Cost of Establishing a Fruit Orchard and National Fruit Market Trends

1. Cost of Establishing a Fruit Orchard and National Fruit Market Trends R. Karina Gallardo WSU-Tree Fruit Research and Extension Center, School of Economic Sciences, Wenatchee Presentation at the WA Chapter of American Society of Farm Managers & Rural Appraisers Leavenworth May 5, 2011

2. Cost of Establishing a Fruit Orchard

3. Content • Budget Process • Where to find these studies? • Assumptions made • Study components • Summary of findings • Use of budgets

4. Budget Process • Convene a group of growers • The budgets are not a survey • Representation of location, size of operations, and experience

5. Budget Process (2) • Determine the production scenario • Puts everyone on the same page when it comes to our assumptions

6. Budget Process (3) • Costs depend on the assumptions • Numbers are a reflection of expected costs under a strict set of assumptions

7. Where is it? http://extecon.wsu.edu/

8. Cost Estimates of Establishing andProducing Gala apples are available in both Excel and PDF http://extecon.wsu.edu/pages/Enterprise_Budgets

9. Assumptions for Gala Study • Gala on 9 series Dwarf rootstock • Block size: 40 acres • Orchard size: 160 acres • Irrigation system • Overhead and under tree drip sprinklers • Public irrigation district • Architecture • Two dimensional system (planar canopy), randomly trained w/18-in radius from tree center • In-row space: 4 feet • Between row: 10 feet • Life of planting: 15 years • Density: 1,089 trees per acre

10. Data on Costs during a Full Production Year for a 40-Acre Gala Block

11. Summary of Costs By Categories – Gala Apples ($/acre) Fixed Costs

13. Cost Estimates of Establishing andProducing Sweetheart Cherries are available in both Excel and PDF http://extecon.wsu.edu/pages/Enterprise_Budgets

14. Assumptions for Sweet Cherry Study • Sweetheart on Mazzard rootstock • Block size: 10 acres • Orchard size: 150 acres • Irrigation system • Overhead and under tree drip sprinklers • Public irrigation district • Architecture • Two dimensional system (planar canopy), randomly trained w/18-in radius from tree center • In-row space: 10 feet • Between row: 16 feet • Life of planting: 25 years • Density: 272 trees per acre

15. Fixed Costs Summary of Costs Sweetheart Cherries by Categories ($/acre)

17. Cost Estimates of Establishing andProducing Anjou Pears WILL SOON be available

18. Assumptions for Anjou Study • 12-year old pear orchard • Orchard size: 40 acres • Irrigation system • Micro sprinkler on tubing on every row and 14-ft spacing in the tree row • Public irrigation district • Architecture • In-row space: 7 feet • Between row: 15 feet • Operating period: 20 years • Density: 350 trees per acre; 25% of the planted trees are pollenizer trees (Bartlett)

21. REMEMBER: Use of These Budgets • Growers • Starting point for comparison and creation of own budgets • Policy makers • Educational tool for understanding the different cost centers in tree fruit production • Lenders and investors • Illustration on operating loans and projected costs and returns • Other researchers • Financial feasibility of new technologies

22. National Fruit Market Trends

23. U.S. Domestic Per Capita Consumption Lbs/person Years Source: USDA, cited by Desmond O’Rourke 2010

24. U.S. Consumer Trends • Stagnant per capita consumption of major fruits: apples, oranges and bananas. • Other fruits such as berries, table grapes and sweet cherries are gaining. • Wider Consumer interest in super fruits, tropical fruits (like pineapples, mangos and papayas) and exotic fruits (like durians, ugly fruit, berries, etc.) Source: Adapted from Desmond O’Rourke, 2010

25. Competition from Manufactured Snack Foods and Beverages Source: Desmond O’Rourke, 2010

26. Source: USDA FAS, Outlook of the US Apple Industry

27. New Varieties • New varieties to be released by breeding programs in Washington State, New York, Minnesota, Belgium, Holland, Germany, Italy, Australia, New Zealand, South Africa, and so on. • Traditionally breeding programs have focused on “supply side” characteristics, and not too much on demand side characteristics. Source: Adapted from Desmond O’Rourke, 2010

28. RosBREED: Enabling Marker Assisted Breeding In Rosaceae Socio-Economic Goals • The Socio-Economics Team will identify valuable breeding trait targets • Based on knowledge of what industry sectors and consumers value to inform breeding decisions • Accelerate and increase efficiency of cultivar development and adoption. • New cultivars will have targeted appeal, be more quickly accepted, and have enhanced commercial impact. RosBREED

29. I like tasty strawberries! We like firm tart cherries that pit well! What trait is my next breeding target? We like disease resistant apple trees! Household data analysis 2010 Consumer survey 2012 Market Intermediary survey Fall 2010 Producer survey Fall 2010/Winter 2011 Breeder survey 2010 RosBREED RosBREED’s Socio-Economics Team will determine trait values

30. Export Markets Little growth expected in domestic markets because: • Slow growth expected in U.S. population. • Per capita consumption of fresh apples is stagnant. • With rising incomes, consumer tend to choose competing fruits and snacks. Source: Adapted from Desmond O’Rourke, 2010

31. Growth in Fresh Apple Imports, Key Regions, 1996-98 to 2006-08 Source: Adapted from Desmond O’Rourke, 2010

32. Thank You R. Karina Gallardo Washington State UniversityTree Fruit Research and Extension Center, School of Economic Sciences 1100 N. Western Ave. Wenatchee, WA E-mail:karina_gallardo@wsu.edu Phone: (509) 663–8181 x 261