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Budgeting costs and returns
ALL VOLUMES CITATION SEARCH THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
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Permanent Link: http://ufdc.ufl.edu/UF00026157/00011
 Material Information
Title: Budgeting costs and returns
Series Title: Economic information report
Portion of title: Budgeting costs and returns for Central Florida citrus production
Budgeting costs and returns for for <sic> Central Florida citrus production
Physical Description: v. : ; 27 cm.
Language: English
Creator: University of Florida -- Food and Resource Economics Dept
Publisher: Food and Resource Economics Dept., Agricultural Experiment Stations and Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Creation Date: 1985
Frequency: annual
regular
 Subjects
Subjects / Keywords: Citrus fruit industry -- Economic aspects -- Periodicals -- Florida   ( lcsh )
Citrus fruits -- Marketing -- Periodicals -- Florida   ( lcsh )
Genre: governmental publication   ( marcgt )
serial   ( sobekcm )
 Notes
General Note: Title varies slightly: <1992-93>- Budgeting costs and returns for Central Florida Citrus Production.
General Note: Description based on: 1978-79; cover title.
 Record Information
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000313320
oclc - 08042638
notis - ABU0053
lccn - sn 82000631 /g
System ID: UF00026157:00011

Table of Contents
    Front Cover
        Front cover
    Abstract
        Page i
    Acknowledgement
        Page i
    Table of Contents
        Page ii
    Main
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
    Reference
        Page 12
Full Text















ABSTRACT


Estimated costs and returns of growing round oranges in the Central
Florida citrus area are presented for the twelfth consecutive year.
Central Florida citrus area is defined as those counties having experi-
enced limited citrus tree damage or loss which is generally from Polk
County south. The format presented may be useci by individual growers to
budget costs and returns, utilizing individual data on specific groves.

Key words: citrus, Central Florida, budgeting, costs and returns.





NOTE: Several of the budget costs items have been revised to reflect
current applications being used by growers--e.g., dilute tank is
now 2X (modified dilute). The previous years' costs presented in
this report have also been revised to reflect the changes.








ACKNOWLEDGEMENT


Appreciation is extended to Mrs. Jane Wilson for typing the final
draft of this manuscript.
















ABSTRACT


Estimated costs and returns of growing round oranges in the Central
Florida citrus area are presented for the twelfth consecutive year.
Central Florida citrus area is defined as those counties having experi-
enced limited citrus tree damage or loss which is generally from Polk
County south. The format presented may be useci by individual growers to
budget costs and returns, utilizing individual data on specific groves.

Key words: citrus, Central Florida, budgeting, costs and returns.





NOTE: Several of the budget costs items have been revised to reflect
current applications being used by growers--e.g., dilute tank is
now 2X (modified dilute). The previous years' costs presented in
this report have also been revised to reflect the changes.








ACKNOWLEDGEMENT


Appreciation is extended to Mrs. Jane Wilson for typing the final
draft of this manuscript.
















TABLE OF CONTENTS


Page

ABSTRACT. . . . . ... . ... i

ACKNOWLEDGEMENT . . . . ... ...... i

LIST OF TABLES. . . . . .... .... ii

INTRODUCTION. . . . . ... ....... .1

METHOD OF DATA COLLECTION ................. 1

THE GROVE SITUATION . . . . ... . 2

COSTS OF INPUTS . .. . . . . 4

SPRAY PROGRAM ............... . .... 7

COSTS AND RETURNS . . . . . 7

HISTORICAL COST TRENDS. ................ .. 10

REFERENCES. ................ . .... 12


LIST OF TABLES


Table

1 Schedule of production practices for a Central Florida
citrus grove. . . . . ... .. 3

2 Calculation of normal production per tree . .. 4

3 Costs of inputs supplied on a custom basis used in cal-
culating costs. ................ .. 5

4 Costs of chemicals used in calculating costs. . 6

5 Spray program used in budget based on custom rates and
application of one 500-gallon tank (2X) per acre ... 8

6 Estimated annual per acre costs and returns for a
mature, Valencia round orange grove producing citrus
for processing in Central Florida . .... 9

ii










BUDGETING COSTS AND RETURNS:
CENTRAL FLORIDA CITRUS PRODUCTION, 1985-86


Ronald P. Muraro


INTRODUCTION


Due to the manner in which data become available, there is always a
time lag between the collection of production cost and return informa-
tion and when they are analyzed and published. Hence, production costs
in one year are understood to relate to the crop which is harvested the
following season.
In order to obtain current data for various decision making pur-
poses, a budget may be constructed by developing a list of production
practices and their costs. Budget analysis provides the basis for many
grower decisions. For example, budget analysis can be used to calculate
potential profits from an operation, to determine cash requirements for
an operation, and to determine break-even prices. These data can then be
used as a basis for management decision making.
Due to the December 1983 and January 1985 freezes, the character of
the Central Florida citrus production area has changed. Thus, Central
Florida in this report refers to those counties having experienced
limited citrus tree damage or loss which is generally from Polk County
south. Budgets for rehabilitating or replanting citrus groves where
extensive tree damage or loss has occurred are presented and discussed in
a separate report.


METHOD OF DATA COLLECTION


The data presented here were developed from surveying custom opera-
tors, input suppliers, and from discussions with colleagues at the Citrus
Research and Education Center in Lake Alfred. This annual survey is
conducted in February and March.


RONALD P. MURARO is associate professor of food and resource
economics and extension farm management economist. He is stationed at
the Citrus Research and Education Center, Lake Alfred.










THE GROVE SITUATION


Shown in Table 1 are production practices for a Central Florida
citrus grove and times during the year when they would likely be
performed. There are two benefits to developing such a table for an
individual grove. First, it shows what work is needed and when, so that
operations can be planned well in advance. Second, it can be helpful if
an annual cash flow analysis is developed for financial planning. The
individual grower can achieve benefits by developing a plan for a
particular grove.
Specific production practices vary from grove to grove making it
difficult to define a "typical" grove. Many combinations of practices
and various tree combinations accomplish production of acceptable yields
and returns. Although the example represents a Valencia orange grove,
the cost and return data are designed to be applicable to most grove
situations. A grower can substitute his individual grove costs and
expected returns into the budget format and develop a budget for a
particular grove. A "your cost" column is provided for this purpose.
In the following budget, above average management and cultural
practices are assumed. Beyond this general assumption, the following
specifics are assumed:


1. A 25-year-old irrigated grove;
2. Type is round orange on rough lemon rootstock;
3. Tree loss is 2 percent annually;
4. Trees are pulled and replaced when production falls
below 50 percent of expected yield;
5. Production is for processing only;
6. Tree density is 70 trees per acre;
7. Custom-caretaker providing grove management; and
8. Normal average yield reduced by 20% due to freeze
damage.


As a result of tree losses and replacement, the tree ages will
vary. The budget reflects the following age distribution:












Table 1.-Schedule of production practices and budget items for a Central Florida citrus grove


Month Annual
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec total


Total revenue: 20% Partial Final
deposit payment payment
Less: Pick & haul cost X
DOC advertisement tax X
Adjusted revenue

Grove expenses:
Disc X X
Chop X X
Mow
Labor, general grove
work, pull vines X X
Herbicide (1/2 grove acre
equivalent) X X
Spray: Post bloom/nutritional X
Summer oil/greasy spot X
Fall miticide X
Supplemental miticide
Dust
Fertilizer 90# N/A 90# N/A Dolomite
Hedging and topping Hedge
Brush removal/chop brush Chop brush
Tree removal X
Young tree care X X X X X
Irrigation (times/month) 2 4 4 2 1 1
Miscellaneous
Grove taxes including water management X
Interest expense X
Annual principal payment on mortgage X
Total grove expenses

Net returns (loss)

Cumulative net returns
ais is a suggested schedule of practices. Actual pra ces uld not nessarly be done on the exact schedule here.
This is a suggested schedule of practices. Actual practices would not necessarily be done on the exact schedule shown here.





4



Situation Boxes/tree

2% pulled and replanted 0.0
2% 1 year old 0.0
2% 2 years old 0.0
2% 3 years old 0.6
2% 4 years old 0.9
38% 5-24 years old 4.4
2% producing 50% of expected yield 4.0
50% 25 years old or older 8.0

Calculation of normal production per tree is shown in Table 2.


Table 2.--Calculation of normal production per tree

Boxes Total
Age of Tree Trees /tree boxes

Total no. Proportion No. ea.
all ages ea. age age -----No.-----

3 years 70 x 0.02 = 1.4 x 0.6 = 0.84
4 years 70 x 0.02 = 1.4 x 0.9 = 1.26
5-24 years 70 x 0.38 = 26.6 x 4.4 = 117.04
Prod. 50% of
exp. yield 70 x 0.02 = 1.4 x 4.0 = 5.60
25 years 70 x 0.50 = 35.0 x 8.0 = 280.00
Total boxes = 404.74

proportion adds up to 0.94 (94 percent) as 6 percent of the trees
were non-bearing (see page 4).

COSTS OF INPUTS


Costs for various production inputs are the average of the data
obtained from annual custom rate and chemical and fertilization surveys.
The custom rate costs are shown in Table 3 and the various input costs
are shown in Table 4.
Both tables, as do the others, have a column reserved for the
individual grower to insert data from a particular grove. This will
allow a comparison of the grower's costs and returns with those of the
hypothetical case presented.








Table 3.-Costs of inputs supplied on a custom basis used in calculating costs


Item Unit Low High Average Your cost


.nTr I


Spray, 2X
Dust, ground
Fertilize, bulk
Dolomite application
Chopping
Discing (9'-10')
Topping (single boom)
Topping (double boom)
Hedging (2-side) tractor-drawn
Hedging (2-side) self-propelled
Front-end loader
Bulldozer
Truck and driver
Tractor and driver
Power saw w/out operator
Labor
Herbicide


Tank
Acre
Acre
Ton
Acre
Acre
Hour
Hour
Hour
Hour
Hour
Hour
Hour
Hour
Hour
Hour
Hour


24.00
5.50
4.50
5.00
6.00
6.50
200.00

47.50
180.00
35.00
31.50
14.50
14.00
4.00
6.00
17.50


35.00
9.25
8.40
10.00
9.50
9.50
275.00

62.00
250.00
55.00
45.00
22.00
25.00
10.00
8.70
30.00


------------------------


29.65
7.21
6.26
7.00
7.69
8.93
245.00
365.00
56.50
217.50
44.29
37.68
17.30
18.24
5.70
7.08
21.03


I


e
------


------------------


--












Table 4.-Costs of chemicals used in calculating costs


Item Unit Cost Your cost


---------------Dollars--------------

Chlorobenzilate Pint 3.41
Copper, tri-basic Lb. 0.95
Zinc Lb. 0.37
Borates Lb. 0.55
Manganese Lb. 0.20
Ethion Pint 2.51
Vendex 50W Lb. 17.93
Oil Gal. 2.13
Kelthane MF Pint 3.33
Sulphur Lb. 0.14
Sticker Pint 0.94
Roundup Gal. 82.78
Krovar II Lb. 7.90
16-0-16 fertilizer Ton 127.50
8-2-8 fertilizer plus minors Ton 104.93
Dolomite (delivered) Ton 20.50










SPRAY PROGRAM


The spray program presented here is believed to be of the type
followed by a majority of growers. It is not the exact program outlined
in the Florida Citrus Spray Guide 1986, nor is it necessarily the most
economical spray program. Most growers of fruit for processing use at
least two sprays and one dust in their insect and disease control pro-
grams. These costs are presented in the budget.
This program is outlined in Table 5 as a post bloom, a summer oil,
and a fall miticide application. The first two are modified dilute (2X)
sprays while the third is a ground application of sulphur. Table 5 also
shows a supplemental miticide application that may be used when addi-
tional control for rust mite is needed.


COSTS AND RETURNS

The estimated costs and returns based on the foregoing assumptions
and data are shown in Table 6. Total revenue ($1,547.32) is based on
preliminary estimated on-tree price per box (price net of picking and
hauling costs). Normal average production was decreased by 20 percent to
reflect the fruit loss due to the January 1985 freeze. Total specified
costs ($618.08) is comprised of grove care costs ($540.71) plus a manage-
ment cost ($77.37). Return to land and trees ($929.24) represents net
return above fixed costs.
An individual grower may have other cost items which were not in
Table 6. For instance, supplemental miticide (Table 5) would add $55.34
to operating costs. Freeze protection--the use of heaters or microsprin-
klers-is another cost item which could be included.
Fixed costs were not included in the budgeted costs since these costs
vary from one grove operation to another. However, for guidelines, ad
valorem taxes in Polk County would add another $40 to $50 per acre.
Annual debt payment may cost as high as $400 per acre ($3,000 average debt
per acre @ 12 percent interest). Other grower assessments and crop
insurance are other costs not included which vary widely among different
grove operations.









Table 5.-Spray program used in budget based on custom
acre


rates and application of one 500-gallon tank (2X) per


Item


Amount/acre


Costa


Your cost


----------Dollars-------
Post bloom application


Kelthane MF
Zinc
Borates
Manganese
Sticker
Application (2X)
Total
Summer oil application
Ethion
Oil
Copper
Application (2X)
Total
Fall miticide application


Sulphur
Application (ground)
Total
Grand total
Supplemental fall miticide application
Vendex 4L
Sticker
Application (2X)
Total


6 pints
15 lbs.
1.25 lbs.
15 lbs.
1 pint
1 tank


7.5 pints
5 gals.
7 Ibs.
1 tank


3 Ibs.
$7.21/ acre


1.25 lbs.
1 pint
1 tank


supervision charge is added


21.96
6.15
0.76
3.30
1.04
29.65
62.86

20.07
11.05
7.32
29.65
68.09

10.50
7.21
17.71
148.66

24.65
1.04
29.65
55.34


aAssumes material is custom applied; ther-eore, a 10 percent handling and
to the material cost.


~ _~ ~ _~ ~_~~ ~ _a~ ~~


--~----~--c~


I








Table 6.-Estimated annual per acre costs and returns for a mature, Valencia round orange grove producing citrus for processing in
Central Florida


Item Description


Amoun t


404 boxes @ 3 .


--------------Dollars--------

1,547.32


II. Expenses
Weed control
General grove work
Herbicide (2 applications)
Discing
Chopping
Spray program
Fertilizer
Materiale (Based on 180 lbs N/aci
Application
Dolomite
Materials
Application
Pruning (maintenance)
Topping
Hedging
Chopping brush
Tree replacement and care
Pull trees and remove
Prepare site, plant and ring
Water
Fertilizer
Tree wraps, sprout,
Ridomil/Aliette, etc.
Irrigation (operating costs for
overhead sprinklers)
Management


1/2 grove acre, Krovar II, incli appl.
Twice/year
Twice/year
From Table 5

re) 16-0-16, 1,125 Ibs.
2 @ $6.26

1/3 ton @ $22.55
$7.00/ton @ 1/3

($245/hr. + 8.0 A/hr. = $30.63) + 3 yrs.
($217/hr. + 11.0 A/hr.= $19.73) + 2 yrs.
Custom rate
(1 through 4 years)
1.4 trees/acre
(Includes trees)
(Average 10 waterings)
(Includes application)

(Year of planting)

13.2 inches/year
5% of gross sales


III. Total specified costs

IV. Return to land and trees

On-tree price per box is preliminary; assumes price for processed oranges onl


Herbicide costs shown represent the cost for an existing prog
would be $18.30 for application and $52.14 for material.


Te initial cost fo- beginning a herbicide program


Assumes material custom applied; therefore, a 10 percent handling and supervisio charge is added to material cost.

not include $59.54 per acre of fixed depreciation cost.

eOther methods to estimate a management cost are used in the industry which may give a different return to land and trees than
reported here.


I. Revenue


Your cost


5.63
53.06
17.86
15.38


78.75
12.52

7.52
2.33

10.21
9.86


12.11
11.55
9.87
11.62

7._ 2


91.93
148.66


91.27


9.85



29.10


52.57

117.33
77.37

618.08


~










HISTORICAL COST TRENDS

Annual budgets of costs and returns for processed, round oranges in
Central Florida have been developed and published the past four years.
Estimated cost and return histories for 1981-82 through 1984-85 along
with 1985-86, and a five-year average are presented in Table 7. Of the
past five production seasons, only during the 1982-83 and 1985-86
seasons was fruit yield not affected by a freeze. The recent freezes
have reduced Florida's round orange supply substantially resulting in
higher on-tree prices per box through the 1984-85 season. However, with
Florida's crop production rebounding from the freeze years with an
increased world supply of orange products, on-tree price and return to
land and trees are the lowest since the 1979-80 season. To allow
comparisons in current values, these same costs and returns, inflated to
1986 dollars, are presented in Table 8.








Table 7.-Estimated annual per acre costs and returns and 5-year average
costs and returns for a mature, Valencia round orange grove
producing citrus for processing in Central Florida, 1981-82-
1985-86

On-tree Total Net return
price Gross specified to land
Year /box Yield revenue costs and trees


1981-82
1982-83
1983-84
1984-85


$4. 15a
5.48a
6.55a
7.59a
3.83b


3230
404
3230
323c
4 04


1,340.145
2,213.92
2,115.65
2,451.5
1 547. 32


571.30
628.42?
6'c.^ 'i, '2


769.15
1,585.50
1 487 .44
1, 774. 80
929.24


5-yr. avg. 5.52 355 1,959.60 6o.5o 1,33504

On-tree price for processed Valencia oranges as reported by the
Florida Crop and Livestock Reporting Service.

Estimated at time of printing and is not a publi.ised price.

CYield reduced due to January or December freezes during 1981,
1982, 1983, and 1985.

dFixed costs such as taxes, debt payment, and crop insurance are
not included. A management cost of 5% of gross revenue is included.


Table 8.--Estimated annual per acre costs anr return and 5-year average
costs and returns (inflated to 1986 dollars) for a nature,
Valencia round orange grove producing citrus for processing in
Central Florida, 1981-82--1985-86


On-tree
price
/box


Gross
Yield revenue


Total Net return
specified to land
costs and trees


$4.69 323 1,514.87 645.57


6.00 404 2,424.00
6.88 323 2,222.24
7.70 323 2,487.10


869.30


688.12 ,735.88
659.62 1,562.62
686.24 1,800.86


3.83 404 1,547.32 618.08


929.24


5-yr. avg.


5.82 355 2,066.10


659.53 1,406.57


Year


Consumer
price
index


1981-82
1982-83
1983-84
1984-85
1985-86


113.0
109.5
105.0
101.4
100.0


-Consumer price index for each year inflated to !.' ,- prices (1 86
100), with 1986 consumer price index estimated to be 32c.8.


------^1_1_-- 1111~


~










REFFR E 'rr


Citrus Summary 1985. Florida Crop and Livestock Reporting Service.
Florida Agricultural Statistics. Jan. 1986.

DuCharme, E. P. "Tree Loss in Relation to Young Tree Decline and Sand
Hill Decline of Citrus in Florida," Proc. Fla. State Hort. Soc. 84
(1971), pp. 48-52.

Florida Citrus Spray Guide 1986. Univ. of Fla. Coop. Ext. Svc. Cir.
393-L. Gainesville: Jan. 1986.

Harrison, D. S. and R. C. J. Koo. Sprinkler Irrigation Systems for
Citrus. Univ, of Fla. Agr. Ext. Rpt. AE 7"T-1-5 7'ev.). Gainesville:
'. 1974.

Koo, R, C. J., editor. Recommended Fertilizer aid Nuitritiounal Srays
for Citrus. Univ. of Fla. Agr. Exp. Sta. Bull. 536D. Gainesville:
'-h-t i 1984.

Muraro, Ronald i "C'omparative COitrub Budgets." l.ke ifred Citrus
Research and ikiucnation Center (CREC) Repot., Lake Alfred FL
Apr. 1' ,,

"Cost for Est.abli'shinig, Planiiting, and Maiitaining a Citruus
Grove through Four Years of Age." Lake Alfr-ed CREC Report. Lak.
Alfred, FL: Nov. 1035.

S"Cost of Plantinr .i M- inta niig Reset COtri; Tree through
Four Years." I.;a Alfred CREC Report. Lake Alfred, FL: Aug.
1985.

"Summary Custom Rate Survey for Forty-five Interior Citru.
Caretakers." Lake Alfred CREC Report. L.ke Alfred, FL: Apr.
1936.

__ and John L. Jackson. Ten-year Pnalysis for RehAbilitation of
Freeze Damaged Citrus Groves. Univ. of Fla., Food and Resource
Econ. Staff Paper 270. Jan. 1985.

and J. Fred Kurras. "Estimating the 'i"i .ue to Citrus Trees and
Resulting Value Loss Due to the January, 1982 Freeze," Florida Food
and Resource Economics No. 39 (Mar.-Apr. 1982). University of
Florida: Gainesvi ie.

Savage, Zach. Citrus Yields Per Tree Age. Agr. Ext. Ser. 60-8. Univ.
of Fla., Gainesville. 1960.