North Carolina Hops Project (Enterprise Budget and Market Survey)

Transcription

1 North Carolina Hops Project (Enterprise Budget and Market Survey) Enterprise Budget Introduction Assumptions Analysis Production Costs Break-Even Prices Market Analysis Market Survey Survey Results North Carolina Market Today s Agenda Robert Austin, Soil Science, NC State University Gary Bullen, Agricultural and Resource Economics, NC State University Goals/Objectives Sources of Information Enterprise Budget provide an accurate estimate of initial investment costs annual production costs break-even price Provide producers, stakeholders, and other interested parties with a tool to evaluate the profitability, cash flows, and risks Microsoft Excel Workbook Research Hop Yards and Project personnel Lake Wheeler and Mills River Researchers, Agronomists, and Project personnel Collaborating Growers Blue Ridge Hops, Hop n Blueberry Farm, Winding river, and Echoview Capital expenses purchase prices Labor Time recorded to perform each task by project staff Stringing, training, stripping, weeding, pruning, etc Bureau of Labor for manual farm labor $9.75/hour (includes payroll and tax withholdings) Other Hops Budgets Budget Assumptions Observed Yields Small-Scale Commercial Production Small-scale is considered less than 2 acre or 2000 plants 200 plants on 0.25 acres (i.e. small-scale) A hops trellis has a 20-year life (WSU 2010, OSU 1990) Hops lifespan = 10 years Changing market demand is primary driver Labor: $9.75 manual farm labor (H2-A labor rate) From field preparation to harvest Does not include drying, processing, transportation, or packaging costs Yields and break-even price are in wet weight Wet hops average 75% moisture by weight; dry hops 10% moisture. Hops are hand harvested Realistic yields are under development 2011 Production Numbers Numbers represent 200 plants on 0.25 acre! Photoperiod limited Day length to plant height relationship Thomas G. C., Schwabe, W.W., Factors Controlling Flowering in the Hop Variety First Year Production Established Production Cascade/Zeus pounds wet (30-45 lbs. dry) pounds wet (40-60 lbs. dry) Robert Austin ([email protected]) 1

2 Labor cost ($) hours Land Preparation Total Cost: $218 Annual Cost: $11 Planting Materials Total Cost: $490 Annual Cost: $117 Trellis Materials Total Cost: $2097 Annual Cost: $105 Irrigation Setup Total Cost: $1983 Annual Cost: $191 Initial Investment Costs Labor Total Cost: $1406 Annual Cost: $70 TOTAL: $6195 ANNUAL FIXED COST: $494/yr 5% interest on $6195 = $309 discing, posts, discing auger (pro-rated), post hole auger rhizomes, (rental), top and work, bottom setting fertilizer, mulch wire, poles, ground pump, anchors, filters, lime ground anchors, planting, mainline, mulching, laterals, fittings, regulator, cable anchoring clamps, wire posts, crimps, emitters, poly tubing, cistern eye top/bottom bolts, washers wire install, and nuts etc.. [37%] Labor is ~30% of initial investment Initial Investment Costs [13%] TOTAL: $6193 Annualized: $494/year [59%] Posts make up 55% of Trellis material costs (~$1200) Cistern makes up 66% of irrigation cost (~$1300) [16%] Annual Production Expenses Annual Labor Expenses Cultural Expenses Annual Cost: $342 Trellis/Irrigation Maintenance Annual Cost: $49 Production Labor Annual Cost: $1503 fertilizer, misc. herbicides, irrigation Stringing, training, pesticides, and fungicides, trellis repairs, pruning basal fuel, broken testing, pipes, hand picking growth, cones twine replacement hardware stripping leaves, mowing, mulching, weeding, spraying Total: $2088 Hours: 218 (28-8hr days) Harvest Labor Annual Cost: $585 ANNUAL EXPENSES: $2479 * $9.75/hour labor rate assumed (H2-A labor rate) Total Cost to Produce Hops in NC Break-Even Prices (wet hops) Best performing varieties (Cascade/Zeus) $3347 / 200= $16.00/lb Total cost of producing 200 hops on a quarter acre of land in North Carolina. Break-Even Price Fixed costs are incurred whether you produce hops that year or not * Yield on 200 plants Robert Austin ([email protected]) 2

3 If and Butts Budget Comparison Initial Investment Cost 1 acre Current (16/lb) Scenario 1($14/lb) 0.25 acres labor? Scenario 2 ($11/lb) Scenario 1: Reduce annual labor by 30% (from $3347 to $2720/year) Scenario 2: Use in-house source of Trellis Posts (from $3347 to $2192/year) Lake Wheeler: $1400 labor, $4800 materials (30% labor) Mills River: $2760 labor, $6042 materials (45% labor) Labor not included in establishment cost Irrigation not included nchops.soil.ncsu.edu Budget Worksheet Market Survey Survey Response 47 breweries surveyed (67 contacted) (beerme.com) Every brewery received a copy of a nine-question survey 13/47 responded (27% response rate) 7 different counties, 4 distinct regions of operations Wake and Durham Co Winston-Salem and High Point area Charlotte area Ashville Would you be interested in purchasing hops grown in North Carolina? 13/14 said yes (92%) How many pounds of hops do you purchase per year? Average: 2076 pounds; range(6-6000lbs) What is the average paid for hops (dry and pelletized)? $8.45 (range: $4.50 $10.00) Would you be willing to purchase hops at a premium if they are produced in North Carolina? 3/13 no premium, 3/13 10%, 3/13 15%, 2/15 20%, 2/13 depends on quality Survey Conducted by Matthew Drake, S. Gary Bullen Research Assistant and Extension Associate in Agriculture and Resource Economics Department, NCSU no premium 10% 15% 20% depends on quality Robert Austin ([email protected]) 3

4 Pounds Hops (dry) Barrels Produced Acres Required Survey Response North Carolina Market What form would you prefer? (pelletized, whole, dry, wet) What quantity of locally grown hops would you consider purchasing? Back-of-Napkin Calculation 2009: 48 breweries produced ~71,000 barrels (US Brewers Association) Assuming 1 pound of dry hops per barrel Assuming 200 pound dry hops/ac (50lbs/0.25 acre) Are you able to use fresh/wet hops? % 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Market Other Hop Markets Summary Breweries Wet versus dry? Home brewers Direct Sales homebrew supply stores Pick your own field day Sell Rhizomes $3-5.00/rhizome Initial Investment Cost $6000 (materials: $4600, labor: $1400) $500 Amortized Establishment Cost Annual Cost $2400 (materials: $400, labor $2000) Total Annual Production Cost $2900* (%500+$2400) Break-Even Price $12-$16/pound wet Market Survey Brewers want quality hops at a reasonable price in a usable form *does not includes fixed costs of taxes, land charge, or overhead Hop Yard Tour World Production World Leaders 1) United States 30% acres 38% production 2) Germany 33% acres 28% production United States Imports: 11 million lbs Exports: 71 million lbs Hop Growers of America, 2009 Statistical Report Robert Austin ([email protected]) 4

5 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec U.S. Hops Production Daylength 2010 Forecast 31,251 acres harvested (21% decrease from 2009) summer solstice (june 21 st ) Raleigh PacificNW Washington State forecast to harvest 24,115 ac (77% of PNW) equinox (march 20 st ) the inventory of hops help by growers, dealers, and brewers on March 1st, 2010 totaled 102 million pounds, A RECORD HIGH Change in Production 9 8 Factors Effecting Flowing In Hops Glasshouse Experiment 8h, 13.5h, 16.5h, and 20.5hr 8hr became dormant after short period of growth 20.5 h grew vegetatively for 44 weeks 13.5 hour flowered in 17 weeks 16.5 hour lowered in 33 weeks (4 month difference) Latitude versus Flowering Date (Fuggle) May 31-May 30-Jun 30-Jul 29-Aug 28-Sep Robert Austin ([email protected]) 5