2.1: Gross margin sensitivity for Red Delicious to export, interstate, and
local market price changes (yield = 1600).
A 30%o price increase on the export market from $32/ctn to $42/ctn would
result in a 70% gross margin increase. A 30% price increase on the
interstate market would only increase the gross margin by 20%, and a 30%
price increase on the local market would increase the gross margin by 14%.
It was assumed that 60% of Red Delicious were intended for the export
market, resulting in a high sensitivity to price changes in this market.
Prices are also higher in this market.
36
Table 8.2.2 below shows the sensitivity of the gross margin for Red
Delicious per hectare to both yield and packout. Table 8.2.3 shows this
gross margin sensitivity per carton.
Yield (ctn/ha)
70%
75%
80%
85%
90%
1400
$7,373
$8,050
$8,726
$9,403
$10,079
1500
$8,170
$8,895
$9,620
$10,345
$11,069
1600
$8,967
$9,740
$10,513
$11,287
$12,060
1700
$9,764
$10,586
$11,407
$12,229
$13,050
1800
$10,561
$11,431
$12,301
$13,171
$14,040
Table 8.2.2: Gross margin sensitivity (S/hectare) for Red
Delicious to both yield and packout.
Yield (ctn/ha)
Packout
70%
75%
80%
85%
90%
1400
$5.76
$6.29
$6.82
$7.35
$7.87
1500
$6.38
$6.95
$7.52
$8.08
$8.65
1600
$7.01
$7.61
$8.21
$8.82
$9.42
1700
$7.63
$8.27
$8.91
$9.55
$10.20
1800
$8.25
$8.93
$9.61
$10.29
$10.97
Table 8.2.3: Gross margin sensitivity (S/carton) for Red
Delicious to both yield and packout.
The gross margin for the highest yield and packout combination (1800
ctn/ha yield and 90% packout, row 5 column 5 of Table 8.2.3) is 90%
higher than for the lowest yield and packout combination (1400 ctn/ha
yield and 70% packout, row 1 column 1 of Table 8.2.3).
The gross margin for the highest yield and packout combination is 34%
higher than for the average of 1600 cartons per hectare yield and a 80%
packout.
A 5% increase in packout level will increase the gross margin by between
6.6% and 9.2%. Increasing yield levels by 100 cartons per hectare will
result in a gross margin increase of between 7.5% and 10.8%.
37
8.3
Growing cost to packing shed door for Red Delicious
FERTILISER COST
$/ha
Lime
N:P:K 6:5:5
Nitram (Mar-Apr)
Urea (Mar-Apr)
Application cost
1 t/ha
0.2 t/ha
0.1 t/ha
0.2 t/ha
4 hours
@
$35/t
$317/t
$477/t
$472/t
$6.87/hr
Spray volume 2500 l/ha
Black Spot/Mildew (8 appl)
Grubs
(6 appl)
Red spider
(2 appl)
Bitter pit
(6 appl)
Core rot
(2 appl)
Core rot
(2 appl)
Core rot
(2 appl)
Application cost
Roundup
Sprayseed
Surflan/Simazine
Willow herb
Application cost
(2
(2
(2
(2
appl)
appl)
appl)
appl)
Nustar
1 g/100 I
Lorsban 100 g/100 I
Omite
30 g/1001
Calc. Chi. 1 g/100 I
Rovrol
100 g/1001
Benlate 50 g/100 I
Citowett 10 g/100 I
12 hours
Amotrole
8 hours
l/ha
l/ha
l/ha
l/ha
@
@
@
@
@
$240.00/kg
$5.50/100 I
$38.00/kg
$4.52/kg
$79.35/kg
$78.00/kg
$8.00/kg
$6.87/hr
$25.00/1
$8.25/1
$6.80/1
$11.04/1
$6.87/hr
PRIMARY THINNING COST
Primary spray volume 4000 l/ha
NAA(4-10ppm)
(2 appl)
Wetting agent
(2 appl)
SECONDARY THINNING COST
50 g/1001
20 g/1001
Secondary spray volume 4000 l/ha
NAA(4-10ppm)
(1 appl)
THIRD THINNING COST
50 g/100 I
Third spray volume 3000 l/ha
Carbaryl(1000ppm)
(2 appl)
Application cost
@
@
125 g/100 I
6 hours
$16.50/1
$8.95/1
@
$16.50/1
@
@
$21.00/1
$6.87/hr
7 minutes/tree
@
$8.70/hr
PRUNING COST
Summer
Winter
@
@
$69.60/day
$69.60/day
$50.00
$16.50
$13.60
$22.08
$54.96
$/ha
Your budget
$66.00
$14.32
$/ha
Your budget
$33.00
$/ha
Your budget
$236.25
$41.22
4 hrs/ha
2 hives
1.9 Ml/ha
@
@
@
$6.87/hr
$25.00/hive
$93.68/MI
Your budget
$812.00
Your budget
$348.00
$487.20
$/ha
OTHER COST
Mowing btwn rows (twice)
Pollination
Irrigation
$82.44
$/ha
5 days
7 days
Your budget
$48.00
$82.50
$57.00
$0.68
$396.75
$195.00
$4.00
$/ha
HAND THINNING COST
Average
$35.00
$63.40
$47.70
$94.40
$27.48
$/ha
INSECTICIDE, FUNGICIDE & HERBICIDE COST
Your budget
Your budget
$54.96
$50.00
$177.99
$3,612.43
TOTAL GROWING COST PER HECTARE
TOTAL GROWING COST PER BIN
$45.16
# The growing and picking costs are not expressed in $/carton as this is not considered relevant until the apples have been packed.
38
8.4
Picking cost to packing shed door for Red Delicious
PICKING COST
$/ha
Picking
Transport to shed
@
@
80 bins/ha
80 bins/ha
$17.20/bin
$0.10/bin
$1,376.00
$8.00
$1,384.00
$17.30
TOTAL PICKING COST PER HECTARE
TOTAL PICKING COST PER BIN
8.5
Your budget
Marketing cost for Red Delicious
LOCAL FREIGHT COST
$/ha
Average local transport cost for 15% (192 cartons) of packable yield
Hobart, Bell Bay, and Burnie
$1.03/ctn
$20.60/bin
Your budget
$197.76
$/ha
INTERSTATE FREIGHT COST
Your budget
Average interstate transport cost for 25% (320 cartons) of packable yield
Melbourne, Sydney, and Brisbane
$3.33/ctn
$66.60/bin
$1,056.60
LessTFES
$0.85/ctn
$17.00/bin
($272.00)
$/ha
INTERNATIONAL FREIGHT COST
Average international transport cost for 60% (768 cartons)
Overseas freight
$7.85/ctn
Bank charges
$0.40/ctn
Overseas commission
$0.75/ctn
Exporter commission
$1.78/ctn
Miscellaneous
$0.12/ctn
Average local freight
$1.10/ctn
of packable yield
$8.00/bin
$15.00/bin
$157.00/bin
$6,028.80
$307.20
$576.00
$35.60/bin
$1,367.04
$2.40/bin
$22.00/bin
$92.16
$844.80
QUARANTINE COST
$/ha
Interstate and overseas only (816 cartons)
Quality inspection (State charge)
$33.00/hr
$1.50/bin
$30.00/load
Export permit (Federal charge)
$78.00 first half hour
Inspection (Federal charge)
$35.00/first half hour + $30.00
Phyto insp & cert (Federal charge)
$81.60
$30.00
$78.00
$65.00
$10,461.96
TOTAL MARKETING COST PER HECTARE
TOTAL MARKETING COST PER BIN
TOTAL MARKETING COST PER CARTON
$163.47
$8.17
39
Your budget
Your budget
8.6
Variable handling cost for Red Delicious
$/ha
VARIABLE HANDLING COST
Dipping
$0.25/ctn
Grading & packing (standard)
$5.70/ctn
Grading & packing (heavy - overseas only) $6.05/ctn
Ordinary cool storage
$0.74/ctn
CA storage
$1.50/ctn
$5.00/bin
$114.00/bin
$121.00/bin
$14.80/bin
$30.00/bin
$390.40
$2,918.40
$4,646.40
$189.44
$1,536.00
$/ha
OTHER COST
Apple and pear levy
Crop insurance (90% of packable yield)
$0.22/ctn
$0.16/ctn
$4.40/bin
$3.20/bin
$10,146.56
$158.54
$7.93
TOTAL VARIABLE COST PER HECTARE
TOTAL VARIABLE COST PER BIN
TOTAL VARIABLE COST PER CARTON
$25,604.95
$400.08
$20.00
Expected revenue for Red Delicious
revenue/ha
JUICING AND PROCESSING
Processing
Juicing
0 bins
16 bins
0 ctn
320 ctn
@ $51.00/bin
@ $41.00/bin
9.6 bins
192 ctn
@ $20.00/ctn
Interstate revenue
16 bins
320 ctn
@ $22.00/ctn
Overseas revenue
38.4 bins
768 ctn
@ $32.00/ctn
$24,576
TOTAL REVENUE PER HECTARE
TOTAL REVENUE PER BIN
TOTAL REVENUE PER CARTON
$36,118.42
$564.35
$28.22
GROSS MARGIN PER HECTARE
GROSS MARGIN PER BIN
GROSS MARGIN PER CARTON
$10,513.47
$164.27
$8.21
40
Your budget
$7,040
revenue/ha
INTERNATIONAL SALES
Your budget
$3,840
revenue/ha
INTERSTATE SALES
Your budget
$0.00
$662.42
revenue/ha
LOCAL SALES
Local revenue
Your budget
$281.60
$184.32
TOTAL VARIABLE HANDLING COST PER HECTARE
TOTAL VARIABLE HANDLING COST PER BIN
TOTAL VARIABLE HANDLING COST PER CARTON
8.7
Your budget
Your budget
GROSS MARGIN - GOLDEN DELICIOUS
The management variables and prices used in the gross margin analysis for
Golden Delicious are summarised below.
Planting
Yield
Packout
Local market price
Interstate market price
Overseas market price
Juicing price
Processing fruit
800 trees per hectare
2000 cartons per hectare
70% (14 out of 20)
$18 per carton
$20 per carton
$28 per carton
$45 per bin
$51 per bin
50% of packable yield
45% of packable yield
5% of packable yield
Using these input variables, a gross margin of $9,797 per hectare ($7.00
per carton) for Golden Delicious has been obtained.
Variable cost for Golden Delicious
The average gross margin for Golden Delicious is obtained through the
subtraction of costs from revenue. The cost structure for Golden Delicious
is shown in Figure 9.1.1.
Variable cost breakup for Golden Delicious - Tasmania
3%
•
CHEMICALS & FERTILISER COST
D THINNING COST
•
TRACTOR RUNNING COST
•
HARVESTING COST
L I PRUNING COST
•
POLLINATION, IRRIGATION & INSURANCE
COST
5
MARKETING COST
IB VARIABLE HANDLING COST
Figure 9.1.1: Average variable cost breakup for Golden Delicious Tasmania 1995.
The variable growing costs for Golden Delicious makes up slightly more
than one quarter of the total variable cost. The variable handling cost
makes up over 50% of the total variable cost. The marketing costs
comprise one fifth of the total variable cost.
41
TAKE NOTE:
THE LABOUR COST OF THE OWNER OR OPERATOR OF THE
ORCHARD (WHICH MAY BE VALUED AT AROUND $ 3 0 , 0 0 0 PER
ANNUM) IS IN THIS ANALYSIS TREATED AS AN OVERHEAD COST
AND IS NOT INCLUDED IN THE GROSS MARGIN ANALYSIS.
TAKE NOTE:
THE VARIABLE COST DIFFERENCES BETWEEN THE FOUR
VARIETIES CANNOT BE DEDUCED FROM FIGURES 7 . 1 . 1 , 8.1.1,
9.1.1, AND 10.1.1 IN SECTION 7 TO 10.
A COMPARISON OF THE VARIABLE COST DIFFERENCE BETWEEN
THE VARIETIES IN TERMS OF ACTUAL NUMBERS IS SHOWN IN
SECTION 11.
9.2
Sensitivity analysis of Golden Delicious gross margins
The gross margins for all varieties will vary with yield, packout and prices.
The sensitivity of the gross margin to changes in packout, yield and prices
for all varieties is shown in this section.
Table 9.2.1. below shows a sensitivity analysis for changes in export,
interstate and local prices (at 2000 cartons/ha yield) and the resultant gross
margin for Golden Delicious.
Export market
Price
$39
$36
$33
$30
$27
$24
$21
Interstate Market
Gross margin
Price
Gross margin
$7.55/ctn
$7.40/ctn
$7.25/ctn
$7.10/ctn
$6.95/ctn
$6.80/ctn
$6.65/ctn
$26
$24
$22
$20
$18
$16
$14
$9.70/ctn
$8.80/ctn
$7.90/ctn
$7.00/ctn
$6.10/ctn
$5.20/ctn
$4.30/ctn
Local Market
Price
$23
$22
$20
$18
$16
$14
$13
Gross margin
$9.70/ctn
$8.80/ctn
$7.90/ctn
$7.00/ctn
$6.10/ctn
$5.20/ctn
$4.30/ctn
Table 9.2.1: Gross margin sensitivity for Golden Delicious to export, interstate, and
local market price changes (yield = 2000).
A 30% price increase on the export market from $30/ctn to $39/ctn would
result in a 6% gross margin increase. A 30% price increase on the
interstate and local market would increase the gross margin by 39%.
It was assumed that 50% of Golden Delicious were intended for the local
market and 45% for the interstate market resulting in a high sensitivity to
price changes in these markets.
42
Table 9.2.2 below shows the sensitivity of the gross margin for Golden
Delicious per hectare to both yield and packout. Table 9.2.3 shows this
gross margin sensitivity per carton.
Yield (ctn/ha)
60%
65%
70%
75%
80%
1700
$6,644
$7,249
$7,855
$8,461
$9,067
2000
$8,372
$9,085
$9,797
$10,510
$11,223
1800
$7,220
$7,861
$8,503
$9,144
$9,786
2100
$8,948
$9,696
$10,445
$11,193
$11,942
2200
$9,524
$10,308
$11,092
$11,876
$12,660
Table 9.2.2: Gross margin sensitivity (S/hectare) for Golden
Delicious to both yield and packout.
Yield (ctn/ha)
Packout
60%
65%
70%
75%
80%
1700
$4.75
$5.18
$5.61
$6.04
$6.48
1800
$5.16
$5.62
$6.07
$6.53
$6.99
2000
$5.98
$6.49
$7.00
$7.51
$8.02
2100
$6.39
$6.93
$7.46
$8.00
$8.53
2200
$6.80
$7.36
$7.92
$8.48
$9.04
Table 9.2.3: Gross margin sensitivity ($/carton) for Golden
Delicious to both yield and packout.
The gross margin for the highest yield and packout combination (2200
ctn/ha yield and 80% packout, row 5 column 5 of Table 8.2.3) is 90%
higher than for the lowest yield and packout combination (1700 ctn/ha
yield and 60% packout, row 1 column 1 of Table 8.2.3).
The gross margin for the highest yield and packout combination is 29%
higher than for the average of 2000 cartons per hectare yield and a 70%
packout.
A 5% increase in packout level will increase the gross margin by between
6.6% and 9%. Increasing yield levels by 100 cartons per hectare will result
in a gross margin increase of between 6.6% and 9%.
43
9.3
Growing cost to packing shed door for Golden Delicious
FERTILISER COST
$35/t
$317/t
Lime
1 t/ha
N:P:K 6:5:5
0.2 t/ha
Nitram (Mar-Apr)
0.1 t/ha
Urea (Mar-Apr)
0.2 t/ha
Application cost
4 hours
INSECTICIDE, FUNGICIDE & HERBICIDE COST
Spray volume 2500 l/ha
Black Spot/Mildew (8 appl)
Grubs
(6 appl)
Red spider
(2 appl)
Bitter pit
(6 appl)
Application cost
$477/t
$472/t
$6.87/hr
Nustar
1 g/100 I
Lorsban 100 g/100 I
Omite
30 g/100 I
Calc. Nitr. 1 g/100 I
12 hours
Roundup
(2 appl)
Sprayseed
(2 appl)
Surflan/Simazine (2 appl)
Willow herb
(2 appl) Amotrole
Application cost
8 hours
PRIMARY THINNING COST
l/ha
l/ha
l/ha
l/ha
Primary spray volume 4000 l/ha
NAA (4-10 ppm)
(1 appl)
Wetting agent
(1 appl)
SECONDARY THINNING COST
25 g/100 I
20 g/1001
Secondary spray volume 4000 l/ha
NAA (8-12 ppm)
(1 appl)
Wetting agent
(1 appl)
THIRD THINNING COST
60 g/100 I
20 g/1001
Third spray volume 3000 l/ha
NAA (8-12 ppm)
(1 appl)
Wetting agent
(1 appl)
FOURTH THINNING COST
60 g/100 I
20 g/1001
Fourth spray volume 3000 l/ha
Carbaryl (1000ppm)
(1 appl)
Application cost
HAND THINNING COST
125 g/100 I
4 hours
Heavy
PRUNING COST
10 minutes/tree
Winter
OTHER COST
9 days
Mowing btwn rows (twice)
Pollination
Irrigation
4 hrs/ha
2 hives
1.9 Ml/ha
@
$/ha
Your budget
$35.00
$63.40
$47.70
$94.40
$27.48
$/ha
Your budget
$240.00/kg
$5.50/100 I
$38.00/kg
$4.52/kg
$6.87/hr
$48.00
$82.50
$57.00
$0.68
$82.44
$25.00/1
$8.25/1
$6.80/1
$11.04/1
$50.00
$16.50
$13.60
$22.08
$54.96
$/ha
Your budget
$16.50
$7.16
$/ha
Your budget
$39.60
$7.16
$/ha
Your budget
$29.70
$5.37
$/ha
Your budget
$6.87/hr
$16.50/1
$8.95/1
$16.50/1
$8.95/1
$16.50/1
$8.95/1
@
$21.00/1
$6.87/hr
@
$8.70/hr
@
$69.60/day
@
@
@
$6.87/hr
$25.00/hive
$93.68/MI
$78.75
$27.48
$/ha
Your budget
$1,160.00
$/ha
Your budget
$626.40
$/ha
Your budget
$54.96
$50.00
$177.99
$2,976.81
$29.77
TOTAL GROWING COST PER HECTARE
TOTAL GROWING COST PER BIN
The growing and picking costs are not expressed in $/carton as this is not considered relevant until tha apples have been packed.
44
9.4
Picking cost to packing shed door for Golden Delicious
PICKING COST
$/ha
Picking
Transport to shed
$17.20/bin
$0.10/bin
100 bins/ha
100 bins/ha
$1,720.00
$10.00
$1,730.00
$17.30
TOTAL PICKING COST PER HECTARE
TOTAL PICKING COST PER BIN
9.5
Your budget
Marketing cost for Golden Delicious
$/ha
LOCAL FREIGHT COST
Average local transport cost for 50% (700 cartons) of packable yield
Hobart, Bell Bay, and Burnie
$1.03/ctn
$20.60/bin
$712.00
$/ha
INTERSTATE FREIGHT COST
Your budget
Your budget
Average interstate transport cost for 45% (630 cartons) of packable yield
Melbourne, Sydney, and Brisbane
$3.33/ctn
$66.60/bin
$2,097.90
Less TFES
$0.85/dn
$17.00/bin
($535.50)
INTERNATIONAL FREIGHT COST
$/ha
Your budget
Average international transport cost for 5% (70 cartons) of packable yield
$549.50
Overseas freight
$157.00/bin
$7.85/ctn
$28.00
Bank charges
$8.00/bin
$0.40/ctn
$52.50
Overseas commission
$15.00/bin
$0.75/ctn
Exporter commission
$35.60/bin
$124.60
$1.78/ctn
Miscellaneous
$8.40
$2.40/bin
$0.12/ctn
Average local freight
$77.00
$1.10/ctn
$22.00/bin
QUARANTINE COST
$/ha
Interstate and overseas only (816 cartons)
$33.00/hr
$1.50/bin
Quality inspection (State charge)
$30.00/load
Export permit (Federal charge)
$78.00 first half hour
Inspection (Federal charge)
Phyto insp & cert (Federal charge)
$35.00/first half hour + $30.00
$52.50
$30.00
$78.00
$65.00
$3,348.90
$33.49
TOTAL MARKETING COST PER HECTARE
TOTAL MARKETING COST PER BIN
TOTAL MARKETING COST PER CARTON
$1.67
45
Your budget
9.6
Variable handling cost for Golden Delicious
VARIABLE HANDLING COST
$/ha
Dipping
$0.25/ctn
Grading & packing (standard)
$5.70/ctn
Grading & packing (heavy - overseas only) $6.05/ctn
Ordinary cool storage
$0.74/ctn
CA storage
$1.50/ctn
$5.00/bin
$114.00/bin
$121.00/bin
$14.80/bin
$30.00/bin
OTHER COST
$315.00
$7,581.00
$423.50
$207.20
$1,680.00
$/ha
Apple and pear levy
Crop insurance (90% of packable yield)
$0.22/ctn
$0.16/ctn
$4.40/bin
$3.20/bin
$10,716.30
$107.16
$5.36
TOTAL VARIABLE COST PER HECTARE
TOTAL VARIABLE COST PER BIN
TOTAL VARIABLE COST PER CARTON
$18,772.01
$187.72
$9.39
Expected revenue for Golden Delicious
JUICING AND PROCESSING
Processing
Juicing
9.9 bins
20 bins
revenue/ha
198 ctn
402 ctn
@ $51.00/bin
@ $45.00/bin
35 bins
700 ctn
@ $18.00/ctn
Interstate revenue
31.5 bins
630 ctn
@ $20.00/ctn
Overseas revenue
3.5 bins
$28.00/ctn
70 ctn
$1,960
TOTAL REVENUE PER HECTARE
TOTAL REVENUE PER BIN
TOTAL REVENUE PER CARTON
$28,569.43
$408.13
$20.41
GROSS MARGIN PER HECTARE
GROSS MARGIN PER BIN
GROSS MARGIN PER CARTON
$9,797.42
$136.96
$7.00
46
Your budget
$12,600
revenue/ha
INTERNATIONAL SALES
Your budget
$12,600
revenue/ha
INTERSTATE SALES
Your budget
$504.90
$904.53
revenue/ha
LOCAL SALES
Local revenue
Your budget
$308.00
$201.60
TOTAL VARIABLE HANDLING COST PER HECTARE
TOTAL VARIABLE HANDLING COST PER BIN
TOTAL VARIABLE HANDLING COST PER CARTON
9.7
Your budget
Your budget
GROSS MARGIN - DEMOCRATS
The management variables and prices used in the gross margin analysis for
Democrats are summarised below.
Planting
Yield
Packout
Local market price
Interstate market price
Overseas market price
Juicing price
Processing fruit
600 trees per hectare
2400 cartons per hectare
75% (15 out of 20)
$12 per carton
$15 per carton
$22 per carton
$41 per bin
$51 per bin
75% of packable yield
0% of packable yield
25% of packable yield
Using these input variables a gross margin of $2,776 per hectare($1.54 per
carton) for Democrats has been obtained.
Variable cost breakup for Democrat
The average gross margin for Democrats is obtained through the
subtraction of costs from revenue. The cost structure for Democrats is
shown in Figure 10.1.1.
Variable cost breakup for Democrats - Tasmania
• CHEMICALS & FERTILISER COST
•
THINNING COST
• TRACTOR RUNNING COST
• HARVESTING COST
•
PRUNING COST
II POLLINATION, IRRIGATION & INSURANCE
COST
5 MARKETING COST
III VARIABLE HANDLING COST
Figure 10.1.1: Average variable cost breakup for Democrats - Tasmania 1995.
The variable handling cost makes up 56% of the total variable cost for
Democrats. Less than one fifth of the total variable cost is attributable to
growing costs (chemical & fertiliser, thinning, tractor running, harvesting,
pruning, pollination, irrigation, and insurance).
47
TAKE NOTE:
THE LABOUR COST OF THE OWNER OR OPERATOR OF THE
ORCHARD (WHICH MAY BE VALUED AT AROUND $30,000 PER
ANNUM) IS IN THIS ANALYSIS TREATED AS AN OVERHEAD COST
AND IS NOT INCLUDED IN THE GROSS MARGIN ANALYSIS.
TAKE NOTE:
THE VARIABLE COST DIFFERENCES BETWEEN THE FOUR
VARIETIES CANNOT BE DEDUCED FROM FIGURES 7.1.1, 8.1.1,
9.1.1, AND 10.1.1 IN SECTION 7 TO 10.
A COMPARISON OF THE VARIABLE COST DIFFERENCE BETWEEN
THE VARIETIES IN TERMS OF ACTUAL NUMBERS IS SHOWN IN
SECTION 11.
10.2
Sensitivity analysis of Democrats gross margins
The gross margins for all varieties will vary with yield, packout and prices.
The sensitivity of the gross margin to changes in packout, yield and prices
for all varieties is shown in this section.
Table 10.2.1. below shows a sensitivity analysis for changes in export,
interstate and local prices (at 2400 cartons/ha yield) and the resultant gross
margin for Democrats.
Export market
Local Market
Price
Gross margin
Price
Gross margin
$29
$26
$24
$22
$20
$18
$15
$3.19/ctn
$2.64/ctn
$2.09/ctn
$1.54/ctn
$0.99/ctn
$0.44/ctn
($0.11/ctn)*
$16
$14
$13
$12
$11
$10
$8
$4.24/ctn
$3.34/ctn
$2.44/ctn
$1.54/ctn
$0.64/ctn
($0.26/ctn)
($1.16/ctn)
Table 10.2.1: Gross margin sensitivity for Democrat
to export, interstate, and local market price changes
(yield = 2400).
*
A figure in brackets is negative.
It was assumed that 75% of Democrats were intended for the local market
resulting in a high sensitivity to price changes in this market. A 30% price
increase from $12 to $16 per carton results in a 175% change in gross
margin.
48
Table 10.2.2 below shows the sensitivity of the gross margin for
Democrats per hectare to both yield and packout. Table 10.2.3 shows this
gross margin sensitivity per carton.
Yield (ctn/ha)
65%
70%
75%
80%
85%
2200
$2,242
$2,310
$2,378
$2,446
$2,514
2300
$2,435
$2,506
$2,577
$2,648
$2,719
2400
$2,627
$2,701
$2,776
$2,850
$2,924
2500
$2,820
$2,897
$2,975
$3,052
$3,129
2600
$3,013
$3,093
$3,174
$3,254
$3,334
Table 10.2.2: Gross margin sensitivity ($/hectare) for Democrats
to both yield and packout.
Yield (ctn/ha)
65%
70%
75%
80%
85%
2200
$1.25
$1.28
$1.32
$1.36
$1.40
2300
$1.35
$1.39
$1.43
$1.47
$1.51
2400
$1.46
$1.50
$1.54
$1.58
$1.62
2500
$1.57
$1.61
$1.65
$1.70
$1.74
2600
$1.67
$1.72
$1.76
$1.81
$1.85
Table 10.2.3: Gross margin sensitivity (S/carton) for Democrats
to both yield and packout.
The gross margin for the highest yield and packout combination (2600
ctn/ha yield and 85% packout, row 5 column 5 of Table 10.2.3) is 48%
higher than for the lowest yield and packout combination (2200 ctn/ha
yield and 65% packout, row 1 column 1 of Table 10.2.3).
The gross margin for the highest yield and packout combination is 20%
higher than for the average of 2400 cartons per hectare yield and a 75%
packout.
A 5% increase in packout level will increase the gross margin by between
2.2% and 2.4%. Increasing yield levels by 100 cartons per hectare will
result in a gross margin increase of between 5.9% and 8%.
49
10.3
Growing cost to packing shed door for Democrats
FERTILISER COST
$/ha
Lime
N:P:K 6:5:5
Nitram (Mar-Apr)
Urea (Mar-Apr)
Application cost
$35/t
$317/t
$477/t
$472/t
$6.87/hr
1 t/ha
0.2 t/ha
0.1 t/ha
0.2 t/ha
4 hours
$35.00
$63.40
$47.70
$94.40
$27.48
$/ha
INSECTICIDE, FUNGICIDE & HERBICIDE COST
Spray volume 2500 l/ha
Black Spot/Mildew (8 appl)
Grubs
(6 appl)
Red spider
(2 appl)
Bitter pit
(6 appl)
Application cost
Nustar
1 g/100 I
Lorsban 100 g/100 I
Omite
30 g/100 I
Calc. Nitr. 1 g/100 I
12 hours
$240.00/kg
$5.50/1001
$38.00/kg
$4.52/kg
$6.87/hr
$48.00
$82.50
$57.00
$0.68
$82.44
Roundup
Sprayseed
Surflan/Simazine
Willow herb
Application cost
1
1
1
Amotrole 1
8 hours
$25.00/1
$8.25/1
$6.80/1
$11.04/1
$6.87/hr
$50.00
$16.50
$13.60
$22.08
$54.96
(2
(2
(2
(2
appl)
appl)
appl)
appl)
l/ha
l/ha
l/ha
l/ha
@
PRIMARY THINNING COST
$/ha
Primary spray volume 4000 l/ha
NAA (4-10 ppm)
(1 appl)
Wetting agent
(1 appl)
Application cost
25 g/100 I
20 g/1001
1 hours
@
$16.50/1
$8.95/1
$6.87/hr
Minimal
3 minutes/tree
@
$8.70/hr
Winter
8 days
@
$69.60/day
Mowing btwn rows (twice)
Pollination
Irrigation
4 hrs/ha
2 hives
1.9 Ml/ha
@
@
@
$6.87/hr
$25.00/hive
$93.68/MI
Your budget
Your budget
$556.80
$/ha
OTHER COST
Your budget
$261.00
$/ha
PRUNING COST
Your budget
$16.50
$7.16
$6.87
$/ha
HAND THINNING COST
Your budget
Your budget
$54.96
$50.00
$177.99
$1,827.02
$15.23
TOTAL GROWING COST PER HECTARE
TOTAL GROWING COST PER BIN
The growing and picking costs are not expressed in $/carton as this is not considered relevant until the apples have been packed.
50
10.4
Picking cost to packing shed door for Democrats
PICKING COST
$/ha
Picking
Transport to shed
120 bins/ha
120 bins/ha
@
@
$17.20/bin
$0.10/bin
TOTAL PICKING COST PER HECTARE
TOTAi Dirk'iMr: m c x DCD DIM
10.5
Your budget
$2,064.00
$12.00
$2,076.00
<M7 -in
Marketing cost for Democrats
LOCAL FREIGHT COST
$/ha
Average local transport cost for 75% (1350 cartons) of packable yield
Hobart, Bell Bay, and Burnie
$1.03/ctn
$20.60/bin
$1,390.50
INTERSTATE FREIGHT COST
$/ha
Average interstate transport cost for 0% (0 cartons) of packable yield
Melbourne, Sydney, and Brisbane
$3.33/ctn
$66.60/bin
LessTFES
$0.85/ctn
$17.00/bin
$0.00
($0.00)
INTERNATIONAL FREIGHT COST
$/ha
Average international transport cost for 25% (450 cartons)
Overseas freight
$7.85/ctn
Bank charges
$0.40/ctn
Overseas commission
$0.75/ctn
Exporter commission
$1.78/ctn
Miscellaneous
$0.12/ctn
Average local freight
$1.10/ctn
$/ha
Interstate and overseas only (816 cartons)
$33.00/hr
$1.50/bin
Quality inspection (State charge)
$30.00/load
Export permit (Federal charge)
$78.00 first half hour
Inspection (Federal charge)
$35.00/first half hour + $30.00
Phyto insp & cert (Federal charge)
$33.75
$30.00
$78.00
$65.00
$6,997.25
$77.75
$3.89
51
Your budget
Your budget
of packable yield
$157.00/bin $3,532.50
$180.00
$8.00/bin
$337.50
$15.00/bin
$801.00
$35.60/bin
$54.00
$2.40/bin
$495.00
$22.00/bin
QUARANTINE COST
TOTAL MARKETING COST PER HECTARE
TOTAL MARKETING COST PER BIN
TOTAL MARKETING COST PER CARTON
Your budget
Your budget
10.6
Variable handling cost for Democrats
VARIABLE HANDLING COST
$/ha
Dipping
$0.25/ctn
Grading & packing (standard)
$5.70/ctn
Grading & packing (heavy - overseas only) $6.05/ctn
Ordinary cool storage
$0.74/ctn
CA storage
$1.50/ctn
$5.00/bin
$114.00/bin
$121.00/bin
$14.80/bin
$30.00/bin
OTHER COST
$360.00
$7,695.00
$2,722.50
$266.40
$2,160.00
$/ha
Apple and pear levy
Crop insurance (90% of packable yield)
$0.22/ctn
$0.16/ctn
$4.40/bin
$3.20/bin
$13,859.10
$153.99
$7.70
TOTAL VARIABLE COST PER HECTARE
TOTAL VARIABLE COST PER BIN
TOTAL VARIABLE COST PER CARTON
$24,759.37
$275.10
$13.76
Expected revenue for Democrats
JUICING AND PROCESSING
Processing
Juicing
20 bins
9.9 bins
revenue/ha
402 ctn
198 ctn
@ $51.00/bin
@ $41.00/bin
67.5 bins
1350 ctn
@ $12.00/ctn
Interstate revenue
0 bins
Octn
@ $15.00/ctn
Overseas revenue
22.5 bins
450 ctn
$22.00/ctn
$9,900
$27,534.97
$305.94
TOTAL REVENUE PER HECTARE
TOTAL REVENUE PER BIN
TOTAL REVENUE PER CARTON
$15.30
$2,775.60
$30.84
$1.54
GROSS MARGIN PER HECTARE
GROSS MARGIN PER BIN
GROSS MARGIN PER CARTON
52
Your budget
$0
revenue/ha
INTERNATIONAL SALES
Your budget
$16,200
revenue/ha
INTERSTATE SALES
Your budget
$1,025.10
$409.87
revenue/ha
LOCAL SALES
Local revenue
Your budget
$396.00
$259.20
TOTAL VARIABLE HANDLING COST PER HECTARE
TOTAL VARIABLE HANDLING COST PER BIN
TOTAL VARIABLE HANDLING COST PER CARTON
10.7
Your budget
Your budget
VARIABLE COST COMPARISON
The variable cost per bin is similar for Red Delicious and Fuji. The average
variable cost per bin is considerably lower for Golden Delicious. This is
due to the low variable handling and marketing cost as the relative
proportion of Golden Delicious intended for export is low.
Cost factor
FUJI
S/bin
Chemical & fertiliser
$23.47
Thinning
$22.13
Tractor running
$5.01
Harvesting
$28.83
Pruning
$17.40
Pollination, irrigation & insurance
$7.63
Marketing
$140.21
Variable handling
$149.11
Average variable cost per bin
$394
RED
GOLDEN
DEMODELICIOUS DELICIOUS CRATS
$/bin
$/bin
$/bin
$17.60
$18.15
$4.08
$21.63
$13.05
$6.44
$167.87
$151.26
$5.31
$13.44
$2.47
$17.30
$6.26
$4.30
$36.57
$102.07
$5.90
$3.16
$2.52
$23.07
$6.19
$5.41
$77.75
$151.11
$400
$188
$275
Table 11.1: Average expected cost structure per bin for Democrat, Golden & Red
Delicious, and Fuji apples.
The variable cost for Democrats is higher than for Golden Delicious
because 25% of the Democrat crop was assumed to have an overseas
destination. The marketing and variable handling costs for apples destined
for export are much higher.
Comparison of revenue between varieties
Revenue per hectare is highest for the Fuji and Red Delicious varieties at
around $36,000/ha. Revenue per carton and bin is highest for Fuji at $758.
The lower revenue per carton and bin for Red Delicious is due to the
greater number of cartons produced per hectare for Red Delicious than for
Fuji.
The same applies for Democrats and Golden Delicious. The revenue for
each is similar at around $28,000 per hectare, but Golden Delicous
produces a higher average revenue per carton and bin.
53
Revenue
Per hectare
Per carton
Per bin
FUJI
RED
DELICIOUS
$36,378
$37.89
$758
$36,118
$28.22
$564
GOLDEN
DELICIOUS
$28,569
$20.41
$408
DEMOCRATS
$27,535
$15.30
$306
Table 11.1.1: Average expected revenue for Fuji, Golden & Red Delicious, and
Democrat apples per hectare, carton, and bin.
11.2
Comparison of gross margin between varieties
As expected, the gross margin is highest for Fuji, mainly due to the
relatively high prices obtained for this variety. However, the gross margin
for Fuji is very sensitive to price changes in both the export and interstate
market.
The possible impact of a decrease in the price received for Fujis in the
export market should be considered carefully. Sections 7.2, 8.2, 9.2, and
10.2 contain sensitivity analyses showing the effects of changes in price,
yield, and packout.
Gross margin
FUJI
Per hectare
Per carton
Per bin
$17,476
$18.20
$364
RED
DELICIOUS
GOLDEN
DELICIOUS
$10,513
$8.21
$164
$9,797
$7.00
$140
DEMOCRATS
$2,776
$1.54
$31
Table 11.2.1: Average expected gross margin for Fuji, Red & Golden Delicious, and
Democrat apples per hectare, carton, and per bin.
The gross margin for Fujis, shown in Table 11.2.1 is not necessarily higher
than the gross margin for any other new variety, such as Braeburn, Gala,
Jonagold, Pink Lady, and Sundowner. The latter have not been assessed in
this report.
A gross margin analysis for each of these new varieties (which consists of
determining the relative variable cost and revenue levels) would need to be
carried out in order to enable assessment of the difference in gross margin
levels to Fujis.
The gross margins of the new apple varieties in question is also likely to be
sensitive to the price obtained on overseas markets, as was the case with
Fujis.
54
REFERENCES
ABARE (AUSTRALIAN BUREAU OF AGRICULTURE AND RESOURCE
ECONOMICS), 1994; Commodity statistical bulletin. Commonwealth of
Australia.
AUSTRALIAN APPLE & PEAR GROWERS ASSOCIATION, 1976; The apple
and pear industry: a review of problems and practical solutions.
BUREAU OF AGRICULTURAL ECONOMICS, 1973; The Australian apple and
pear growing industry: a review of the current situation and outlook, Industry
Economics monograph No 1, Australian Government publishing service,
Canberra.
BUREAU OF AGRICULTURAL ECONOMICS, 1974; Income levels and
adjustment pattens in a rural community: Huon Valley Tasmania, Industry
Economics monograph No 2, Australian Government publishing service,
Canberra.
BUREAU OF AGRICULTURAL ECONOMICS, 1975; Economic policies and the
Australian apple and pear industry: a preliminary submission. Industry
Economics monograph No 4, Australian Government publishing service,
Canberra.
CASTALDI, M., 1993; Is high density the way to go?: another viewpoint. Good
Fruit Grower, January 1, pp. 6-10.
DEPARTMENT OF AGRICULTURE (VIC), 1993; Fruit prices - Melbourne Fresh
Centre: Average weekly prices for fruit sold at the Melbourne Fresh Centre
Market during 1993.
DEPARTMENT OF PRIMARY INDUSTRY AND FISHERIES, 1994
(November); Tasmanian exports continue to increase. Pome fruit newsletter,
24, p. 139.
DEPARTMENT OF PRIMARY INDUSTRY AND FISHERIES, 1995; Farm
Budget Guide DPIF.
FAST (Farm Advisory Service Team Ltd), 1993; High density tree planting to
control size, quality. Successful horticulture: The business magazine for
horticulture, January/February, pp 9-10.
FLEMINGS, 1991; Deciduous fruit tree cultivars, Advertising publication.
GORDON, R. and WALKER, S., 1991 (?); Batlow and District: Economic issues
of apple production, NSWDeparment of Agriculture.
GORDON, R., 1994; The bottom line: An investment appraisal of two apple
production systems, NSW Agriculture.
GUNN, E., 1992; Growing for perfection, Record of the proceedings of seminar
"get it right and appeal to the bite. Glenelg, South Australia.
HARDY, R. J. and MEREDITH, R. J., 1987; A chronology of the Tasmanian
apple and pear industry from 1788, Tasmanian Department of Primary
Industry.
55
HOCKING, A., 1982; The Tasmania apple and pear industry 1966-1981,
Economics Department University of Tasmania.
JONES, K., 1989; Thinning apples in Tasmania, Department of Primary Industry,
Tasmania.
PENGUIN MACQUARIE, 1988; Dictionary of economics and finance: A penguin
Australia reference book, Penguin books.
PULLAR, D. & ASSOCIATES, 1995; Pear industry benchmarking study, The
International Competitiveness Committee of the Pear Industry Steering
Group.
THOMPSON, J. F., 1986; The Tasmanian apple industry), Department of Primary
Industry Internal Publication by the Pome Fruit Liaison Officer.
56
PERSONAL COMMUNICATIONS
John O'Loughlin
Senior Horticulturalist
Department of Primary Industry
and Fisheries, Tasmania
Julie Ingram
Senior Consultant
Meyers Strategy Group Pty Ltd
Amanda Moses
Marketing Co-ordinator
Meyers Strategy Group Pty Ltd
Francis Bright
Risk Management Officer
Department of Primary Industry
and Fisheries, Tasmania
Ron Gordon
Horticulturalist
NSW Department of Agriculture
C. & H Hanssen
Orchardist
C. Bannister
TGIO
Mike Oakford
Technical Officer
Department of Primary Industry
and Fisheries, Tasmania
Predo Jotic
Horticulturalist
Department of Primary Industry
and Fisheries, Tasmania
Keith Jones
Principal Scientist
Department of Primary Industry
and Fisheries, Tasmania
57
APPENDIX 1 - PART A
CAPITAL COSTS
Land
Chisel Plough (5 tyne heavy duty)
Harrow (stump jump)
Disc Plough (16 plate, 3 plate offset)
Tractor (74-80 H.P.)
Tractor (40kW), Iseki TA550F
Sprayer
Herbicide Unit (400I)
Disk mower (8')
Super Spreader
4 W.D. utility
Fork Lift Attachment (Front)
Rear Fork
Apron (460m2 of concrete for @ 6000/220m2)
Bins (85% of Bearing Yield)
Picking Ladders (8 Ft)(Average price steel & aluminium)
Picking Bags (1.5 bushell)#
Pruning Equipment
Short Handled
Long Handled
Storage Shed (Zincalume, 9 x 24 x 3m)
Fencing (24200 metres)
Irrigation (assume water at head of block)
Sub Mains, Laterals, Drippers
800
trees/ha
Trellis
Tree Guards @ 13c per tree
800
trees/ha
Spur Bearers© 4.5x1.8m
800
trees/ha
*
***
#
##
###
@
@
@
@
@
@
@
@
@
@
@
@
@
@
@
@
@
$3,000
$1,210
$942
$2,370
$75,000
$31,250
$12,000
$2,800
$7,000
$1,500
$30,000
$4,000
$300
$6,000
$44
$230
$45
/ha
@
@
@
@
$1,100
$1,300
$10,600
$6,500
/km##
@
@
@
@
$1.52
$859
$0.13
$5.00
/tree
/ha
/tree
/tree###
*
*
*
**
*
***
***
***
***
**
**#
/220m 2
/bin
/ha
*
Equipment cost obtained from the "farm budget guide" (DPIF 1995).
Prices from "Cash Crop Enterprise Budgets" 1994/1995
Prices from "Tas Farm Equipment"
Assume 3 pickers/ha; harvest period 14 days
Price Quoted by Acton agricultural Services - Fencing Contractor @ $6.50/m.
Price quoted by Grove research Station for Fuji or delicious with MM106 rootstock and
M9 interstem
58
APPENDIX 1 - PART B
ESTABLISHMENT COSTS
Liming Fert.
t/ha
7.5
Single Super
t/ha
0.375
Deep Ripping
ha/hr
1
Pegs
Pegging Labour Costs
hrs/ha
2
Tree Planting Labour (3 peopli3 @ 3hrs/ha)i
Lease of Tree Planter
800
trees/ha
Seed
kg/ha*
Perrenial Ryegrass
12.5
White Clover
6.25
kg/ha
Surflan
l/ha
4.5
Knockdown x 1
l/ha
2.5
59
@
@
@
@
@
@
@
$35.00
$208.00
$90
$20
$8.70
$80.00
$0.20
/t
/t
/hr
/ha
/hr
/ha
/tree
@
@
@
@
$2.30
$5.85
$34.52
$6.98
/kg
/kg
/I
/I
APPENDIX 1 - PART C
OVERHEAD COSTS
Rates
Workers compensation
Insurance
Vehicle Reg. & Licence
Journals & Stationary
Telephone
Accountant & Legal
Travelling Expenses
Repairs & Maintenance
Fuel & Oil
Owner/Operator Labour
$495
/year
$3,226
/year
(Average 0.3% Capital costs)
$600
/year
$350
/year
$1,200
/year
$1,600
/year
$1,500
/year
$2,000
/year
$5,000
/year
$26,000
/year
60
APPENDIX 2
IRRIGATION RUNNING COSTS
The following costs are estimates of the likely cash expenses associated with owning and running a
travelling irrigator capable of irrigating 20 hectares in January / February. Average needs over this
period are approximately 5 mm per day or 35-40 mm per week.
Design detail
Static Head (max.)
Total Head (max.)
Hose length
Hose Diameter
lane Spacing
Water Applied Per Run
Time per run (300m)
Area per run (ha)
Time to Cover 20 hectares
Power Required at the Shaft
Motor Efficiency Electric
Diesel
30
110
150
89
64
37
11
1.92
121
38
90
80
m
m
m
mm
m
mm/ha
hrs
ha
hrs
KW
%
As designed the system is capable of applying 37 mm over 20 hectares in 11 runs or 5.5 days.
Thus there is some scope to increase the area irrigated or to allow for breakdowns.
ANNUAL RUNNING COSTS - Calculations based on the following:
No. of irrigations per 20 ha
Total Water Applied
Diesel Price (net rebate & levy)
Diesel Usage
HEC (tariff 73)*
7am-8pm (13 hrs)
8 p m - 7 a m (11 hrs)
Weighted Average cost
Repairs & Maintenance
Diesel
HEC
Tractor work
Tractor Running Cost
10
370
41.93
0.35
mm/ha
c/L
L/KWhr
11.33
4.97
8.68
0.68
0.41
0.75
6.87
c/KWhr
c/KWhr
c/KWhr
c/hr
c/hr
hr/shift
$/hr
TOTAL ANNUAL RUNNING COSTS - (10 irrigations over 20 hectares)
Electricity / Diesel costs = Shaft Power (KW)/Efficiency (%) * Time (hrs) * Cost /KWhr
Total cost
HEC
Diesel
Electricity / Diesel cost
Repairs & Maintenance
Supply Charge
Tractor Running
$4435
$496
$471
$567
$8435
$823
Total Running cost
Operating Cost per Irrigation (37mm)
Operating Cost per 25mm
$5969
$29.84
$20.16
$9825
$49.12
$33.19
Assume Irrigation usage 75% HEC & 25% Diesel
Average irrigation cost per 25mm
Per Megalitre
$23.42
$93.68
61
$567