Minnesota Specialty Crops

Transcription

1 Minnesota Specialty Crops An Analysis of Profitability & Performance containing results for fresh market apples, berries, cantaloupe, grapes, pumpkins, sweet corn, and assorted vegetables

2 PROJECT PARTNERS Copyright 2012, Minnesota Department of Agriculture This publication may be reprinted, in whole or in part, without permission. Please credit the Minnesota Department of Agriculture (MDA). The MDA is an equal opportunity provider and employer. No person or persons are excluded from the use of services, employment, examination, appointment, training, promotion, retention, discipline, or any other transactions, because of race, color, religion, national origin, sex, creed, marital status, veteran status, status with regard to public assistance, political opinion or affiliation, age, or handicap. In accordance with the Americans with Disabilities Act, an alternative form of communication is available upon request. TDD: Support for this project was provided to the MDA by the United States Department of Agriculture (USDA) Specialty Crop Block Grant Program. Opinions, findings, conclusions, or recommendations expressed in this publication do not necessarily reflect the view of the USDA.

3 MINNESOTA SPECIALTY CROP FARM PERFORMANCE By Dale Nordquist 1, Thaddeus McCamant 2, Meg Moynihan 3, and Gene Kuntz 4 More and more people are interested in growing fruits and vegetables for the local market both to meet the rising demand for local food, and to diversify incomes. Until recently, there was no official data on the economics of many locally grown specialty crops in Minnesota. Rumors about spectacular profits for locally grown fruits and vegetables were often repeated and occasionally published in newspapers and magazines. Several years ago, the Minnesota Department of Agriculture (MDA), Farm Business Management (FBM) programs at Minnesota State Colleges and Universities (MnSCU), and the Center for Farm Financial Management (CFFM) at the University of Minnesota started a project to get better, more accurate information about the financial performance of specialty crops in Minnesota. Funds for this effort have been provided by USDA s Specialty Crop Block Grant program and provide scholarships that make it more affordable for growers to participate. This report contains financial summaries from 47 Minnesota farms that participated in the project between 2008 and It is intended to give growers (and potential growers) some of the hard data they need to help them decide what kind of fruit or vegetable production could fit their financial goals. Existing growers can also use this information to compare their returns to the averages experienced by others. This report includes enterprise data for the following specialty crops: Apples Blueberries Cantaloupe Grapes Pumpkins Raspberries Strawberries Sweet corn Assorted vegetables RESULTS The enterprise reports highlight the diversity of returns for these farms. Strawberries have been consistently profitable over the four years of this project. Raspberries and assorted vegetables have also been money-makers. Pumpkins were profitable in 2010 and Several other crops (cantaloupe, grapes, and sweet corn) covered or almost covered direct and overhead expenses but did not cover full compensation to the owner for labor and management. Please note that these results are from a limited number of farms and other farms in the state may have experienced different financial results. In general, crop performance can be divided into three categories: high gross returns (above $8,000 per acre); medium gross returns ($4,000-$6,000 per acre); and low gross returns (below $2,000 per acre). High gross return crops include strawberries and mixed vegetables. Crops with medium gross returns include blueberries, apples, cantaloupes, and raspberries. Crops grossing under $2,000 per acre were sweet corn, pumpkins, and grapes. However, high gross returns for specialty crops do not assure profitability. Specialty crops require money to 1 Center for Farm Financial Management, University of Minnesota, 2 Northland College, 3 Minnesota Department of Agriculture, 4 South Central College 3

4 establish, grow, harvest, and sell. Hired labor was the biggest direct expense for every crop except pumpkins. Seed, fertilizers, and crop chemicals were all higher for specialty crops than for row crops, while marketing (advertising, stall fees at farmers markets, etc.) often cost more than $300 per acre. The highest overhead costs for most crops were machinery, building depreciation, and interest. After subtracting overhead and direct expenses, the only crops that demonstrated consistent profitability were strawberries, raspberries, pumpkins, and assorted vegetables. Strawberries returned $3,610 per acre, but this figure does not include establishment costs, and strawberries must be planted, weeded, and watered for one year before they can be harvested. In order to be profitable, a crop must be sold for more than it costs to produce. At the bottom of each page there is a section that details cost of production. Inexperienced growers often only look at the cost of production after direct expenses, but the true cost of production includes overhead expenses, too. The cost of production in Minnesota is quite high for most specialty crops. On average, sweet corn cost about $4.00 per dozen to produce. Pick-your-own strawberries cost $1.10 a pound to grow, while cantaloupe cost $0.60 a pound. Customers need to know that Minnesota growers have to charge a fair price so that they can remain in business. By the same token, growers need to know that they are not gouging the customer when they sell their products for prices above the cost of production. Farms must be profitable to survive. PROCEDURES The enterprise reports are based on the actual farm records from individual specialty crop producers. Under the guidance of a MnSCU farm management educator, each producer completes an analysis to evaluate the financial soundness and performance of the entire operation. Income and expenses are assigned to specific crops to create the individual farm enterprise reports that become the basis of these group summaries. The analysis for each farm goes through several layers of review to provide as much confidence in the accuracy as can be reasonably expected. The data is published by the Center for Farm Financial Management (CFFM) at the University of Minnesota in a searchable database called FINBIN, which is available to the public at For data integrity and grower privacy reasons, at least five farms must have grown the crop for it to be included in the report. The column called is the average for If only the average column is included, it is the average of the crop over all four years. As you review these reports, keep in mind that while this a relatively small sample, there are not a lot of sources of this type of real-farm data, so these reports do reflect the real world for participating farms. SPOTLIGHT ON APPLES Most of the apples in this report were valued at the wholesale price, even if the farmer was selling apples for retail prices on the property. The average price of $43.56 a bushel (slightly over $1.00 per pound) reflects the wholesale price. The average retail price was closer to $1.70 per pound, with high-value cultivars like Honeycrisp and Zestar averaging over $2.00. Many apple growers have a farm store where they sell apple pies, caramel apples, and other products in addition to fresh apples. This analysis includes only the wholesale value of the apples. The value added and the expenses incurred by the stores were analyzed separately and are not included in this report. When the store and the orchard were combined, apple enterprises were profitable for most producers. In all cases, the majority of sales at the farm stores were fresh apples. 4

5 GLOSSARY Yield based on actual reported total production divided by acres. Value per unit sales price for products sold, ending inventory value for production that is still in inventory at year end. Gross return per acre Yield x Value per Unit, plus the value of any other income that was allocated to this enterprise. Direct expense Expenses incurred that can be directly attributed to production of this crop = total accrual expense for this crop divided by acres. Land rent is only assigned to cash rented crops. Some expenses that cannot be easily assigned to specific crops, such as fuel and repairs, are allocated across all enterprises based on allocation factors that weight the relative use of each expense by different crops raised. Return over direct expense per acre the amount contributed by this crop to covering overhead expenses. Overhead expenses Total expense incurred (accrual amount) allocated based on relative weight of use by each enterprise. Ownership costs (long-term interest and real estate taxes) are allocated only to production on owned land. Depreciation is based on economic, not tax, depreciation. No opportunity cost is included for equity capital. Net return the amount contributed toward covering owner withdrawals and taxes. Net return over lbr & mgt the amount returned after subtracting an opportunity charge for unpaid labor and management. For LLCs and corporations, wages paid to owners are included in labor and management charge. Cost of production with labor and management the breakeven price per unit that will cover all expenses including a return for unpaid labor and management. Machinery cost per acre includes fuel, repairs, machinery lease expense, interest on machinery, machinery depreciation, and custom hire expense. Est. labor hours per acre total hours of operator and hired labor allocated to this enterprise divided by acres. 5

6 Apples (irrigated and non-irrigated, on owned land) 2011 Number of fields Number of farms 15 7 Acres Yield per acre (bu.) Operators share of yield % Value per bu Other product return per acre Total product return per acre 5, , Crop insurance per acre Gross return per acre 5, , Direct Expenses Seed Fertilizer Crop chemicals Non-chemical crop protect Crop insurance Irrigation energy Packaging and supplies Fuel & oil Repairs Custom hire Hired labor Machinery leases Utilities Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre 2, , Return over direct exp per acre 2, , continued... 6

7 Apples (page 2) 2011 Overhead Expenses Hired labor Machinery leases Building leases RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre 2, , Total dir & ovhd expenses per acre 5, , Net return per acre (103.53) (110.53) Government payments Net return with govt pmts (103.53) (110.53) Labor & management charge 1, , Net return over lbr & mgt (1,181.04) (1,153.95) Cost of Production Total direct expense per bu Total dir & ovhd exp per bu Less govt & other income With labor & management Net value per unit Machinery cost per acre 1, , Est. labor hours per acre

8 Blueberries (irrigated and non-irrigated, on owned land) Number of fields 15 Number of farms 10 Acres 0.73 Yield per acre (lb.) 2, Operators share of yield % Value per lb Total product return per acre 5, Gross return per acre 5, Cost of Production Total direct expense per lb Total dir & ovhd exp per lb Less govt & other income 2.86 With labor & management 3.78 Net value per unit 2.77 Machinery cost per acre 1, Est. labor hours per acre Direct Expenses Seed Fertilizer Crop chemicals Irrigation energy Packaging and supplies Fuel & oil Repairs Hired labor 1, Hauling and trucking 6.64 Marketing Operating interest 1.06 Miscellaneous Total direct expenses per acre 3, Return over direct exp per acre 2, Overhead Expenses Hired labor RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre 2, , Net return per acre (171.60) Government payments Net return with govt pmts (171.60) Labor & management charge 1, Net return over lbr & mgt (2,126.48) 8

9 Cantaloupe (irrigated and non-irrigated, on owned land) Number of fields 5 Number of farms 5 Acres 1.03 Yield per acre (cwt.) Operators share of yield % Value per cwt Total product return per acre 4, Gross return per acre 4, Cost of Production Total direct expense per cwt Total dir & ovhd exp per cwt Less govt & other income With labor & management Net value per unit Machinery cost per acre Est. labor hours per acre Direct Expenses Seed Fertilizer Crop chemicals Crop insurance Irrigation energy 0.35 Packaging and supplies Fuel & oil Repairs Hired labor Utilities 3.50 Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre 2, Return over direct exp per acre 1, Overhead Expenses Hired labor Machinery leases 0.57 RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre 1, Total dir & ovhd expenses per acre 4, Net return per acre Government payments Net return with govt pmts Labor & management charge Net return over lbr & mgt (23.91) 9

10 Grapes (irrigated and non-irrigated, on owned land) Number of fields 9 Number of farms 9 Acres 2.39 Yield per acre (ton) 0.89 Operators share of yield % Value per ton 1, Total product return per acre 1, Gross return per acre 1, Cost of Production Total direct expense per ton 1, Total dir & ovhd exp per ton 1, Less govt & other income 1, With labor & management 1, Net value per unit 1, Machinery cost per acre Est. labor hours per acre Direct Expenses Seed 4.65 Fertilizer Crop chemicals Fuel & oil Repairs Custom hire Hired labor Marketing Operating interest 7.40 Miscellaneous Total direct expenses per acre Return over direct exp per acre Overhead Expenses Hired labor RE & pers. property taxes Farm insurance 6.86 Utilities Dues & professional fees Interest 7.65 Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre 1, Net return per acre (2.80) Government payments Net return with govt pmts (2.80) Labor & management charge Net return over lbr & mgt (352.26) 10

11 Pumpkins (irrigated and non-irrigated, on owned land) Avg. All Farms Number of fields Number of farms Acres Total product return per acre 1, , , , Other crop income per acre Gross return per acre 1, , , , Direct Expenses Seed Fertilizer Crop chemicals Crop insurance Irrigation energy Fuel & oil Repairs Repair, machinery Custom hire Hired labor Machinery leases Utilities Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre Return over direct exp per acre , continued... 11

12 Pumpkins (page 2) Overhead Expenses Avg. All Farms Custom hire Hired labor Machinery leases Building leases RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre 1, , , , Net return per acre (409.74) Cost of production data for pumpkins is currently unavailable Government payments Net return with govt pmts (409.74) Labor & management charge Net return over lbr & mgt (265.22) (501.09) Machinery cost per acre Est. labor hours per acre

13 Raspberrries (irrigated and non-irrigated, on owned land) Number of fields 12 Number of farms 12 Acres 0.49 Yield per acre (lb.) 1, Operators share of yield % Value per lb Total product return per acre 4, Gross return per acre 4, Cost of Production Total direct expense per lb Total dir & ovhd exp per lb Less govt & other income 2.20 With labor & management 2.84 Net value per unit 3.22 Machinery cost per acre Est. labor hours per acre Direct Expenses Seed Fertilizer Crop chemicals Irrigation energy Fuel & oil Repairs Hired labor Utilities Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre 1, Return over direct exp per acre 2, Overhead Expenses Hired labor RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre 1, Total dir & ovhd expenses per acre 2, Net return per acre 1, Government payments Net return with govt pmts 1, Labor & management charge Net return over lbr & mgt

14 Strawberries (irrigated and non-irrigated, on owned land) Number of fields Number of farms Acres Yield per acre (lb.) 5, , , , , Operators share of yield % Value per lb Other product return per acre , Total product return per acre 9, , , , , Gross return per acre 9, , , , , Direct Expenses Seed Fertilizer Crop chemicals Crop insurance Irrigation energy Packaging and supplies Fuel & oil Repairs Custom hire Hired labor , , Utilities Hauling and trucking Marketing , Operating interest Miscellaneous Total direct expenses per acre 3, , , , , Return over direct exp per acre 5, , , , , continued...

15 Strawberries (page 2) Overhead Expenses Hired labor Machinery leases Building leases RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre 2, , , , , Total dir & ovhd expenses per acre 5, , , , , Net return per acre 3, , , , , Government payments Net return with govt pmts 3, , , , , Labor & management charge 1, , , Net return over lbr & mgt 2, , , , , Cost of Production Total direct expense per lb Total dir & ovhd exp per lb Less govt & other income With labor & management Net value per unit Machinery cost per acre 1, , , Est. labor hours per acre

16 Sweet Corn (direct market) (irrigated and non-irrigated, on owned land) Number of fields Number of farms Acres Yield per acre (doz.) Operators share of yield % Value per doz Total product return per acre 1, , , Other crop income per acre Gross return per acre 1, , , Direct Expenses Seed Fertilizer Crop chemicals Crop insurance Irrigation energy Fuel & oil Repairs Custom hire Hired labor Machinery leases Utilities Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre , Return over direct exp per acre continued...

17 Sweet Corn (direct market) (page 2) Direct Expenses Hired labor Machinery leases RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest Mach & bldg depreciation Miscellaneous Total overhead expenses per acre Total dir & ovhd expenses per acre 1, , , Net return per acre (18.29) (233.09) Government payments Net return with govt pmts (17.52) (231.45) Labor & management charge Net return over lbr & mgt (508.36) (633.76) (713.50) Cost of Production Total direct expense per doz Total dir & ovhd exp per doz Less govt & other income With labor & management Net value per unit Machinery cost per acre Est. labor hours per acre

18 Vegetables (assorted) (irrigated and non-irrigated, on owned land) Number of fields Number of farms Acres Yield per acre ($) 7, , , Operators share of yield % Value per $ Total product return per acre 8, , , Gross return per acre 8, , , Direct Expenses Seed Fertilizer Crop chemicals Crop insurance Irrigation energy Packaging and supplies Fuel & oil Repairs Custom hire Hired labor , Utilities Hauling and trucking Marketing Operating interest Miscellaneous Total direct expenses per acre 2, , , Return over direct exp per acre 5, , , continued...

19 Vegetables (assorted) (page 2) Overhead Expenses Hired labor Machinery leases Building leases RE & pers. property taxes Farm insurance Utilities Dues & professional fees Interest , Mach & bldg depreciation Miscellaneous Total overhead expenses per acre 2, , , Total dir & ovhd expenses per acre 5, , , Net return per acre 3, , , Government payments Net return with govt pmts 3, , , Labor & management charge 1, , , Net return over lbr & mgt 1, , , Cost of Production Total direct expense per $ Total dir & ovhd exp per $ Less govt & other income With labor & management Net value per unit Machinery cost per acre 1, , , Est. labor hours per acre

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