The Economics of Owning
and Operating Mechanical
Grape Harvesters
in washington
Circular 540
Washington
1
i
Agricultural
Experiment
Station
ACKNOWLEDGMENTS
The authors wish to acknowledge the assistance of Dr. Walter J. Clore,
Horticulturist at the Washington State University Irrigated Agricultural
Research and Extension Center, Prosser. Also, Mr. Robert Fox, National
Grape Growers Cooperative, Inc., Grandview; Mr. William Lewis, Kraft Foods,
Prosser; Mr. William Wolf, Seneca Foods, Prosser; Mr. Robert Ermey, Ermey
Vineyards, Wapato; Mr. !ley Thompson, Yakima Valley Grape Growers Cooperative, Grandview; Mr. Edward Buskirk and Mr. James Herold, Hurch Company,
Grandview. Finally, appreciation is expressed to the owners of mechanical
grape harvesters who provided information for the analysis.
No endorsement is intended or implied for brand names of equipment mentioned in this report.
Published by the Washington Agricultural Experiment Station, College of
Agriculture, Washington State University.
July, 1971
THE ECONOMICS OF OWNING AND OPERATING
MECHANICAL GRAPE HARVESTERS IN WASHINGTON
R. T. Dailey, R. J. Folwell, and R. C. Bevan 1
SUMMARY
Use of mechanical harvesters to pick grapes has increased rapidly in
Washington since the introduction of this technology in 1968. In 3 years,
the part of the Concord grape crop harvested by this method has increased
from about 1% in 1968 to slightly over 54% in 1970.
Mechanical harvesting requires a large capital investment; about
$54,000 for a typical operation with $27,000 for the harvester itself.
Annual fixed costs for the operation in this analysis were $12,260 or
$7.40/ton. The variable costs per ton were $5.15.
A relationship was developed between fixed and variable costs. As
tonnage harvested per machine increased, variable costs remained constant
at $5.15/ton, while fixed costs decreased from $24.52/ton at 500 tons
harvested to $4.09/ton on a 3,000-ton harvest. Total costs were $29.67
and $9.24/ton for those two respective harvesting rates.
Field observations of 9 harvesting operations provided data on several characteristics of field performance. Operating efficiency, that is
the time a harvester was actually picking grapes, averaged nearly 65%.
These harvesters picked about 1,760 tons of grapes on 245 acres and operated 568 hours during a 29-day harvesting season.
Various harvesting rates per hour were also analyzed. With a per
hour harvesting rate of 2 tons and 200 hours of use per season, the per
ton cost was $35.80. However, with a picking rate of 6 tons/hour and a
400-hour picking season, the cost per ton was $10.26.
A break-even analysis is also provided in this report. The breakeven acreage is computed for investments with total annual fixed costs of
$10,000, $12,000 and $15,000 and variable costs per ton of $5.00, $6.00
and $7.50. The cost variables are based on yields of 5, 6, and 8 tons/acre
and custom rates from $17 to $20/ton.
INTRODUCTION
The mechanical harvesting of Concord grapes was introduced in Washington in 1968. That year two mechanical grape harvesters were operated
1
Extension Economist and Assistant Agricultural Economist; Assistant Agricultural Economist and Assistant Professor; and Research Associate, respectively. Work was conducted under project 0050.
2
in the Yakima Valley; one was operated on a commercial basis and the other
strictly on an experimental basis. These two machines generated a great
deal of interest in this new technology in grape harvesting.
In 1969 thirteen mechanical harvesters were operated in Washington's
Yakima Valley; twelve were used on a commercial basis for custom harvesting
and one was used exclusively to harvest the grapes of the harvester owner.
During the 1970 harvesting season the number of harvesters had nearly
doubled to 25. However, three of these machines did not harvest any significant tonnage of grapes because they were used primarily for experimental
purposes.
The data in table 1 indicate the dramatic trend that has taken place
in just three grape harvesting seasons. In 1968 barely 1% of Washington's
grape crop was harvested mechanically, but by 1970 slightly over 54% of
the grapes were picked by this new method. The thirteen harvesters used
in 1969 picked an average of 1,492 tons of grapes per machine. Because of
a smaller crop in 1970, the average tonnage per harvester dropped to 1,230.
Had each of the 22 harvesters picked as many tons of grapes in 1970 as in
1969, 66% of Washington's 1970 Concord grape crop would have been harvested
mechanically.
Table 1:
Mechanical harvesting of Concord grapes in Washington, 1968-1970
Year
Total Concord
grape crop
(tons)
Harvested
mechanically
(tons)
Harvested
mechanically
(percent)
1968
1969
1970
68,900
63,000
50,000
845
19,400
27,100
1.2
30.8
54.2
OBJECTIVES OF THIS STUDY
Harvesting grapes by traditional methods requires a great deal of hand
labor. With these labor costs increasing and a dependable labor supply
becoming harder to obtain, grape producers wanted some means of harvesting
their crop mechanically. Mechanized harvesting became a reality in 1968.
The objectives of this study were:
1.
To determine the costs associated with owning and operating mechanical grape harvesters at various harvesting rates.
2.
To determine the break-even acreage, using several levels of investment, yield and custom charges.
3
CAPITAL REQUIREMENTS
Mechanical grape harvesting requires considerably more capital than
picking grapes by hand. The data in table 2 are typical of the capital
investment needed for mechanical harvesting. About one-half of the
$54,075 investment is required for the harvester. Since this machine is
new and few people have had experience with it, most harvester owners
estimated a salvage value of $5,000 and a 5-year useful life because of
the relatively high rate of obsolescence for most new agricultural innovations. Some owners estimated 3 years of useful life with a $10,000
salvage value while others chose 8 years for depreciation and no salvage
value.
Table 2:
Estimated capital investment and depreciation cost required for
mechanical grape harvesting 1
Yrs.
of
life
Purchase
price
Salvage
value
$27,000
9,000
3,000
$ 5,000
3,000
0
5
5
7
$22,000
6,000
3,000
Truck (2~ ton)
Truck (~ ton)
Straddlebuggy
3,075
1,000
8,000
1,000
150
3,500
5
5
5
2,075
850
4,500
415
170
900
Washing equipment
Bins (24 @$100)
600
2,400
0
0
5
3
600
2,400
120
800
$54,075
$12,650
$41,425
$8,435
Item
Harvester
Tractors~
@$4500 av.)
Trailers (2 @$1500)
Total
Depreciation
Total 2
Annual
1
Typical costs based on 11 operations in the Yakima Valley.
2
Straight line method of depreciation.
3
Rounded from $428.57 to $430.00.
$4,400
1,200
430 3
The capital investment for this technology can be reduced in some instances. For example, some growers contract with commercial haulers to
transport the grapes from the field to the processing plant, thereby
eliminating the need for the large truck and straddlebuggy. Also, some
processors own the bins needed for hauling the picked grapes and thus
reduce the total grower's investment by $2,400. In spite of such reductions in the total package, a great deal of capital is needed and one should
be aware of this when considering buying a mechanical grape harvester.
4
HARVESTER PERFORt1ANCE
Eleven mechanical grape harvesters were evaluated for field performance during the 1969 grape harvesting season. All were of the same model
and manufactured by the Chisholm-Ryder Corporation.
Table 3 summarizes field performance from the nine harvesting operations upon which complete data were available. A more thorough analysis
of these data will appear in a later publication.
Table 3:
Field performance during mechanical grape harvesting, 1969 1
Average
Item
Harvest period:
Begin
End
Total days
Hours per day
Total hours, season
Range
Sept. 14
Oct. 17
28.75
19.76
568.1
Sept. 8-17
Oct. 8-22
23-35
10-24
304-730
360.6
197.5
63.5
36.5
197-462
86-330
54-80
46-20
.68
1.24
• 33-.64
.47-1.23
4.88
8.91
2.24-6.35
3.28-9.79
Total acres harvested
244.6
210-340
Total tons harvested
1759.8
1475-2150
7.2
6.5-8.1
Harvester operation:
Operating time, hours
Down time, hours 2
Operating time, %
Down time, %
Acres harvested per hour:
Of total time
Of operating time
Tons harvested per hour:
Of total time
Of operating time
Yield per acre
1
3
3
Based on 9 Chisholm-Ryder harvester operations.
2
Includes time spent in moving the machine, servicing, repairs, resting
the crew and the like.
3
Computed by dividing total tons or acres harvested by operating time.
•'
5
The Concord grape harvest in Washington's Yakima Valley begins about
the middle of September and lasts until mid October, about 30-days. There
is no difference in the harvest periods of hand harvested and machine
harvested grapes.
Harvester owners operated their machines, on the average, slightly
under 20 hours per day. Some used two crews and harvested grapes around
the clock. Others used only a single shift during a 10-hour day. The
total hours for the season spent in harvesting grapes mechanically ranged
from 304 to 730 and averaged 568.1.
With the high capital investment required for this technology and
the relatively short period of time that the machine can be used, the
hours per season that a harvester can be operated becomes an important
consideration in the investment decision.
The mechanical harvesting systems operated an average of 568.1 hours
per season. However, 36.5% or 197.5 hours was unproductive down time when
the machine was not actually picking grapes. Down time included such
operations as turning at the ends of the vineyard rows, washing the machine, moving the harvester between vineyards, waiting for bins to be
returned from the processing plant, and the harvester operator talking to
the researcher about the study.
Actual operating, or picking time, ranged from 54% to 80%.
percent is a very efficient grape harvesting operation.
Eighty
The nine harvesters picked an average of about 2/3 acre/hour for
the 568.1 total hours spent in harvesting. The corresponding tonnage
harvested was 4.88 tons/hour. The rates for actual operating time were
1.24 acres and 8.91 tons/hour. It was observed in the field that the
actual picking rate would remain fairly constant at about 2/3 acre/hour
with yields up to a range of 10 to 12 tons/acre. In other words, the
grapes must be quite heavy on the vines before the operator is required
to slow the ground speed of the harvester appreciably. As the operators
of mechanical grape harvesters gain experience with the new technology,
the acreage and tonnage picked per hour will undoubtedly increase. It is
expected that the average rate will be nearly 1.0 acre/hour of total time
and 1.5 acres/hour of actual operating time.
The nine machines in this analysis picked between 210 and 340 acres
of grapes; the season average was 244.6 acres. The average amount harvested was 1,759.8 tons per harvester with a range of 1,475 to 2,150 tons
per machine.
Total tonnage harvested and the percentage of down time are probably
the two most important characteristics in evaluating harvester efficiency
and harvesting costs. Although low grape yields per acre will prohibit
6
high harvesting rates per hour or per acre, this can be offset somewhat
by more efficient field operations (reduced harvester down time), thereby
reducing harvesting costs.
ANNUAL GRAPE HARVESTER COSTS
The annual costs of the mechanical grape harvesting operations studied for this report are a combination of the fixed (ownership) costs and
variable (operating) costs. Annual costs for a typical operation in the
Yakima Valley are shown in table 4.
Table 4:
Estimated annual costs of mechanical grape harvester operations
Item
Depreciation 3
Harvester
Auxiliary equipment
Interest (9%) '+
Taxes
Insurance
Licenses 5
Housing
Total fixed costs
Labor 6
Repairs
Fuel, oil, grease
Truck (~ ton)
Other costs
Total variable costs
Total all costs
Per machine
Per ton 1
Per acre 2
$ 4,400
4,035
3,003
329
322
70
101
12,260
$ 2.66
2.44
1. 81
.20
.19
.04
.06
7.40
$17.96
16.47
12.26
1. 34
1. 31
.29
.41
50.04
5,759
1,621
681
310
150
8,521
3.48
• 98
.41
.19
.09
5.15
23.51
6.62
2.78
1.27
.61
34.79
$20,781
$12.55
$84.83
1
Based on 1655 tons harvested, average for all eleven harvesting operations.
2
Based on 245 acres harvested, average for all eleven harvesting operations.
3
See table 2 for details on depreciation.
4
Based on average investment computed as follows:
(T_o~t~a~l~i~n~v~e~s~t~m~e~n~t~+2~s~a~l~v~a~g_e~v~a~l~ue\Jx
$
54 075
2 650
•
; $l •
= $33,362.50
X
( interest rate )
.09
$3,003
5
License fee for 6 months on straddlebuggy.
6
Does not include supervisory labor provided by the owner-operator.
7
Three-fifths of the annual fixed costs are attributable to depreciation on the harvester and interest on the total investment. Nearly 30%
of the ownership costs are fixed costs for the auxiliary equipment needed
for mechanical harvesting. Included are trucks, trailers, straddlebuggy,
bins, and the like. These fixed costs can be reduced by leasing some of
this equipment or by contracting for such services as hauling grapes from
the vineyard to the processing plant. Although leasing and contracting
will reduce fixed costs, operating costs will be increased. Therefore,
an individual must budget his own harvesting operation to determine which
alternatives will provide the most economic advantage.
The greatest single expense item of the variable costs was labor at
$3.48/ton, about two-thirds of the $5.15/ton variable costs. Equipment
repairs accounted for nearly 20% of these costs. Experience with mechanical grape harvesters thus far indicates that repairs will be a major
expense item.
The total costs per year for a typical operation are nearly $21,000,
or $12.55/ton, based on an annual harvest of 1655 tons. No charges are
included in this analysis for the harvester owner's management, labor or
risk.
HARVESTING COSTS
The data for a typical harvesting operation were analyzed to determine the per ton costs of harvesting grapes mechanically at various harvesting rates per year. Harvesting rates from 500 to 3,000 tons and their
corresponding costs are shown in table 5.
Table 5:
Estimated costs for mechanically harvested grapes at selected
tonnages
Tons
harvested
per machine
Total
fixed
costs
500
1,000
1,500
$12,260
12,260
12,260
2,000
2,500
3,000
12,260
12,260
12,260
1
Based on $5 .15/ton.
Total
costs
per ton
Total
costs
Fixed
costs
per ton
Variable
costs
per ton
$ 2,575
5,150
7, 725
$14,835
17,410
19,985
$24.52
12.26
8.17
$5.15
5.15
5.15
$29.67
17.41
13.32
10,300
12,875
15,450
22,560
25,135
27,710
6.13
4.90
4.09
5.15
5.15
5.15
11.28
10.05
9.24
Total
variable
costs 1
8
Based on an annual harvest of 500 tons, the total cost per ton is
nearly $30. This cost is the sum of the $24.52 fixed cost and $5.15 variable cost per ton. Fixed costs per ton decrease as the tonnage harvested
increases, while variable costs per ton remain constant. Thus, total
costs per ton decrease as harvesting rates increase. By increasing the
harvest to 1,000 tons, the per ton costs are reduced over 40%. If harvesting efficiency and high yields per acre could be combined to produce a
seasonal harvest of 3,000 tons of grapes, then the total harvesting costs
per ton in this example would be $9.24, less than one-third of the 500-ton
rate.
Figure 1 illustrates the relationship between tons of grapes harvested
annually and cost per ton. Harvesting costs per ton decline rapidly between
500 and 1,500 tons picked. From the 1,500 to 3,000 ton level, the cost per
ton continues to decline, but at a slower rate. The cost per ton was not
determined for picking rates beyond 3,000 tons annually. With present mechanical harvesting technology it is not probable that operators would exceed
3,000 tons of grapes picked per season.
Not only is there a variation in the total tonnage of grapes harvested
per season, but also a variation in the harvesting rate per hour. As indicated earlier, the hourly rate at which grapes are harvested is related
to the efficiency of the mechanical picking operation.
Table 6 shows harvesting rates per hour from 2 to 6 tons; 200, 400
and 600 harvesting hours per season and the resulting tonnage that would
be harvested; and the total harvesting cost per ton. These costs are based
on the capital investment shovm in table 2 with fixed costs of $12,260 and
variable costs of $5.15. The harvesting rates are typical of those experienced by owners of mechanical harvesters in the Yakima Valley.
As expected, the cost per ton to harvest grapes decreases as both the
harvesting rate per hour and the hours harvesting per season increase. For
example, at an hourly picking rate of 4 tons and an expected season of 400
harvesting hours, the total tons harvested would be 1,600 with a per ton
cost of $12.81. If the picking rate per hour ~.;rere 6 tons and seasonal
machine use 400 hours, the per ton cost would be reduced to $10.26.
The relationship between cost per ton and various rates of harvesting
is shown in figure 2. Costs per ton drop rather significantly when the
picking rate per hour is increased from 2 to 4 tons. On the other hand,
costs per ton are reduced very little if the harvester is used more than
600 hours per year. However, 600 hours approaches the maximum rate a
harvester can be used during a 30-day harvesting period.
9
1000
1500
2000
2500
3000
TONS HARVESTED PER SEASON
1.
Cost per ton of harvesting grapes
mechanically.
--2 TONS PER HOUR
400
600
800
1000
HOURS OF OPERATION PER SEASON
2.
Cost per ton for mechanically harvested
grapes at selected harvesting rates
10
3.
4.
One of several kinds of grape harvesters being used in
Washington.
The machine delivers grapes into bins in the field.
Bins are towed through the field in parallel with
the harvester.
11
Table 6:
Total cost per ton for mechanically harvested grapes at selected
harvesting rates
Tons harvested
per hour
1
Harvesting hours
per season
Total tons
harvested
Total costs
per ton 1
2
200
400
600
400
800
1200
$35.80
20.48
15.37
3
200
400
600
600
1200
1800
25.58
15.37
11.96
4
200
400
600
800
1600
2400
20.48
12.81
10.26
5
200
400
600
1000
2000
3000
17.41
11.28
9.24
6
200
400
600
1200
2400
3600
15.37
10.26
8.56
7
200
400
600
1400
2800
4200
13.91
9.53
8. 07
8
200
400
600
1600
3200
4800
12.81
8.98
7.70
Based on annual fixed costs of $12,260 and variable costs per ton of
$5.15.
BREAK-EVEN ANALYSIS
Many grape producers want to know how many acres or tons of grapes
must be harvested each season to justify an investment in mechanical harvesting equipment. Operators of mechanical harvesting-units are interested
in knowing the acreage or tonnage they must harvest in a season before
breaking even on their investment. This section outlines the procedure
for a break-even analysis of an investment in mechanical grape harvesting
equipment.
12
The following method will show how the annual break-even points are
determined, using the investment and costs illustrated in this report.
The break-even formula is:
Q=
F
p - v
Where:
Q
the units (tons or acres) harvested required to break even
on the investment.
F
the total annual fixed costs.
P
the price or custom charge per unit.
V
the variable costs per unit.
To illustrate using the data from table 4:
F
$12,260.
P = $18 -- an assumed custom rate per ton.
V
=
$5.15/ton.
Substituting in the formula:
Q=
$12,260
$18 - $5.15
$12,260
$12.85
954 tons
We find that 954 tons of grapes must be harvested in order to break
even, using the costs illustrated.
With a custom charge of $20/ton, the break-even point would be 826
tons:
Q
$12,260
$20 - $5.15
826
13
To convert the analysis to an acreage basis, we must assume a yield
per acre. For illustrative purposes assume an average yield of 7
tons per acre and a custom rate of $18/ton.
Then:
F
$12,260.
P
$126; $18 (7 tons).
V
= $36.05;
$5.15 (7 tons).
Substituting:
-
$12,260
Q - $126 - $36.05
$12,260
$89.95
136 acres.
With an average yield of 7 tons/acre and the costs shown, an operator would need to harvest 136 acres in order to recover all costs. It
should be noted that at that level, 136 acres, all fixed and variable
costs are covered for that harvesting season. Profit will be the difference between the price (custom rate) and variable costs for the acreage
harvested beyond 136. For example, the net returns for 200 acres harvested at $18/ton and a 7-ton yield would be $5,756.80.
200 - 136
= 64 acres.
64 (7 tons per acre)
= 448
tons.
$18 (custom rate) - $5.15 (variable cost)
$12.85 (448)
=
$12.85.
= $5,756.80.
These costs do not include a charge for the harvester owner's labor,
management or risk. Profit, then would be $5,756.80, less any charges
for those items.
Not everyone who owns or is thinking of buying mechanical grape harvesting equipment has the same costs. Table 7 shows the annual acreage
of grapes that must be harvested with various yields and costs in order
to break even. For example, if a vineyard owner has annual fixed costs
of $10,000, variable costs of $6.00/ton, expects an average yield per acre
of 6 tons and a custom rate of $19/ton, he will need to harvest 128 acres
to reach the break-even point. This acreage would increase to 154 with
annual fixed costs of $12,000 and all other aspects of the example remaining the same.
Table 7.
Acreage required to reach break-even point for mechanical harvesting with selected yields
and costs per acre
Fixed Costs
-$10,000- - - -
Yield
per
acre
(tons)
Cost
i~~l
($)
Cost
per
acre 2
($)
- - - -$12,000- - - -
Variable Costs
$5.00
$6.00
$7.50
$5.00
$6.00
$7.50
$5.00
$6.00
$7.50
- - - - - - - - - - - - -Annual break-even acreages - - - - - - - - -
5
17
18
19
20
85
90
95
100
167
154
143
133
182
167
154
143
211
190
174
160
200
185
171
160
218
200
185
171
253
229
209
192
250
231
214
200
273
250
231
214
316
286
261
240
6
17
18
19
20
102
108
114
120
139
128
119
111
152
139
128
119
175
159
145
133
167
154
143
133
182
167
154
143
211
190
174
160
208
192
179
167
227
208
192
179
263
238
217
200
8
17
18
19
20
136
144
152
160
104
96
89
83
114
104
96
89
132
119
109
100
125
115
107
100
136
125
115
107
158
143
130
120
156
144
134
125
170
156
144
134
197
179
163
150
1
These may be considered custom rates.
2
Based on yield per acre multiplied by cost per ton .
.. ...
~
- - - -$15,000-
...,
'~-
.....