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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/UF00026157/00012
 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: 1986
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: UF00026157:00012

Table of Contents
    Front Cover
        Front cover
    Abstract
        Page i
    Acknowledgement
        Page i
    Table of Contents
        Page ii
    List of Tables
        Page iii
    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 thirteenth 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 used 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 thirteenth 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 used 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


ABSTRACT. . . .


ACKNOWLEDGEMENT . .


LIST OF TABLES . .


INTRODUCTION. . .


METHOD OF DATA COLLECTION .


THE GROVE SITUATION . .


COSTS OF INPUTS . .


SPRAY PROGRAM . . .


COSTS AND RETURNS . .


HISTORICAL COST TRENDS. .


REFERENCES. . .


* .





* .


Page


i


i


iii


1


1


2


4


7


7


10


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
calculating 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

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, 1982-83--1986-87 . . . .. 11

8 Estimated annual per acre costs and returns and 5-year
average costs and returns (inflated to 1987 dollars) for
a mature, Valencia round orange grove producing citrus
for processing in Central Florida, 1982-83-1986-87 11











BUDGETING COSTS AND RETURNS:
CENTRAL FLORIDA CITRUS PRODUCTION, 1986-87


Ronald P. Muraro


INTRODUCTION


Budget analysis provides the basis for many grower decisions.
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. This paper presents a budget constructed
from current data and will serve as a format for growers to develop an
analysis of costs and returns from their individual records.
In order to assist with decision making, production budgets 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; and
7. Custom-caretaker providing grove management.


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


50%
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 900 N/A 900 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

aThis is a suggested schedule of practices. Actual practices would not necessarily be done on the exact schedule shown here.


__ __ __













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.
a
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

aProportion 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.
Most tables 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


----------------------,Dollars------- ----------

Spray, 2X Tank 22.00 40.00 31.09
Dust, ground Acre 5.50 9.25 7.53
Fertilize, bulk Acre 4.50 8.40 6.58
Dolomite application Ton 5.00 10.00 7.69
Chopping Acre 6.50 10.00 7.85
Discing (9'-10') Acre 7.25 10.00 8.93
Topping (single boom) Hour 150.00 225.00 187.50
Topping (double boom) Hour 365.00
Hedging (2-side) tractor-drawn Hour 54.00 65.00 58.54
Hedging (2-side) self-propelled Hour 190.00 235.00 209.29
Front-end loader Hour 35.00 55.00 42.06
Bulldozer Hour 35.00 50.00 40.57
Truck and driver Hour 14.70 25.00 18.26
Tractor and driver Hour 15.00 25.00 18.11
Power saw w/out operator Hour 4.00 8.00 5.31
Labor Hour 6.00 10.00 7.22
Herbicide Acre 8.50 10.50 9.48


_I_ ____












Table 4.--Costs of chemicals used in calculating costs


Item Unit Cost Your cost


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

Chlorobenzilate Pint 4.25
Copper, tri-basic Lb. 0.93
Zinc Lb. 0.43
Borates Lb. 0.57
Manganese Lb. 0.21
Ethion Pint 2.70
Vendex 50W Lb. 16.08
Oil Gal. 1.90
Dicofol 4MF Pint 3.77
Sulphur Lb. 0.14
Sticker Pint 1.01
Roundup Gal. 71.76
Krovar II Lb. 7.92
16-0-16 fertilizer Ton 134.32
8-2-8 fertilizer plus minors Ton 122.30
Dolomite (delivered) Ton 20.42










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 1987, nor is it necessarily the most
economical spray program. Most growers of fruit for processing use at
least two sprays and one fall sulphur dust or miticide spray in their
insect and disease control programs. 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, $2,084.64, is based on
preliminary estimated on-tree price per box (price net of picking and
hauling costs). Total specified costs, $663.98, is comprised of grove
care costs, $559.75, plus a management cost, $104.23. Return to land and
trees, $1,420.66, 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 $54.31
to operating costs. Freeze protection--the use of heaters or microsprin-
klers-is another cost item which could be included.
In addition to the management cost, ad valorem taxes, and overhead
and administrative costs-such as water drainage/district taxes, crop
insurance, and other grower assessments, can add up to 12 percent to the
total grove care costs. These costs vary from grove to grove depending on
age, location, soil, and time of purchase or establishment. However, as
guidelines, ad valorem taxes in Polk County would average $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 over 20 years). These costs
should be considered in arriving at a net return to land and trees (total
return minus costs).










Table 5.-Spray program used in budget based on custom rates and application of
acre


one 500-gallon tank (2X) per


Item Amount/acre Costa Your cost

----------Dollars----------
Post bloom application
Dicofol 4MF 6 pints 24.88
Zinc 15 lbs. 7.10
Borates 2.50 lbs. 1.57
Manganese 15 lbs. 3.47
Sticker 1 pint 1.11
Application (2X) 1 tank (500 gals.) 31.09
Total 65.75
Summer oil application
Ethion 7.5 pints 22.28
Oil 5 gals. 10.45
Copper 7 lbs. 7.16
Application (2X) 1 tank (500 gals.) 31.09
Total 70.98
Fall miticide application
Sulphur 70 Ibs. 11.55
Application (ground) $7.53/acre 7.53
Total 19.08
Grand total 155.81
Supplemental fall miticide application
Vendex 4L 1.25 lbs. 22.11
Sticker 1 pint 1.11
Application (2X) 1 tank (500 gals.) 31.09
Total 54.31


supervision charge is added


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










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 Amount Tour cost

-oollars -
I. Revenue 404 boxes 0 5.16a 2,084.64
II. Expenses
Weed control
General grove work b 5.81
Herbicide (2 applications) 1/2 grove more, Krovar II, incl. appl. 53.81
Discing Twice/year 17.86
Chopping Twiee/year 15.70 93.18
Spray programs From Table 5 155.81
Fertilizer
Materials (Based on 180 lbs N/acre) 16-0-16, 1,125 lbs. 83.25
Application 2 0 $6.58 13.16 96.41
Dolomite
Materialc 1/3 ton @ $22.46 6.81
Application $6.84/ton 1/3 2.28 9.09
Pruning (maintenance)
Topping ($187.50/hr. 6.0 A/hr. = $31.25) 3 yrs. 10.42
Hedging ($209.29/hr. 4 10.0 A/hr. $20.93) 2 yrs. 10.47
Chopping brush Custom rate 9.51 30.40
Tree replacement and care (1 through 4 years)
Pull trees and remove 1.4 trees/acre 12.01
Prepare site, plant and ring (Includes trees) 11.91
Water (Average 10 waterings) 10.19
Fertilizer (Includes application) 12.00
Tree wraps, sprout,
Ridomil/Aliette, etc. (Tear of planting) 7.66 53.77
Irrigation (operating costs ford
overhead sprinkler1) 13.2 inches/year 121.09
Total Grove Care Expenses 559.75
III. Management 55 of gross salesf 104.23
IV. Total specified costs 663.98
V. Return to land and trees 1,420.66


aOn-tree price per box is preliminary; assumes price for processed oranges only.
bThe herbicide costs shown represent the cost for an existing program. The initial cost for
would be $18.96 for application and $52.26 for material.


beginning a herbicide program


CAssumes material custom applied; therefore, a 10 percent handling and supervision charge is added to material cost.
Does not include $59.54 per acre of fixed depreciation cost.
Other cost items which are not included in the budget are ad valorem taxes and interest on grove investment. In addition to
these cost items, overhead and administrative costs, such as water drainage/district taxes, crop insurance, and other grower
assessments, can add up to 12 percent to the total grove care costs. These costs vary from grove to grove depending on age, location,
soil, and time of purchase or establishment.
other methods to estimate a management cost--e.g., $3.00 per acre per month or 10% of total grove care costs--are used in the
industry which may give a different return to land and trees than reported here.


__ __













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 1982-83 through 1985-86 along
with 1986-87, and a five-year average are presented in Table 7. During
the past five production seasons, the fruit yield for 1983-84 and
1984-85 was 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
have been reduced. To allow comparisons in current values, these same
costs and returns, inflated to 1987 dollars, are presented in Table 8.








11
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, 1982-83-
1986-87

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

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

1982-83 $5.48 404 2,213.92 628.42 1,585.50
1983-84 6.55 323c 2,115.65 628.21 1,487.44
1984-85 7.59 323c 2,451.57 676.77 1,774.80
1985-86 3.85 404 1,555.40 618.48 936.92
1986-87 5.16b 404 2,084.64 663.23 1,420.66

5-yr. avg. 5.73 372 2,131.56 643.02 1,488.54


aOn-tree price for processed
Florida Agricultural Statistics Se


Valencia oranges as reported by the


bEstimated at time of printing and is not a published price.

cYield reduced due to December 1983 and January 1985 freezes.

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 and returns and 5-year average
costs and returns (inflated to 1987 dollars) for a mature,
Valencia round orange grove producing citrus for processing in
Central Florida, 1982-83--1986-87

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

1982-83 112.2 $6.15 404 2,484.60 705.09 1,779.51
1983-84 108.5 7.11 323 2,296.53 681.61 1,614.92
1984-85 104.8 7.95 323 2,567.85 709.25 1,858.60
1985-86 103.2 3.97 404 1,603.88 638.27 965.61
1986-87 100.0 5.16 404 2,084.64 663.23 1,420.66
5-yr. avg. 6.07 372 2,258.04 679.49 1,578.55

aConsumer price index for each year inflated to 1987 prices (1987 =
100), with 1987 consumer price index estimated to be 333.65. Consumer
price index for other years are: 1983 = 297.4; 1984 = 307.6; 1985 =
318.5 and 1986 = 323.3












REFERENCES


Citrus Summary 1985-86. Florida Agricultural Statistics Service.
Florida Agricultural Statistics. Jan. 1987.

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 1987. Univ. of Fla. Coop. Ext. Svc. Cir.
393-M. Gainesville: Jan. 1987.

Harrison, D. S. and R. C. J. Koo. Sprinkler Irrigation Systems for
Citrus. Univ. of Fla. Agr. Ext. Rpt. AE 73-15 (Rev.). Gainesville:
Aug. 1974.

Koo, R. C. J., editor. Recommended Fertilizers and Nutritional Sprays
for Citrus. Univ. of Fla. Agr. Exp. Sta. Bull. 536D. Gainesville:
March 1984.

Muraro, Ronald P. "Comparative Citrus Budgets." Lake Alfred Citrus
Research and Education Center (CREC) Report. Lake Alfred, FL:
Apr. 1987.

"Cost for Establishing, Planting, and Maintaining a Citrus
Grove through Four Years of Age." Lake Alfred CREC Report. Lake
Alfred, FL: Nov. 1985.

"Cost of Planting and Maintaining Reset Citrus Trees through
Four Years." Lake Alfred CREC Report. Lake Alfred, FL: Aug.
1985.

"Summary Custom Rate Survey for Forty-seven Interior Citrus
Caretakers." Lake Alfred CREC Report. Lake Alfred, FL: Apr.
1987.

and John L. Jackson. Ten-year Analysis 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 Damage 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: Gainesville.

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