Group Title: Circular ;
Title: Should I buy a citrus grove? /
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00102080/00001
 Material Information
Title: Should I buy a citrus grove? /
Series Title: Circular ;
Physical Description: 12 p. : ill. ; 23 cm.
Language: English
Creator: Savage, Zach
University of Florida -- Agricultural Extension Service
Publisher: Agricultural Extension Service, University of Florida
Place of Publication: Gainesville, Fla
Gainesville, Fla
Publication Date: 1953
Copyright Date: 1953
 Subjects
Subject: Citrus fruit industry -- Economic aspects -- Florida   ( lcsh )
Fruit trees -- Purchasing -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: Zach Savage.
General Note: Caption title.
General Note: "October 1953."
 Record Information
Bibliographic ID: UF00102080
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 221972960

Full Text

October 1953


COOPERATIVE EXTENSION WORK IN
AGRICULTURE AND HOME ECONOMICS
(Acts of May 8 and June 80, 1914)
Agricultural Extension Service, University of Florida,
Florida State University and
United States Department of Agriculture, Cooperating
H. G. Clayton, Director




SHOULD I BUY A CITRUS

GROVE?

By Zach Savage
Associate Agricultural Economist,
Agricultural Experiment Stations

Entering any business enterprise as another
means of making profits is not so serious a matter
as entering that business as a sole means of sup-
port. But anyone who enters citrus production
by investing all assets in a grove must realize a
profit from it. If only partial payment is made
for the grove with a mortgage for the balance,
additional income will be needed for interest on
the loan and to amortize the debt.


Fruit goes in bulk to the cannery or concentrating plant.


Circular 119


6=ftwt^M:.-- m





For the past 10 years groves have been selling
at high prices when measured in relation to pre-
vious sale prices of groves. Prior to 1940 it was
the exception for a grove to sell as high as $1,000
per acre. If such a grove sells at $2,500 now and
its purchase was made for 50 percent cash, the
purchaser could still owe more on his mortgage
than the full price of the same grove a few years
ago.
It might be well to consider the earning power
of citrus groves over the past few years as an
indication of what might be expected in the future
in the way of returns for a livelihood and debt
payment. During the 1950-51 season the Agri-
cultural Extension Service and the Agricultural
Experiment Stations, through the cooperation of
citrus growers, obtained records of costs and re-
turns on 192 groves. The average age of these
groves was 28 years, and no grove with average
age under 11 years was used in this tabulation.
These groves returned $248 per acre after paying
operating costs. Such returns would contribute
well towards living costs, interest on debt, and
debt payment. During the 20 years these records
have been secured there were six seasons with
better results than during the 1950-51 season.
TABLE 1.-Percentage Frequency Distribution of Returns
After Deducting Operating Costs by 5-Year Averages
and 20-Year Average, 1931-51.
1931-51






-$400 to -$301 .... 0.4 0.1 0.1
- 300 to- 201 .... 1.7 0.4 0.5
- 200 to 101 .. 0.4 0.2 0.2 4.2 1.3 1.8
- 100 to 1 .... 30.9 22.5 1.8 13.8 17.5 19.3
0 to 99 .... 47.6 51.7 10.2 17.1 32.1 51.4
100 to 199 ... 14.1 18.0 15.4 16.4 16.1 67.5
200 to 299 ... 4.7 5.4 17.0 13.3 10.3 77.8
300 to 399 .... 1.9 1.5 15.1 9.9 6.7 84.5
400 to 499 .... 0.3 0.5 11.6 7.6 4.8 89.3
500 to 599 .... 0.1 0.1 9.7 5.0 3.5 92.8
600 to 699 ... 7.3 4.1 2.6 95.4
700 to 799 .... 0.1 5.6 2.8 2.1 97.5
800 to 899.... 2.5 2.0 1.1 98.6
900 to 999 .... 1.9 0.8 0.7 99.3
1000 and above 1.7 0.9 0.7 100.0
100.0 100.0 100.0 100.0 100.0 100.0

2





Table 1 shows the varying returns after de-
ducting operating costs expressed in percentage
by 5-year averages and the 20-year average.
There has not been a season of this 20-year
period when one or more groves did not fail to
return operating costs. There were four seasons
when more than one-third of these groves failed
to return operating costs (Table 2), two seasons
when more than one-half, and one season when
almost two-thirds of these groves failed to return
operating costs. In such seasons heavy debt ob-
ligations would be extremely difficult to meet ex-
cept on the very best groves.


A good yield means hard work at harvest time.

There were 11 seasons when returns after de-
ducting operating costs were less than $100 per
acre on more than one-half these groves. There
were seven seasons when more than three-fourths
of these groves returned less than $100 per acre
after deducting operating costs and four seasons
when more than 85 percent of the groves returned
less than this amount. There were eight seasons
when more than 90 percent of the groves returned





less than $200 per acre after deducting operating
costs. There were only four seasons of the 20
when more than 75 percent of these groves re-
turned more than $200 per acre after deducting
operating costs and seven seasons when more
than 50 percent returned a similar amount.


TABLE 2.-Percent of Groves by Seasons that Returned
Stipulated Amounts After Deducting Operating Costs,
1931-51.


Percent of
Percent After D
Failed to -
Return
Operating $0 to $99
Cost Per Acre


20.0
55.4
24.7
35.5
20.9

31.3
4.8
31.1
29.1
38.2
10.2

22.7
3.8
1.2
0.5
3.6
1.0

2.0
26.9
65.6
2.5
2.5
9.9

20.1

19.3


42.2
39.6
64.9
48.4
42.9

47.6
42.6
53.0
58.6
44.3
60.1

51.7
35.1
7.5
0.5
4.1
3.9
10.2
31.5
26.5
14.0
6.0
16.1

17.1

32.1


SGroves with Returns
)educting Operating
Costs of:


$100 to
$199
Per Acre


26.7
4.0
7.7
10.4
22.0

14.1
28.7
13.3
11.9
11.0
25.2

18.0
32.1
17.5
6.3
10.9
10.2

15.4
25.6
5.1
20.5
14.6
17.7

16.4

16.1


$200 and
Over
Per Acre

11.1
1.0
2.7
5.7
14.2

7.0
23.9
2.6
0.4
6.5
4.5

7.6
29.0
73.8
92.7
81.4
84.9

72.4
16.0
2.8
63.0
76.9
56.3

46.4

32.5


Over this 20-year period 19 percent of these
groves failed to return operating cost, 32 per-
cent returned from $0 to $99 per acre after de-
ducting operating cost, 16 percent from $100 to
$199, and 33 percent returned over $200 per acre
after deducting operating cost. Fifty-one percent
of the groves returned less than $100 per acre
after deducting operating cost during the 20-year
4


Season

1931-32 ........
1932-33 ........
1933-34 ........
1934-35 ........
1935-36 ........
1931-36
Average ......
1936-37 ........
1937-38 ........
1938-39 ......
1939-40 ........
1940-41 ........
1936-41
Average ......
1941-42 ........
1942-43 ........
1943-44 ........
1944-45 ........
1945-46 ........
1941-46
Average .....
1946-47 ....
1947-48 ......
1948-49 .......
1949-50 ........
1950-51 ........
1946-51
Average ......
Average
1931-51 ........





period. During the first 10 years of this period
77 percent of the groves returned less than $100
per acre after deducting operating cost. The pro-
portion returning less than $100 per acre during
the third 5-year period was 12 percent, and 37
percent during the fourth 5-year period.
It can readily be noted from these figures that
there has been much of the time over the past
20 seasons when a sizable proportion of these
groves did not return enough after deducing oper-
ating costs to contribute much per acre toward
living expenses for the owner. The average for
these grove records over the past 20 years would
have paid operating costs, $70 interest payment
on a $1,400 loan at 5 percent, $70 principal pay-
ment on a 20-year loan and only $6 per acre liv-
ing expenses.
These groves averaged 7 percent higher yields
over this period than all groves of similar ages
in the State. Since average figures for 20 seasons
have been used, it would be well to apply the re-
turns realized during the 10-year pre-war period
of 1931-1941. The average returns from fruit
were $97 with an average cost of production of
$57, which left a net of $40 per acre. History
may not repeat itself to the extent that the aver-
age returns for 10 years after deducting operat-
ing costs will be that low, but it is reasonable to
assume that returns may drop considerably below
the present rate. A net of $40 per acre would
make an interest payment at 5 percent and a prin-
cipal payment on a 20-year loan amounting to
only $400 per acre with nothing left for making
the next crop nor any contribution to living ex-
penses. At this performance rate, 90 acres would
be necessary to supply $3,600 for living expenses
with no debt load.
A Valencia-grapefruit grove on which records
were obtained for 12 years was sold recently. This
grove was not one of the best groves included in
these records, nor was it one of the poorest. Its
average age at the time of the sale was 27 years,
and 41 percent of the trees were grapefruit. It
paid unusually well for the last two seasons prior
to the sale, when 48 percent of the returns from
fruit and 62 percent of the net returns for the
12 seasons were received.





Stated another way, total receipts from fruit
for the two seasons were 91 percent of the total
receipts for the 10 seasons prior to that time, and
the net receipts were one and two-thirds times
that of the total for the 10 previous seasons. Re-
ceipts from fruit for these 10 seasons, 1933-43,
averaged $159 per acre. Production costs were
$93 for this period, leaving a net of $66 per acre.
This net figure would pay 5 percent interest and
principal payment on a 20-year loan on a debt of
only $660 per acre. If the purchaser bought this
grove at $1,000 per acre and paid 34 percent of
the purchase price in cash, this rate of income
would service the debt and pay production costs,
but would contribute nothing towards living ex-
penses. With no debt load, this rate of perform-
ance would require 55 acres to net $3,600.
Average figures for the 20-year period of
1931-51 for all record groves were materially
boosted by six seasons when returns after deduct-
ing operating costs were in excess of $250 per


acre each season. The combination of good yields
and good prices in relation to production cost
for seven of the past nine seasons contributed
much toward favorable net returns from groves
and to increases in grove prices. The seasons
of 1946-47 and 1947-48 were not favorable for
the Florida citrus grower and the latter season
was the worst of the 20 seasons of these records.
Returns from fruit failed to equal operating costs
on the average grove in two of the past 20 seasons,
the seasons of 1947-48 and 1932-33.
Groves that did not pay production costs during
the seven seasons, 1942-46 and 1948-51, were very
poor groves. If the excellent financial returns
of these seasons could be maintained in the future
there would be justification for present prices of
most groves. The above-mentioned Valencia-
grapefruit grove netted an average of $542 per
acre for the two seasons, 1943-45. This rate of
income would pay interest and principal payment
on a $5,400 20-year loan if all the net were used


Obtain an accurate tree count by variety, age of tree, and tree condition before you buy a grove.


4 S. .^
C41 %.^^ *;%





for that purpose. Or, it would service a debt of
$2,000 per acre and contribute $342 per acre to-
wards living expenses. If this rate of net income
could be maintained, this grove would be a good
buy at the best current grove prices.
Another grove was sold in 1945 on which
records were obtained for the four previous sea-
sons, 1940-44. Both returns from fruit and the
net returns amounted to more in the 1943-44
season than the sum of these separate items for
the three previous seasons. This is a 12-acre
Pineapple-Valencia grove averaging 19 years of
age at the time it was sold. The net returns
averaged $194 for the three seasons of 1940-43.
This rate of income, which was during seasons
of good yields and fruit prices generally, would
service a debt of $700 and contribute $124 per
acre, or a total of $1,488 from the grove, towards
living expenses. Thus a purchase price of $1,000
per acre, paying 30 percent cash, might be justified
at this rate of net returns.
For a grove to pay high net returns it must
yield well and the fruit must be sold at a good
price. These two favorable factors rarely occur
at the same time, but such has been the case
during seven of the past nine seasons. It is not
likely that both factors may continue so favor-
able for so high a proportion of the seasons of
the future.
Several things might be pointed out that any-
one who contemplates buying a citrus grove should
consider before purchasing.
1. Before purchasing a grove, obtain an ac-
curate tree count by variety, age of tree, and
tree condition. Also, if possible, obtain the yield,
gross returns, production costs, and net returns
each season for the past six or eight seasons.
Study and analyze these records.
2. Check for unusual soil conditions, and grove
location with reference to likelihood of cold dam-
age to the entire acreage and for cold spots in
the grove.
3. Check with the fruit men who have been
handling fruit from the grove, as to its quality
and salableness.





4. Selling fruit at a price advantageous to the
grower is fully as important as efficient produc-
tion at a low cost. Therefore, it is highly im-
portant that a good job of selling the fruit be
done, as well as a good job of production.
5. If it is contemplated that a caretaker will
be employed to do the grove work, check avail-
ability and reliability of those in the vicinity.
6. Get sufficient acreage to supply ample in-
come to carry the debt load, if any, and to furnish
a living. With a reasonable purchase price, it is
usually better to have a small equity in a good
grove of ample acreage-40 acres or more-than
to have a large equity in too few acres.
7. The best groves usually come nearer being
worth prices asked for them than do poor groves.
8. Citrus production is a highly competitive
enterprise and should be so recognized by those
contemplating the purchase of grove property.


Foreign visitors often come to Florida to study citrus.





ESTIMATED CITRUS ACREAGE REQUIRED
TO NET $3,600
The question often arises as to the citrus acre-
age necessary to supply a living for a family.
This is a good question but a difficult one to answer
with a high degree of accuracy. There is a wide
variation in earning power between different
groves. The range in returns after deducting
operating cost on 192 groves over 10 years of age
in 1950-51 was from a loss of $256 to a profit of
$759 per acre, with fruit averaging $1.14 per box
on the tree.
There are also rather wide variations between
earnings of the same grove in different seasons.
In Table 3 six more or less typical groves were
selected for indicating variations in returns after
deducting operating costs over the 1941-51 period.
Two of these groves did not return operating
costs in two of these 10 seasons, two failed in one
season, and two returned operating costs in every
season. During eight of these 10 seasons citrus
prices were generally good.

TABLE 3.-Variations in Returns per Acre After Deduct-
ing Operating Costs on Six Individual Groves and All
Groves of the Study During the 10-Year Period of
1941-51.

Returns After Deducting Relative
Operating Cost Position
Age in Lowest Highest Average Average
1941-42 Year Year 10 Yrs. as 100

Grove No. 1 17 -$ 73.85 $ 457.16 $236.00 94
Grove No. 2 22 43.62 1,052.94 441.73 176
Grove No. 3 20 13.19 379.08 222.70 89
Grove No. 4 17 134.32 759.69 379.19 151
Grove No. 5 20 25.07 372.36 126.28 50
Grove No. 6 19 208.73 532.67 382.06 152
All Groves,
10 Seasons 21 -$387.01 $1,674.31 $251.53 100


There are wide variations as to the amount of
money considered necessary for a "living" for
different families. Table 4 indicates approximate
acreages necessary to return $3,600 annually after
deducting operating costs over the 1946-51 period.
Age of trees and bearing capacity enter into such
a calculation in that yield tends to increase with
age of tree. Kind and variety also enter into the





picture. One of the most important factors is
fruit price. Acreages required to net this amount
would have been less in each case over the 1941-46
period, due to higher fruit prices and lower oper-
ating costs.

TABLE 4.-Approximate Grove Acreage to Net 83,600
Annually After Deducting Operating Costs During the
5-Year Period of 1946-51.

Age of Trees ............ 15 20 25 30 35 40

Oranges:
Early ....................... 20 15 12 11 10 10
Midseason ................ 35 25 20 19 18 17
Late ........................ 28 21 17 14 13 12
Mixed ..................... 28 21 17 14 13 12
Temple Oranges ........ 18 14 11 9 9 9
Tangerines .............. 100 82 70 59 52 47
Grapefruit:
Seeded ...................... 133 100 80 66 63 60
Seedless .................. 74 50 38 33 32 30
Mixed ...................... 100 75 59 50 48 45
Mixed Citrus
(1 grapefruit) ........ 52 39 31 27 25 23


IS THIS THE TIME TO BUY ADDITIONAL
CITRUS ACREAGE?
Some growers who have been producing citrus
for many seasons contemplate purchasing addi-
tional acreages. Much of the material of this
publication up to this point will apply to such
growers. Adequate volume or acreage is always
an important consideration and should not be
overlooked.
There have been instances in recent years in
which growers have bought additional groves and
paid for them with the returns of a few fruit
crops, and the groves increased in value. Both
the general price situation and good yields have
been favorable for such successes. Growers now
in a favorable credit position need to use caution
lest their enthusiasm for recent successes lead
them to set their own stage for disastrous experi-
ences later.
In growing citrus, a productive grove in the
hands of a capable grower or manager is nearly
always a good investment, but low-producing
groves are seldom good investments in the long





run. Average-producing groves may become bad
investments in an economic depression.
Groves that can be bought and paid for quickly
under favorable circumstances sometimes can be
lost just as quickly under unfavorable conditions.
One or two years of low yields because of un-
favorable weather or any other reason would make
it increasingly difficult to make payments on a
mortgage.
Some people believe that an economic depres-
sion is impossible or at least unlikely because of
government efforts to support farm income and
safeguard the economy generally. They may be
right, but pressure from production costs, taxes,
or slackened demand for citrus products could
place a severe strain on individual growers, par-
ticularly if unfavorable weather hazards should
occur.




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