Pena, Jose G.

Taylor, Merritt J.

Teague, Paul

English

Texas A&M University

L-2322
Texas Agricultural Extension Service
Texas Citrus
Mature Orchard Production Costs and Returns-
Years 8 to 10+
Merritt J. Taylor, Jose G. Pena and Paul Teague*
Citrus groves planted after the 1983 freeze are
in a state of increasing production with accom-
panying increases in production costs. These trees
have not reached maturity or maximum production
potential.
Two Extension fact sheets, Orchard Estabfish-
nlent Costs and Young Orchard Production Costs
and Retttrns- Years 4 to 7, evaluate the land
preparation costs and the associated costs of
establishing and developing the orchard through
the seventh year. A positive net return occurs
during the fifth year after planting. A summary of
the first 7 years' budgets is developed in Table 1.
This paper discusses the expected costs and
returns for the specific case of a small-acreage,
high-technology operation during the later years
after grove establishment and development when
the grove is in full production and considered to be
mature. The case of a large commercial scale farm
will not be addressed in this paper.
Assumptions
Data used to support this publication were
collected from orchard managers, research scien-
tists, agribusinessmen, Texas A&I Citrus Center
personnel and Texas A&M University Extension
and Research specialists.
Land Tenure
The three most common types of citrus op-
erations in the Lower Rio Grande area are: 1)
complete management services for investor-owned
orchards; 2) owner-managed with major equipment
operations performed by use of custom services
*Extension economists-management, Texas Agricultural Ex-
tension Service, The Texas A&M University System, and citrus
economist Texas A&I University Citrus Center, Weslaco, Texas.
and 3) complete owner/operator-managed or-
chards. This paper concentrates on the second
category- where some equipment and services are
provided by the manager, but the major spray
operations are conducted by custom operators.
Returns
Returns are to management and risk because an
imputed charge is not calculated for the owner's
management.
Orchard Characteristics
A hypothetical20-acre model is used throughout
this study, but the costs are discussed on a cost-
per-acre basis. It was necessary to select an
historically economic unit because high manage-
ment and equipment requirements and operation
size substantially influence establishment costs. It
is understood that a larger tract of land probably
would reduce the cost-per-acre charges for equip-
ment. A tree density of 145 trees per acre is used.
Soil and Irrigation
It is assumed that the orchard is established on
alluvial soil that needs no drainage system. Rio
Grande River water supplied through existing
water districts will be used as a primary source of
water, applied through a permanent valve system.
Prices
Costs are based on Fall 1987 costs. Citrus fruit
sales are estimated to average $135 per ton.
Miscellaneous
The study assumes that equipment, labor and
supplies will be obtained specifically for the
establishment and operation of the orchard.
Harvesting will be conducted and paid for by the
buyer.
Texas Agricultural Extension Service. Zerle l. Carpenter, Director. The Texas A&M University System • College Station, Texas
~---------------------
Table 1. Citrus orchard establishment and development costs and returns for years 1 through 7 (per acre),
Lower Rio Grande Valley, Texas, 1988.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Tons production/acre 0 0 2 4 7 10 13
Price per ton N/A N/A $135.00 $135.00 $135.00 $135.00 $ 135.00
Gross revenue/acre 0 0 270.00 540.00 945.00 1,350.00 1,755.00
Variable costs $1,331.43 $384.12 $475.31 $527.33 $615.49 $ 622.34 $ 653.99
Fixed costs 373.13 318.62 290.72 283.98 247.49 207.03 207.03
Total costs/acre $1,704.56 $702.74 $766.03 $811.31 $862.98 $ 829.37 $ 861.02
Projected returns/acre ($1,704.56) ($702.74) ($496.03) ($271.31 ) $82.02 $ 520.63 $ 893.98
Breakeven price per
ton for variable costs N/A N/A $237.66 $131.83 $87.93 $62.23 $50.31
Breakeven price per
ton for total costs N/A N/A $383.02 $202.83 $123.28 $82.94 $66.23
Breakeven production
per acre to cover total
costs at $135 per ton N/A N/A 5.7 6.0 6.4 6.1 6.4
Tax Issues
This study does not address income tax issues.
Tax implications should be addressed in the context
of the total business and with specialized pro-
fessional assistance.
Orchard Development and
Operational Costs and Returns
Table 2 provides an estimate of the costs and
returns to maintain a citrus orchard during the
mature years of production. The values provided
in these budgets represent an average of the costs
and returns obtained from growers. They do not
represent the costs and returns of any particular
orchard. Potential investors should modify these
estimates and adapt them to more accurately
describe a specific operation.
Returns to Risk and Management
A small amount of production should begin in
the third year. Yields gradually increase from 2
tons per acre in the third year after planting to
approximately 1) tons per acre in the seventh
year.
In the eighth year after planting, the citrus
grove is considered mature even though yields
continue to increase. Variable costs are about
$661, with fixed costs leveling off at $207 per acre.
Total costs are 3868 per acre with a break-even
selling price of $54.24 per ton, assuming 16 tons
per acre yield.
The ninth year after planting ha the same
variable and total costs of S661 and 5207, respec-
tiyely, as in the eighth year. With the increased
expected yields of 19 tons per acre, the expected
returns to risk and management are $1,697 per
acre. The break-even selling price at this level of
production is 545.68/ton.
In the tenth year after planting, and those years
following, production is expected to rise to 22 ton
per acre, stablizing at that level for subsequent
years. With an expected total cost of production of
about 5864 per acre, the break-even selling price is
$)9.76 per ton.
-------~
Table 2. Citrus orchard development budget estimates, Texas Lower Rio Grande Valley, 1988 projected
costs and returns per acre.
Phase of Development
Production Production Mature
(year 8) (year 9) Orchard
Projected Projected Projected
Category Unit $/Unit Yield Value Yield Value Yield Value
1. Gross receipts
ton $135.00 16.00 $2,160.00 19.00 $2,565.00 22.00 $2,970.00
--- -- --
Total projected returns 16.00 $2,160.00 19.00 $2,565.00 22.00 $2,970.00
2. Variable costs Input use Input use Input use
Preharvest costs
Nitrogen lb. $0.26 125.00 $32.50 125.00 $32.50 150.00 $39.00
Fertilizer appl. appl. $3.00 3.00 9.00 3.00 9.00 3.00 9.00
Tree hedging acre 30.00 1.00 30.00 1.00 30.00 1.00 30.00
Miticide qt. $8.28 4.00 33.12 4.00 33.12 4.00 33.12
Citrus oil gal. $4.60 8.00 36.80 8.00 36.80 8.00 36.80
Insecticide #1 qt. $9.68 4.00 38.72 4.00 38.72 4.00 38.72
Insecticide #2 qt. $38.76 1.00 38.76 1.00 38.76 1.00 38.76
Insecticide appl. appl. $21.75 4.00 87.00 4.00 87.00 4.00 87.00
Fungicide* lb. $2.30 6.00 13.80 6.00 13.80 6.00 13.80
Contact herbicide qt. $17.50 2.00 35.00 2.00 35.00 2.00 35.00
Selective herb. #1 qt. $3.60 5.00 18.00 5.00 18.00 5.00 18.00
Selective herb. #2 lb. $3.20 5.00 16.00 5.00 16.00 5.00 16.00
Irrigation water appl. $8.00 6.00 48.00 6.00 48.00 6.00 48.00
Fuel and lube acre 3.00 3.00 3.00
Repairs acre 2.00 2.00 2.00
Labor-machinery hour $6.13 2.00 12.26 2.00 12.26 2.00 12.26
irrigation hour $4.70 9.00 42.30 9.00 42.30 9.00 42.30
equipment hour $4.70 1.20 5.64 1.20 5.64 1.20 5.64
other hour $4.70 10.00 47.00 10.00 47.00 10.00 47.00
Tree insurance LVL2 acre 1.00 77.50 77.50 77.50
Operating capital int. sum/2 $0.11 313.20 34.45 313.20 34.45 316.45 34.81
Total variable costs acre $660.85 $660.85 $667.71
Break-even price, variable costs $41.30 / ton $34.78 / ton $30.35 / ton
3. Income above variable cost acre $1,499.15 $1,904.15 $2,302.29
4. Fixed costs
Cash costs
Taxes acre $20.00 1.00 $20.00 1.00 $20.00 1.00 $20.00
Misc. admin. O/H acre $7.50 1.00 7.50 1.00 7.50 1.00 7.50
Non-cash
Land acre $0.05 2,000.00 100.00 2,000.00 100.00 2,000.00 100.00
Equip deprec. years 15.00 1,210.00 64.53 1,210.00 64.53 1,210.00 64.53
Irr. sys. depr. years 20.00 300.00 15.00 300.00 15.00 300.00 15.00
Total fixed costs acre $207.03 $207.03 $207.03
5. Total projected costs acre $867.89 $867.89 $874.74
Break-even price, total $54.24 / ton $45.68/ ton $39.76/ ton
6. Net projected returns acre $1,292.11 $1,697.11 $2,095.26
to risk and management
Note: Projections for planning purposes only. Should not be used without updating.
*Used in grapefruit production.
@----------------
Educational programs conducted by the Texas Agricultural Extension Service serve people of all ages regardless of socioeconomic
level, race, color, sex, religion, handicap or national origin.
Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 8. 1914. as
amended, and June 30, 1914, in cooperation with the United States Department of Agriculture. Zerle L. Carpenter, Director. Texas
Agricultural Extension Service, The Texas A&M University System.
1.5M-9-88, New HaRT 2-2. ECO


Texas Citrus Mature Orchard Production Costs and Returns--Years 8 to 10+.

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Texas Citrus Mature Orchard Production Costs and Returns--Years 8 to 10+.

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