Title: Costs for handling Florida oranges shipped in consumer bags and in bulk
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Full Text


Agricultural Economics Mimeo Report 58-12


COSTS FOR HANDLING


FLORIDA ORANGES SHIPPED


IN CONSUMER BAGS


AND IN BULK




by
George L. Capel


Department of Agricultural Economics
Florida Agricultural Experiment Station
in cooperation with
Marketing Research Division
Agricultural Marketing Service
United States Department of Agriculture





June, 1958
















CONTENTS


PREFACE . . . . . . . ii

SUMMARY . . . .... iii


INTRODUCTION . . . .
Method of Study . . .. .
Simplifying Assumptions Used in this Study

DESCRIPTION OF HANDLING METHODS . .
Shipping-point Bagging and Handling .
Unioading Bags . . . .
Londing Bulk Trucks at the Shipping Point .
Unclading and Bagging Bulk Shipments .

HANDLING EIGHT-POUND BAGS . . .
Packinghouse Cost for Bags . ..
Unloading Bags in the Market . .
Loading Bulk Fruit . . .
Unloading and Packing Bulk Shipments .
Comparison of Costs between the Two Methods

HANDLING FIVE-POUND BAGS . . .
Packinghouse Costs for Bags . .
Unloading Bags in the Market . .
Loading Bulk Fruit ...
Unloading and Packing Bulk Shipments
Comparison of Costs between the Two Methods


ADDITIONAL CONSIDERATIONS IN BULK SHIPPING .
Advantage of a Fresh Pack . .. .
Increased Efficiency in the Use of Resources by


* S 9 9 99 99
* 9 9 9 9 9 9 9
* S 9 9 9


Some Firms .


Possibility for Reducing the Cost of Shipping-point Bagging .
Additional Possibilities for Bulk Shipping . . .
Damage Factor . . . . .









PREFACE


This study was made cooperatively by the Department of Agricultural

Economics, Agricultural Experiment Station, University of Florida and the

Marketing Research Division, Agricultural Marketing Service, United States

Department of Agriculture. It is a portion of an over-all study of ef-

ficiency in handling and packing citrus fruits from the grove through the

packinghouse. Other segments of the over-all study relate to (1) grove to

highway handling of citrus fruit going to processing plants (see "Cost of

Moving Citrus from Tree onto Highway Trucks as Related to Methods of

Handling," Florida Agricultural Experiment Station Bulletin 547, September

1954, by Eric Thor and Luke D. Dohner); (2) grove to packinghouse transpor-

tation, receiving, and degreening (see "Cost Analysis of Bulk Handling

Methods for Fresh Citrus," Florida Agricultural Experiment Station, Depart-

ment of Agricultural Economics Mimeo Report 55-1, September 1954, by

Eric Thor); (3) packing citrus fruit into shipping containers (see "The Use

of Packing Labor in Florida Citrus Packinghouses," Florida Agricultural

Experiment Station, Department of Agricultural Economics Mimeo Report 57-8,

June 1957, by George L. Capel); (4) economies of scale in the operation of

citrus packinghouses (see Florida Agricultural Experiment Station Bulletin

Manuscript, "Economies of Scale in the Operation of Florida Citrus Packing-

houses," by Eric Thor); and (5) costs for alternative methods for performing

operations in packinghouses (see Florida Agricultural Experiment Station

Bulletin Manuscript, "Comparative Costs of Alternative Methods for Perform-

ing Specific Handling Operations in Florida Citrus Packinghouses," by

George L. Capel). This study is also a part of Southern Regional Marketing

Project SM-4, "Increasing Efficiency in the Marketing and Pricing of Fresh

and Processed Citrus Fruits."













SUMMARY


This study of bulk shipping of Florida oranges was undertaken to

compare the costs for handling and packing bulk shipments in the market

with the cost for handling fruit bagged at the shipping point, and to

determine problems and further possibilities in bulk shipping.

The costs for packing eight-pounds bags of oranges at the shipping

point and unloading in the market are slightly lower than the costs for

loading the oranges bulk and packing them in eight-pound bags in the

market, if the market packer handles about 50,000 1-3/5-bushel-box equiva-

lents of oranges per year. At an annual volume of 300,000 box equivalents,

however, the bulk shipping method has a cost advantage of over $5,000.

There is a greater cost advantage for bulk shipping when the oranges are to

be packed in five-pound bags. The difference in the two methods is over

$12,500 when the market receiver handles 300,000 box equivalents per year.

There are several additional considerations. Bulk shipping has

the advantage of allowing grading in the market at minimum costs. Some

terminal market firms may make more efficient use of their facilities by

receiving and packing bulk oranges. Possibly bulk shipments can be handled

in loose boxes in the market at large savings. The damage to oranges

observed during this study was less than 1 percent. There is the peawability

that shipping-point packers may reduce the costs of packing bags through a

greater use of machinery.










COSTS FOR HANDLING FLORIDA ORANGES SHIPPED
IN CONSUMER BAGS AND IN BULK

by

George L. Capel

Agricultural Economist, Market Organization and Costs Branch,
Marketing Research Division, Agricultural Marketing Service,
United States Department of Agriculture


INTRODUCTION


Prepackaging has assumed a major role in the merchandising of

fruits and vegetables. Many of these products are available today in

retail stores in both bulk and prepackaged forms. Prepackaging has been

done by both shipping-point and terminal market packers. Traditionally,

Florida citrus fruits have been packaged in consumer bags, primarily at

the shipping point in open mesh bags. Consumer bags began to assume a

major status as a citrus container in Florida at the close of World War II.

In 1945-46, 6 percent of all fresh shipments were in eight-pound bags.

This rose to 12.3 percent in 1947-48. Subsequent to that year, the five-

pound bag assumed a prominent role and since that time has accounted for

about half of the shipments in consumer bags.1

Since 1949-50, there has been an expansion in the shipments of

citrus fruits from Florida in bulk. According to the reports of the

Florida Department of Agriculture,2 bulk shipments have risen from less


1For more detailed data on containers used in shipping, including
bulk shipments, see Table 1 of "The Use of Packing Labor in Florida Citrus
Packinghouses," Agricultural Economics Mimeo Report 57-8, June, 1957.

2Annual Reports, Citrus and Vegetable Inspection Division,
Florida Department of Agriculture.











than 1 percent per year in the years prior to 1949-50 to about 4 percent

in the last four seasons ending with the 1956-57 season in which the bulk

shipments accounted for 3.8 percent of all commercial shipments. There

are two types of bulk shipments. One constitutes shipments of fruit loose

in boxes within the state. The other is made up of oranges or grapefruit

loaded bulk in truck bodies and shipped to markets outside of Florida.

While data are not available to show the proportion that each of these

two classes is of the reported bulk shipments, it is believed that the

major share moves out of the state. There are two factors which support

this view. First, the volume of bulk shipments remained constantly low,

about 0.3 percent of all shipments for a number of years and then took a

decided increase about 1948-49. Second, it was about this time that some

Florida packinghouses installed equipment for the efficient loading of

bulk trucks. The bulk shipments reported for packinghouses known to be

making bulk shipments to northern markets accounts for a large part of

the bulk total reported by the Citrus and Vegetable Inspection Division.

The rapid growth of bulk shipments from the state was observed

by research workers of the Florida Agricultural Experiment Station and

the Agricultural Marketing Service during 1953 and 1954. Reports indicated

and observations confirmed that this movement to bulk shipments consti-

tuted a further increase in the quantity of citrus fruits offered to

consumers in consumer bags. In other words, most of this bulk fruit was

packaged into consumer bags in the terminal markets for resale in packaged

form. In 1955, the Florida Agricultural Experiment Station and the Agri-

cultural Marketing Service undertook a study of bulk shipping. This study

was in the nature of a case study of one sizeable bulk receiving operation.











The specific purposes were to: (1) determine the comparative costs of

bulk shipping and market packaging as compared with shipping-point packing

and shipments in bags, and (2) to gain perspective on the additional cost

reducing possibilities offered by bulk shipping and information as to some

of the problems involved.


Method of Study

Data on the costs of packing oranges into consumer bags by hand,

transporting the bags to the loading station, and loading were already

available from studies of costs and efficiency in the operation of citrus

packinghouses. Data were needed on the costs of loading bulk fruit into

trucks at the packinghouses, the terminal market cost of unloading and

bagging fruit hauled in bulk, and the cost of unloading fruit in bags

which had previously been bagged at the shipping point. Observations were

made of the use of labor and equipment in the bagging of oranges in the

market for a bulk receiver in the Philadelphia area. Data were collected

on the unloading of fruit in bags from the bulk receiver and other receivers

in Philadelphia and in Jacksonville, Florida. Loading of bulk fruit was

observed in Florida packinghouses. The observations of these three

operations permitted the computation of labor requirements for the various

jobs and determination of the rate at which specific crews could perform

the operations with the equipment in use at the time. The labor require-

ments constitute the primary basis on which costs are estimated in this

report. In addition to labor costs, the cost of equipment, both fixed

and variable, and the cost of electric power were estimated.3


3For a detailed description of the methods of determining labor
requirements and making the costs analyses as used in this report, see
Florida Agricultural Experiment Station Bulletin Manuscript,"Comparative
Costs of Alternative Handling Methods in Florida Citrus Packinghouses."











Simplifying Assumptions Used in this Study

The packing and handling of oranges in consumer bags is done in

many different ways and under many different circumstances. Therefore, it

was necessary to simplify the analysis along lines that were believed to

be reasonably near the average of what may be experienced. These assumptions

were as follows:

(1) The packinghouse piece wage rate paid for packing oranges
in eight- and five-pound bags was the same as the average
determined in "Cost of Packing and Selling Florida Fresh
Citrus Fruits, 1956-57," Florida Agricultural Economics
Mimeo Report 58-6. These rates were $0.1104 and $0.1327
per 1-3/5-bushel-box equivalent for eight- and five-pound
bags, respectively.

(2) The packinghouse cost for handling bags was that computed
in Florida Agricultural Experiment Station Bulletin Manu-
script, "Comparative Costs of Alternative Methods for
Performing Specific Handling Operations in Florid~ Citrus
Packinghouse," for a packinghouse handling 50,000 1-3/5-
bushel-box equivalents of fruit a year by the method
determined to be the most efficient. In this method, the
bags are placed in a modified field box after packing and
hand trucked to the loading station.

(3) The costs for bulk loading at the packinghouse were computed
for an annual volume of 50,000 1-3/5-bushel-box equivalents.

(4) The market handlers of oranges in bags employ workers for
unloading who also do other work and only the time which
they spent unloading oranges was charged to this operation.

(5) The market receivers of bagged and bulk fruit handle between
50,000 and 300,000 1-3/5-bushel-box equivalents per year.
Costs in this report were determined for volumes within this
range.

(6) The crew used to bag bulk shipments of oranges also do other
work. Only the time which they spent on bulk receiving and
bagging was charged to this operation.

(7) A certain amount of floor space must be assigned to the bulk
receiving and bagging. Building costs are assigned for this
operation but not for the receiving of oranges in bags.










(8) There is no difference in bag and bulk shipments in cost of
transportation to the market. However, in practice there
may be a small difference to some markets.

(9) The same kind of bag is used by both shipping-point and
market packers.


DESCRIPTION OF HANDLING METHODS


Shipping-point Bagging and Handling

Oranges were hand packed into consumer bags by workers at regular

packing bins. They filled, tied, and placed the bags in a modified field

box. The filled field boxes moved down the packed-box conveyor to a box-

closing station. There, a worker assigned to close regular boxes stacked

the boxes for hand trucking. Hand truckers moved the stacks directly to

the loading station or to temporary storage and to the loading station

later. At the loading station, the loaders removed the bags from the field

boxes and loaded them by hand. Hand truckers then returned empty field

boxes to storage or to the packing bins. There are other systems for

handling bags, including the use of master containers. However, the system

described was found to have lowest costs at the assumed annual volume of

bagged fruit.


Unloading Bags

The trucks loaded with bags of oranges were stationed at unloading

docks at the receiver's warehouse. A crew of four men was employed in

unloading the bags. The four men were divided into sub-crews of two each.

Two men removed the bags from the load and placed them on a conveyor belt.

The other two men removed the bags from the conveyor by hand and placed

them on dollies for further handling or storage. Costs in this report were

computed only to the point of loading dollies.











Loading Bulk Trucks at the Shipping Point

The oranges to be loaded into bulk trucks were handled through

the packinghouse the same way as all other fruit until they arrived in

the packing bins. To load a bulk truck, a trap door in the bottom of the

packing bin was opened, allowing the fruit to run through the trap door

to a conveyor belt, which carried it to a bulk fruit conveyor system. The

end of this system was a movable boom which could be extended the entire

distance into the truck body. The truck was usually loaded by extending

the boom the full distance, loading the front end of the truck first, and

then moving the boom back in a number of steps until the truck was loaded

to the desired weight.


Unloading and Bagging Bulk Shipments

When the truck carrying the bulk shipment arrived at the receiver's

warehouse, it was backed into a pit which lowered the rear of the truck.

Trap doors at the rear and bottom of the truck were opened and oranges

flowed out onto an elevator. This elevator carried the fruit up onto a

conveyor belt or grading table, Grading was sometimes omitted. From the

conveyor belt or grading table the oranges were moved to the bagging

machines. The machines filled the bags according to count. For each size

of fruit a given number was required to make the stated weight. The

machine had a series of buckets which rotated around it. Workers placed

bags on these buckets. The buckets moved past the filling station where

the bags were filled with the required number of fruit. After a bag was

filled, it was released onto a conveyor belt at which point workers shaped

it for machine closing of the top. A number of these machines may be used,











depending upon the rate of output desired. The receiver observed in this

study used a series of three machines, which was sufficient to obtain crew

balance in unloading, grading, handling, and checking bagged fruit.

After the bags were closed, they moved on a conveyor belt past a

station where a worker checked the weight of a sample of bags. The same

conveyor transported the bags to a truck for loading or workers placed them

on a dolly for further handling or storage. Bagging operations may differ

with respect to the kind of machine used in filling. Other bag-filling

machines fill by weight. There are a number of different types of weight-

filling machines in use. However, the method of handling oranges to the

machine and the bags after filling is basically the same for either type

of machine.


HANDLING EIGHT-POUND BAGS


Packinghouse Costs for Bags

The costs per l-3/5-bushel-box equivalent for packing and loading

eight-pound bags of oranges in Florida citrus packinghouses are shown in

Table 1. One-third of the time for one man was charged for distributing

bags to the packers. The costs for packing were taken from "Cost of

Packing and Selling Florida Fresh Citrus Fruits, 1956-57," Florida Agri-

cultural Economics Mimeo Report 58-6. This rate is $0.1104 per 1-3/5-

bushel-box equivalent. The cost for handling 50,000 box equivalents of

eight-pound bags at a rate of 340 box equivalents per hour was $1,218.

These three items of cost total $6,787 and average $135.74 per 1,000 box

equivalent.












Unloading Bags in the Market


The labor requirements for unloading eight-pound bags in the

market were as follows:


Item
Set up
Unload
Clean up
Total


Crew Minutes
2.00
86.28
1.00
89.28


TABLE 1

COSTS OF PACKING AND LOADING 50,000 1-3/5-U~SHEL-BOX EQUIVALENTS
OF ORANGES IN EIGHT-POUND BAGS IN FLORIDA CITRUS PACKINGHOUSES



Average Cost
Item Rate Unit Total per
Cost 1,000 Boxes

dollars dollars dollars

Distribute bags
to packersa 1.0000 hour 49 0.98
Pack 0.1104b 1-3/5 bu. 5520 110.40
Transport and
load& ...... ...... 1218 24.36

TOTAL ...... ...... 6787 135.74


aOne-third of the time of one worker.

bRate paid by sample of packinghouses in "Cost of Packing and
Selling Florida Fresh Citrus Fruits, 1956-57," Agricultural Economics
Mimeo Report 58-6.

CCost for handling 50,000 1-3/5-bushel-box equivalents of oranges
in eight-pound bags at an hourly rate of 340 boxes per hour. (See Table
24, Florida Agricultural Experiment Station Bulletin Manuscript,
"Comparative Costs of Alternative Methods for Performing Specific Handling
Operations in Florida Citrus Packinghouses.")












These requirements were computed for a four-man crew unloading a truck of

325 1-3/5-bushel-box equivalents of fruit in eight-pound bags, The 89.28

crew minutes mean that 1.488 crew hours were required, resulting in an aver-

age of 218 box equivalents per crew hour.

The total variable and fixed costs for unloading eight-pound bags

of oranges are presented in Table 2. The labor cost with a crew of four

men and a wage rate of $1.50 was $6.00 per hour. Electricity for 1-1/2

horsepower was 4.5 cents and variable repairs were $0.0312 per hour. This

resulted in a total variable cost of $27.87 per 1,000 box equivalents un-

loaded. The fixed costs on the conveyor were $82.00, assuming an annual

charge for depreciation, insurance, interest, taxes, and fixed repairs of

13.2 percent and a replacement cost for the conveyor of $623.

TABLE 2

TOTAL VARIABLE AND FIXED COSTS FOR UNLOADING EIGHT-POUND BAGS OF ORANGES


Variable Costs Fixed Cost
Cost Annual Replace- Annual
Item per Item Chargea ment Fixed
Hour Cost Cost
dollars percent dollars -
Labor Equipment
Four-man crew unloading at rate of Conveyor-
218 box equivalents per hour; wage 30' x 24" 13.2 623 82
rate, $1.50 6.000
Electricity
1-1/2 horsepower 0.045
Repairs
0.5 percent per 100 hours times
replacement cost of $623 0.031
TOTAL COST PER HOUR 6.076
Average variable cost per 1,000 box
equivalents 27.87
aAnnual charge made up of 6.7 percent for depreciation; 5.0 percent for
insurance, interest, and taxes; and 1.5 percent for fixed repairs.










Loading Bulk Fruit

Data in Table 3 show the estimated total variable and fixed costs

for loading 50,000 1-3/5-bushel-box equivalents of oranges into bulk trucks.

It was assumed that loading took place at a rate of 325 box equivalents per

hour, the assumed average truck load. In computing labor costs, it was

assumed that bulk loading would require one-third of one man's time during

loading. Since it would take 154 hours to load 50,000 box equivalents, the

labor cost was $56.46. Electricity costs for the 6 horsepower units on the

bulk system amounted to $27.72. Variable repairs on the bulk loading system

were $26.27, computed on a replacement cost for the bulk system of $3,411.

This gives a total variable cost of $110.45. Fixed costs for the bulk

conveyor system using an annual charge of 13.2 percent totals $450.28. The

average total costs were $11.21 per 1,000 box equivalents of fruit.

TABLE 3

TOTAL VARIABLE AND FIXED COSTS FOR LOADING 50,000 1-3/5-BUSHEL-BOX
EQUIVALENTS OF ORANGES IN BULK TRUCKS AT A RATE
PER HOUR OF 325 BOX EQUIVALENTS


Item Cost

dollars

Labor
One-third of one man's time at wage rate
of $1.10 for 154 hours 56.46
Electricity
Six horsepower for 154 hours at $0.03
per horsepower hour 27.72
Repairs
0.5 percent per 100 hours for 154 hours
times replacement cost of $3,411 26.27
TOTAL VARIABLE COSTS 110.45
Fixed Costs
Bulk conveyor system at replacement cost
of $3,411 times annual charge of 13.2 percent 450.25
TOTAL ALL COSTS 560.70
Average per 1,000 box equivalents 11.21











Unloading and Packing Bulk Shipments

The crew used to unload and pack bulk shipments into bags consisted

of one truck unloader; two graders; fifteen machine operators (workers to

place bags, observe the operation of the machine, remove bags from the

buckets, and handle the bags through the tying machine); one weight checker;

three bag handlers; and a foreman. The crew minutes for specific phases

of the unloading and packing operation were as follows:

Item Crew Minutes
Set up 4.0
Unload and pack 61.5
Clean up 2.0
Total 67.5

These labor requirements indicate that 1.125 hours of crew time were re-

quired to unload one truck of 325 1-3/5-bushel-box equivalents of oranges,

resulting in an average of 289 box equivalents unloaded and packed per hour.

The total variable and fixed costs for unloading and packing bulk

trucks of oranges into eight-pound bags are presented in Table 4. The

total labor cost per hour was $35. Electricity for the 18 horsepower units

on the unloading and packing system cost 54 cents per hour, and variable

repairs on the equipment, 75 cents per hour. The total variable cost per

1,000 box equivalents of fruit unloaded and packed was $125.57. Fixed

costs totaled $2,865, the largest item of which was the $1,584 cost of the

bagging machines. In addition, there were costs of $399 for the unloading

elevator, grading table, and conveyor system. This operation obviously

required a certain amount of space in the receiver's warehouse. Floor

space of 40 x 70 square feet was allotted for this operation. Assuming an

annual charge of 9 percent and replacement costs of $9,800, fixed costs for

the building space were $882.










TABLE 4

TOTAL VARIABLE AND FIXED COSTS FOR UNLOADING BULK
TRUCKS OF ORANGES AND PACKING IN EIGHT-POUND BAGS


Variable Costs Fixed Costs
Cost Replace- Annual
Item per Item Annual ment Fixed
Hour Chargea Cost Cost

dollars percent dollars -
Labor Equipment
One foreman at wage Three
rate of $2.00 2.00 machines 13.2 12,000 1,584

22-worker crew at Elevator,
wage rate of $1.50 33.00 grading table,
and conveyor
Electricity system 13.2 3,022 399
18 horsepower at
$0.03 0.54 Building
2,800 square
epaiirs feet of space
0.5 percent per 100 at $3.50 per
hours times replace- square foot 9.0 9,800 882
ment cost of $15,022 0.75 tOTAL FIXED
TOTAL COST PER HOUR 36.29 COSTS .... ....* 2,865
Average variable cost
per 1,000 box equiva-
lents 125.57


aAnnual charge for equipment was made up of 6.7 percent for
depreciation; 5.0 percent for insurance, interest, and taxes; and 1.5 per-
cent for fixed repairs. The depreciation rate for the building was 2.5
percent; other charges remained the same.


Comparison of Costs between the Two Methods

The total costs for packing eight-pound bags in the packinghouse

or in the terminal markets are shown in Table 5. These costs were computed











from the equation

TC = FC + Vol (AVCm + ACp)

where TC = total cost,
FCm = annual fixed cost for market handling,
Vol a volume in thousand 1-3/5-bushel-box equivalents,
AVCm average variable cost for market handling,
ACpg average total cost for packinghouse handling.

These costs are shown graphically in Figure 1. At an annual volume of

50,000, shipping-point packing was slightly lower in cost. The costs are

equal at volumes of about 105,000 box equivalents. At an annual volume of

300,000 box equivalents, the advantage for bulk shipping is about $5,300.


TABLE 5

TOTAL COSTS FOR PACKING EIGHT-POUND BAGS OF ORANGES IN FLORIDA
PACKINGHOUSES AND IN TERMINAL MARKETS
ACCORDING TO ANNUAL VOLUME


Total Annual
Volume


1-3/5 bushels

50,000
100,000
150,000
200,000
250,000
300,000


Packiaghouse


Packinghouse
Packed

dollars

8,262
16,443
24,624
32,804
40,984
49,165


Total Costs for
; Bulk Shipped and
Packed in Market

dollars

9,704
16,543
23,382
30,221
37,060
43,899












70


60 ... Pacinghouse packed
c..- Bulk shipped and packed
in market
50 -50


40 -

~0
30.


1 20 -


10 -

0 f I i I

50,000 100,000 150,000 200,000 250,000 300,000
1-3/5 Bushel Equivalents

Figure 1.--Total costs for packing eight-pound bags of oranges in
Florida packinghouses'and in terminal markets according to annual volume.





HANDLING FIVE-POUND BAGS


Packinghouse Costs for Bags

The total and average costs for packing and loading five-pound

bags in Florida citrus packinghouses are shown in Table 6. The costs to

distribute bags and for packing were determined in the same ways as for

eight-pound bags. The costs for transporting and loading were determined

by adjusting the figures for eight-pound bags to five-pound bags. The

total of these three items was slightly over $1,800 and averaged $162.06

per 1,000 boxes handled.











TABLE 6

COSTS OF PACKING AND LOADING 50,000 1-3/5-BUSHEL-BOX SQUIVALBNTS
OF ORANGES IN FIVE-POUND BAGS IN FLORIDA CITRUS PACKINGHOUSES


Average Cost
Item Rate Unit Total per
Cost 1,000 Boxes

dollars dollars dollars

Distribute bags
to packers 1.0000 hour 49 0.98
Pack 0.1327b 1-3/5 bu. 6635 132.70
Transport and
loadc ..... ..... 1419 28.38

TOTAL ..... ..... 8103 162.06


aOne-third of the time of one worker.

bRate paid by sample of packinghouses
Selling Florida Fresh Citrus Fruits, 1956-57,"
Mimeo Report 58-6.


in "Cost of Packing and
Agricultural Economics


CCost of handling 50,000 1-3/5-bushel-box equivalents of oranges
in five-pound bags at an hourly rate of 340 boxes per hour. (Adapted from
Florida Agricultural Experiment Station Bulletin Manuscript, "Comparative
Costs of Alternative Methods for Performing Specific Handling Operations
in Florida Citrus Packinghouses.")


Unloading Bags in the Market

The labor requirements for unloading five-pound bags in the market

were as follows:


Item
Set up
Unload
Clean up
Total


Crew Minutes
2.00
138.05
1.00
141.05


These requirements were computed for a four-man crew unloading a truck of

325 1-3/5-bushel-box equivalents of fruit in five-pound bags. The 141.05












crew minutes mean that 2.351 crew hours were required, resulting in an

average of 138 box equivalents per hour.

The total variable and fixed costs for unloading five-pound bags

of oranges at the receiver's warehouse are presented in Table 7. Total

variable costs for labor, electricity, and variable equipment repairs

totaled $6.0762 per hour or an average of $44.03 per 1,000 box equivalents.

The fixed cost for unloading totaled $82.00 per year, the same as for

unloading eight-pound bags.

TABLE 7 :

TOTAL VARIABLE AND FIXED COSTS FOR UNLOADING
FIVE-POUND BAGS OF ORANGES



Variable Costs Fixed Costs
Cost Replace- Annual
Item per Item Annual ment Fixed
Hour Chargea Cost Cost

dollars percent dollars -
Labor Equipment
Four-man crew unloading at rate Conveyor-
of 138 box equivalents per hour; 30' x 24" 13.2 623 82
wage rate, $1.50 6.000
Electricity
1-1/2 horsepower 0.045
Repairs
0.5 percent per 100 hours times
replacement cost of $623 0.031

TOTAL COST PER HOUR 6.076
Average variable cost per 1,000
box equivalents 44.03


aAnnual charge made up of 6.7 percent for depreciation; 5.0 percent for
insurance, interest, and taxes; and 1.5 percent for fixed repairs.










Loading Bulk Fruit

The costs for loading bulk fruit were not affected by the type of

container in which the fruit was packed in the market. Therefore, the

costs computed for bulk loading for eight-pound bags were also applicable

to the analysis of handling five-pound bags. The average total costs of

$11.21 per 1,000 box equivalents shown in Table 3 were used.


Unloading and Packing Bulk Shipments

The crew used to unload and pack bulk shipments of oranges into

five-pound bags consisted of one unloader, two graders, fifteen machine

operators, one weight checker, four bag handlers, and a foreman. The

crew minutes for specific phases of the unloading and packing operation

were as follows:

Item Crew Minutes
Set up 4.00
Unload and pack 67.42
Clean up 2.00
Total 74.42

These labor requirements indicate that 1.24 hours of crew time were

required to unload one truck of 325 1-3/5-bushel-box equivalents of oranges,

resulting in an average of 262 box equivalents unloaded per hour. This

rate was not substantially below the rate for- unloading and packing eight-

pound bags. The machines were apparently better adapted to packing five-

pound bags. Fewer difficulties were encountered in filling, accounting

for the higher rate of output relative to eight-pound bags than day have

been expected.

The total variable and fixed costs for unloading and packing bulk

trucks of oranges into five-pound bags are presented in Table 8. The total

labor cost was $36.50 per hour. Electricity and variable repair costs were











the same as for eight-pound bags. The total variable costs are $37.79

per hour, or $144.24 per 1,000 box equivalents. Fixed costs for handling

five-pound bags were the same as for eight-pound bags and consequently,

the total amount of $2,865 remains the same.

TABLE 8

TOTAL VARIABLE AND FIXED COSTS FOR UNLOADING BULK
TRUCKS OF ORANGES AND PACKING IN FIVE-POUND BAGS


Variable Costs Fixed Costs
Cost Replace- Annual
Item per Item Annual ment Fixed
Hour Chargea Cost Cost

dollars percent dollars -
Labor Equipment
One foreman at wage Three
rate of $2.00 2.00 machines 13.2 12,000 1,584
23-worker crew at Elevator,
wage rate of $1.50 34.50 grading table,
and conveyor
Electricity system 13.2 3,022 399
18 horsepower at $0.03 0.54
Repairs Building
0.5 percent per 100 2800 square
hours times replacement feet of space
cost of $15,022 0.75 at $3.50 per
-- square foot 9.0 9,800 882
TOTAL COST PER HOUR 37.79 TOTAL FIXED COST **** *..* 2,865

Average variable cost
per 1,000 box equivalents 144.24


aAnnual charge for equipment was made up of 6.7 percent for depreci-
ation; 5.0 percent for insurance, interest, and taxes; and 1.5 percent for
fixed repairs. The depreciation rate for the building wae 2.5 percent; other
charges remained the same.















Comparison of Costs between the Two Methods

The relationship between total costs for packing five-pound bags

in Florida packinghouses and in terminal markets is shown in Table 9 and

Figure 2. At the annual rate of 50,000 box equivalents, the costs are

about equal, but a cost advantage for bulk shipping and market packing

develops as the annual volume is increased. At an annual rate of 300,000

box equivalents the advantage of the bulk-shipping method is over $12,500.


TABLE 9

TOTAL COSTS FOR PACKING FIVE-POUND BAGS OF ORANGES IN FLORIDA
PACKINGHOUSES AND IN TERMINAL MARKETS
ACCORDING TO ANNUAL VOLUME


Total Annual
Volume


1-3/5 bushels

50,000
100,000
15;,000
200,000
250,000
300,000


PackinghouE


Packinghous
Packed

dollars

10,386
20,691
30,996
41,300
51,604
61,909


Total Costs for
e : Bulk Shipped and
Packed in Market

dollars

10,638
18,410
26,182
33,955
41,728
49,500

















$ 50 -
"4

40 -
0

S 30- J
0
0
S 20 -


10 -


0 I i t .I
50,000 100,000 150.000 200,000 250,000 300,000
1-3/5 Bushel Equivalents

Figure 2.--Total costs for packing five-pound bags of oranges in Florida
packinghouses and in terminal markets according to annual volume.







ADDITIONAL CONSIDERATIONS IN BULK SHIPPING


Advantage of a Fresh Pack

Bulk shipping allows the terminal market receiver to grade out

any fruit which has deteriorated in transit at minimum cost. This is

desirable because a number of things can happen to oranges during shipment,

especially when shipped in bags. Oranges may develop cracks, the skin

become dried out, or rots develop. Bulk unloading affords an opportunity

for grading without the expense of opening the containers. Therefore, the

receiver can pack bags with a high proportion of sound fruit. Infrequently,











bag shipments must be repacked at considerable expense. Also, market

grading undoubtedly reduces the effort expended in retail stores to remove

unsound fruit from bags.


Increased Efficiency in the Use of Resources by Some Firms

There are some firms in terminal markets which specialize in

fruit and vegetable prepackaging. If these firms add citrus fruits to

their line of products, the result may be to make a better use of labor

and equipment resources available to them; that is, they may use some of

the resources for the citrus operation when they would otherwise be idle

some of the time. Bulk shipping gives these firms an economical way of

adding..citrus fruit to their line of prepackaged items. The other choices

open to them are to buy the fruit packed in boxes or bags at the shipping

point. Handling boxed fruit is obviously an expensive alternative because

of the high cost of the box and the expense of opening and disposing of the

box. Some fruit in bags is packed in master containers at the shipping

point. While this reduces certain handling costs at the packinghouse and

in the markets, the additional cost of the master container is quite large.


Possibility for Reducing the Cost of Shipping-point Bagging

Practically all shipping-point bagging is done by hand at present.

One of the factors which lead to lower costs for market bagging is the fact

that the market receivers employ machines in bagging. It is possible for

packinghouses to employ the same techniques although very few have.

The present layout and arrangement of most packinghouses make the use of

bagging machines difficult. However, with advances in packinghouse tech-

niques and changes in packinghouse layout, it is entirely possible that











the cost of bagging oranges at the shipping point may be materially reduced.

This would leave the savings of market bagging just in the area of loading

and unloading and possibly in repacking damaged bags in the market.

A second possibility for reducing the cost of shipping-point

bagging would be to increase the volume packed by one shipper. That is,

the costs presented in this report could be recomputed, assuming that a

shipper was interested in specializing in handling bags and wanted to know

if he should do the packing at the packinghouse or arrange to package the

oranges in the market. If we assume that the shipper would handle 300,000

1-3/5-bushel-box equivalents, there would be some reduction in the costs

of bagging at the packinghouse. This decrease must be compared with the

costs for loading all the fruit in bulk and having it packed by one market

receiver. The increased use of the bulk loading system would materially

reduce the costs for the bulk method. The reduction in costs for increased

use of the bulk equipment is about equal to the reduction in costs of

packinghouse bagging caused by the increased volume.


Additional Possibilities for Bulk Shipping

An outstanding possibility for exploiting the advantages of bulk

shipping lies in the area of "loose box" handling in the markets. This

could be done by unloading bulk shipments in the usual way, but, instead

of the fruit going to bagging machines, it would go to stations at which

it could be loaded into loose boxes. The boxes used could be similar to

the banana box in use by produce handlers. This box could then be delivered

to retail grocery stores, in the same way as banana boxes are, and returned.

Many firms use a similar box for handling small packages of produce. The











savings in container costs and labor which may accrue from this possibility

appear to be rather large. Loading at the shipping point and unloading in

the market would each be cheaper than loading fruit in boxes or bags. The

loose box used for market handling would constitute a new cost item, but

it is not likely that this cost would approximate the savings.


Damage Factor

It would appear that the shipment of oranges in large bulk trucks

over long distances might result in considerable physical injury to the

oranges. During the course of the market observations, data were collected

on the volume of oranges which the receiver graded out. The volume graded

out was quite small, accounting for less than 1 percent of total receipts.

The fruit graded out was divided into two groups. One of these was made

up of fruit which had cracks in the surface, and was abandoned. This

comprised about one-third of the volume graded out. The remainder had

only suffered a loss in appearance. This fruit was sold locally and,

therefore, constituted only a partial loss. This fruit was shipped during

late March and early April. Fruit shipped at other periods of the year

may show different loss characteristics, but it is believed that the

quantity of fruit lost in bulk shipments would not be excessive, compared

to losses for what shipped in boxes or in bags. This is, however, an area

which requires further study.










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