Citation
Should I buy a citrus grove

Material Information

Title:
Should I buy a citrus grove
Series Title:
Florida Agricultural Extension Service circular 332
Creator:
Brooke, Donald Lloyd
Affiliation:
University of Florida -- Florida Agricultural Extension Service -- Institute of Food and Agricultural Sciences
Place of Publication:
Gainesville, Fla.
Publisher:
Florida Agricultural Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Publication Date:
Language:
English

Subjects

Subjects / Keywords:
Agriculture ( LCSH )
Farm life ( LCSH )
Farming ( LCSH )
University of Florida. ( LCSH )
Citrus -- Florida ( LCSH )
Agriculture -- Florida ( LCSH )
Farm life -- Florida ( LCSH )
Groves ( jstor )
Operating costs ( jstor )
Prices ( jstor )
Spatial Coverage:
North America -- United States of America -- Florida

Notes

Funding:
Florida Historical Agriculture and Rural Life

Record Information

Source Institution:
Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location:
Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management:
All rights reserved, Board of Trustees of the University of Florida

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HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida




CIRCULAR 332


Should I Buy A

CITRUS GROVE


i~iL~


FLORIDA AGRICULTURAL EXTENSION SERVICE
INSTITUTE OF FOOD AND AGRICULTURAL SCIENCES
UNIVERSITY OF FLORIDA, GAINESVILLE


MAY 1969








Should I Buy A CITRUS GROVE
By D. L. Brooke
Agricultural Economist
Agricultural Experiment Stations


Entering any business as an-
other means of making profit is
not so serious a matter as enter-
ing that business as a sole means
of support. The corporate investor
in a citrus grove over the past 35
years has had returns which would
compare quite favorably with re-
turns from many alternative in-
vestments. The individual investor,
on the other hand, must make a
living for himself and family from
the grove and is more vitally
affected by returns each year. This
publication is designed primarily
to assist the individual grove
owner.
Anyone who enters citrus pro-
duction by investing all of his as-


sets in a grove expects to 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.
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. Should a grove sell for $3,000
an acre now and its purchase is
made for 50 percent cash, the pur-
chaser could still owe more on his
mortgage than the full price of
the same grove 20 years ago.


CITRUS GROVE COSTS AND
RETURNS EXPERIENCE


The Florida Agricultural Ex-
periment Station and the Florida
Agricultural Extension Service
have conducted studies of citrus
grove costs and returns continu-
ously since 1931 through the co-
operation of many Florida citrus
growers. Data have been summa-
rized annually and when averaged
for various lengths of time, are
one indicator of the economic well
being of the individual grove own-
er and the industry.
The earning power of citrus
groves over a recent period of
years is an indication of the re-
turns one might expect in the


short run to meet living expenses
and debt amortization. Earning
power over a longer period is an
indication of the long run invest-
ment potential of citrus grove
ownership. Too, the individual
grove owner must be concerned
with the stability of returns in
successive years.
A summary of costs and returns
for the five seasons 1961-66 for
135 groves averaging 35 years of
age indicated average returns of
$320 per acre per year after pay-
ing operating costs.1 Such returns
would contribute well towards liv-
ing costs, interest on debt and debt


'Operating costs include expenses for labor, power and equipment, fer-
tilizer, spray and dust materials, state and county taxes and miscellaneous
items used in production, including irrigation expense, if any.









repayment. During the 35 years
that these records have been sum-
marized, there were seven seasons
with better returns than the aver-
age of the five years 1961-66.
Table 1 shows the distribution
of average annual returns per
acre, after deducting operating
costs, expressed in percentage of
the number of groves studied by
5-year periods and for the 35-year
period 1931-66. This shows that
the range in returns per acre has
widened and that a smaller pro-
portion of the groves had negative
returns by 5-year periods from
1931 to 1961. Increasing yields
with age of trees affect both of the
above conclusions. The 1961-66
average reflects the extensive loss
of bearing surface resulting from
the 1962 freeze. Some growers lost
more heavily than others and high-
er prices associated with reduced
supplies increased the range in
profits per acre.
In each year of the 35-year
period studied one or more groves
failed 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 sea-
son when almost two-thirds of the
groves studied failed to return op-
erating costs. In such seasons
heavy debt obligations would be
extremely difficult to meet, except
on the very best groves.
There were 12 seasons when re-
turns after deducting operating
costs were less than $100 per acre
on more than one-half of the
groves studied. There were only
six seasons when 75 percent or
more of the groves returned more
than $200 per acre after deducting


operating costs.
Over the 35-year period 18 per-
cent of the groves studied failed
to return annual operating costs,
26 percent returned from $0 to
$99 per acre after deducting oper-
ating cost, 17 percent from $100
to $199, and 39 percent returned
over $200 per .acre after deducting
operating costs. The reader may
make more detailed comparisons
from Table 2.
It can readily be noted that
much of the time during the past
35 seasons a sizeable proportion of
the groves studied did not return
enough after deducting operating
costs to contribute substantially
toward living expenses for the
owner. The average returns per
acre for these grove records over
the 35 seasons would have paid
annual operating costs, plus $195
per acre for principle, interest and
living expenses.
History may not repeat itself to
the extent that the average returns
for 10 years after deducting oper-
ating costs will be as low as $40
per acre as was the case during
1931-41, but it is reasonable to as-
sume that returns may drop con-
siderably below the present rate.
A net return of $40 per acre would
make an interest payment at 5 per-
cent and a principal 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 expenses.
Average returns for the 35-year
period of 1931-66 for all record
groves were materially boosted by
14 seasons when returns after de-
ducting operating costs were in
excess of $250 per acre each sea-
son. The combination of good
yields and prices in relation to








Table 1.-Percentage Frequency Distribution of Returns After Deducting Operating Costs by 5-Year Averages and 35-Year Aver-
age, 1931-66

1931-66

Returns Above 5-Year Average Cumula-
Operating Costs 1931-36 1936-41 1941-46 1946-51 1951-56 1956-61 1961-66 tive
Per Acre Percent Percent Percent Percent Percent Percent Percent Percent


$-400 to $-301
-300 to -201
-200 to -101
-100 to -1
0 to 99
C 100 to 199
200 to 299
300 to 399
400 to 499
500 to 599
600 to 699
700 to 799
800 to 899
900 to 999
1000 and above


0.2 0.2
22.5 1.8
51.7 10.2
18.0 15.4
5.4 17.0
1.5 15.1
0.5 11.6
0.1 9.7
7.3
0.1 5.6
2.5
1.9
1.7


Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0


0.4
1.7
4.2
13.8
17.1
16.4
13.3
9.9
7.6
5.0
4.1
2.8
2.0
0.8
0.9


0.3
0.5
2.2
14.6
25.8
16.8
12.2
8.0
6.1
4.2
3.2
2.4
1.3
0.8
1.6


0.3
0.8
3.0
17.6
43.4
60.2
72.4
80.4
86.5
90.7
93.9
96.3
97.6
98.4
100.0









Table 2.-Percent of Groves by Seasons that Returned Stipulated Amounts After
Deducting Operating Costs, 1931-66

Percent Percent of Groves with Returns After Deducting
Failed to Operating Cost of:
Return $100 to $200 and
Operating $0 to $99 $199 Over Total
Season Cost Per Acre Per Acre Per Acre


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
1951-52
1952-53
1953-54
1954-55
1955-56
1951-56
Average
1956-57
1957-58
1958-59
1959-60
1960-61
1956-61
Average
1961-62
1962-63
1963-64
1964-65
1965-66
1961-66
Average
1931-66
Average


....... 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
S.... 2.5
... 2.5
-...... 9.9

...... 20.1
..... 30.2
... 8.6
...... 10.1
... .. 14.2
...- 12.7

-- 15.1
..... 18.3
- ..-. 9.4
-..-. 6.7
-...... 12.3
....- 6.4

........ 10.8
....... 14.1
....... 22.6
....-... 29.4
....-. 22.4
.....- 26.0

....... 22.8

....... 17.6


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
26.2
17.7
13.4
16.5
5.7

15.9
16.6
16.3
5.3
9.0
10.0

11.7
14.1
17.3
2.8
8.2
13.8

11.1

25.8


100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0'
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0'
100.0
100.0

100.0

100.0






























Most fruit is still being picked by hand


production costs for 10 of the past
18 seasons contributed materially
toward favorable net returns from
groves and to increases in grove
prices. The seasons of 1946-47 and
1947-48 were unfavorable for the
Florida citrus grower. The latter
season was the worst of the 35 sea-
sons recorded. Returns from fruit
failed to equal operating costs on
the average grove in two of the
past 35 seasons, the seasons of
1947-48 and 1932-33.
On the other hand, only the
poorest groves failed to pay pro-
duction costs during the seasons
1942-46, 1949-51 and 1958-65. If
the financial returns of those sea-
sons could be maintained in the
future there would be justification
for present prices of most groves.
As a case in point, one average


27-year-old Valencia-grapefruit
(41 percent) grove netted an aver-
age of $542 .per acre for two con-
secutive seasons. This rate of in-
come would pay interest and
principal on a $5,400 20-year loan
if all of the net were used for that
purpose. Or, it would service a
debt of $2,000 per acre and pro-
vide $342 per acre annually to-
wards living expenses. If this rate
of net income could be maintained,
the grove would be a good buy at
the best current grove prices.
For a grove to pay high net re-
turns it must yield well and the
fruit must be sold at a good price.
These two favorable factors have
occurred at the same time during
10 of the past 18 seasons. As in-
dicated earlier, this probably ac-
counts for current grove prices.







It is not likely that both factors
may continue so favorable for so


high a proportion of the seasons
in the future.


ESTIMATED CITRUS ACREAGE
REQUIRED TO NET $6,000


How much citrus acreage is re-
quired to supply a living for a
family? This is an often asked
question and a difficult one to
answer with a high degree of ac-
curacy. There is a wide range of
earning power between different
groves. The range in returns after
deducting operating costs on 123
groves over 10 years of age in
1965-66 was from a loss of $496
to a profit of $765 per acre, with
fruit averaging $1.41 per box on
the tree.
There are also rather wide vari-
ations between earnings of the
same grove in different seasons.
Ten typical groves were selected
for indicating variations in re-
turns after deducting operating
costs, Table 3. One of those groves
did not return operating costs in


four of the 10 seasons 1957-66.
Three failed in three seasons, two
failed in two seasons, two failed in
one season and only two returned
operating costs in every season. It
may be worthy of note that all 10
groves showed a return above
operating costs only in one year,
1956-57 a year of low season
average prices for oranges. Dur-
ing six of those 10 seasons prices
were generally good.
There are wide variations as to
the amount of money considered
necessary for a "living" for dif-
ferent families. Table 4 indicates
the approximate acreage necessary
to return $6,000 annually after de-
ducting operating costs over the
1961-66 period. Age of trees and
bearing capacity enter into such a
calculation in that yield tends to


Table 3.-Variations in Returns per Acre After Deducting Operating Costs on
Ten Individual Groves and Average per Grove During the 10-Year
Period 1957-66

Returns After Deducting Relative
Grove Age in Operating Cost Position
Numbers First Lowest Highest Average Average
Season Year Year 10 Yrs. as 100

Grove No. 1 25 $- 88.49 $ 659.89 $175.83 52
Grove No. 2 23 -319.35 1125.38 396.60 118
Grove No. 3 29 12.64 948.58 388.96 116
Grove No. 4 30 -100.85 402.24 150.54 45
Grove No. 5 36 64.89 1378.14 816.10 244
Grove No. 6 28 -170.76 338.63 144.59 43
Grove No. 7 37 -194.57 837.51 177.74 53
Grove No. 8 40 108.24 1157.85 542.86 162
Grove No. 9 35 -101.93 647.91 247.56 74
Grove No. 10 24 -353.26 1005.67 310.13 93
Average per
Grove 31 $-116.87 $ 589.94 $335.09 100








Table 4.-Approximate Grove Acreage Required to Net $6,000 Annually After
Deducting Operating Costs During the 5-Year Period of 1961-66.
Age of Trees
Kind 15 20 25 30 35 40

Oranges:
Early .......................... 15 13 13 12 12 12
Midseason ....... 17 15 15 13 13 13
Late .... ......... ...... 17 15 15 12 11 11
Mixed .........- .. 16 14 14 13 12 12
Temple ... .............. ..... 25 18 14 12 12 11
Tangerines ......... ------36 28 25 22 21 20
Grapefruit:
Seedy .......................... 80 60 52 45 42 42
Seedless ...... ................ 40 32 28 24 23 23
Mixed ........ ........ ..... 50 41 36 33 32 32
Mixed Citrus
(1/3 grapefruit) 28 23 21 20 20 20


increase with age of tree.2 Kind,
variety and price also affect the
acreage required. More acreage is
required for grapefruit than for


oranges, tangerines or mixed cit-
rus. This reflects the historically
lower return for grapefruit.


'Yield increases more rapidly to about 25 years of age.
age, increases are less and yield finally levels off at 30 to 45
depending upon kind, variety, health of tree, soil moisture,
etc.


Modern technology will reduce the need for common labor and
increase capital and skilled labor requirements


Beyond that
years of age
temperature,



























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


PONDER POINTS FOR
PROSPECTIVE PURCHASERS


1. Before purchasing a grove,
obtain an accurate tree count by
variety, age of tree and tree con-
dition. Also, if possible, obtain the
yield, gross returns, production
costs, and net returns for each of
the past six or eight seasons.
Study and analyze the records.
2. Check for unusual soil con-
ditions and grove locations with
reference to likelihood of cold
damage to the entire acreage and
for cold spots in the grove. Aerial
photos may indicate differences
not discernible from the ground.
3. Check with the people who
have been handling fruit from the
grove concerning its quality and
marketability.
4. If it is contemplated that a
caretaker will be employed to do


the grove work, check the avail-
ability and reliability of those in
the vicinity.
5. Acquire sufficient acreage to
supply ample income to carry the
debt load, if any, and to furnish a
living. With a reasonable pur-
chase 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.
6. The best groves usually come
nearer being worth prices asked
for them than do poor groves.
7. Citrus production is a highly
competitive enterprise and should
be so recognized by those contem-
plating the purchase of grove
property.
8. If you are unable to perform








a detailed analysis of a prospective
grove, hire a competent consultant


to make the study. It might be the
best investment you ever made.


CITRUS ACREAGE,
SUPPLY AND OUTLOOK


The bearing acreage of citrus in
Florida increased 32 percent dur-
ing the 10-year period 1958-67,
Table 5. In addition, in 1967 there
were 225,000 acres of young non-
bearing citrus, so that by 1971
Florida's bearing acreage will be
in excess of 930,000 acres.3
Production has been erratic be-
cause of varying weather condi-
tions. Even so, favorable weather
and improved practices on an in-
creasing acreage produced a 1966-
67 crop 68 percent greater than
the freeze year crop of 1957-58.


By comparing the production
and value figures of Table 5 one
can easily discern that supply and
value have an inverse relationship.
Large crops are less valuable than
small crops.
Estimates made by DARE4 in
1964 forecast a crop of 220 mil-
lion boxes of all citrus in Florida
by 1975. Of that amount 180 mil-
lion boxes is expected to be or-
anges and they will bring an esti-
mated $1.25 per box on-tree. This
compares to a season average price
of $1.63 per box for the 100 mil-
lion box orange crop of 1965-66.5


'USDA, Florida Crop and Livestock Reporting Service, "Florida Agri-
cultural Statistics, Commercial Citrus Inventory, December, 1967." p. 6.
'IFAS, University of Florida, "The Dare Report," 1964.
'USDA, Florida Crop and Livestock Reporting Service, "Florida Agri-
cultural Statistics, Citrus Summary, 1967 Issue," p. 16.


Table 5.-Bearing Acreage, Total Production and Value of All
1957-58 to 1966-67


Citrus in Florida,


Bearing Total On-Tree
-.Sason Acreage Production Value

Million Million
(000) Boxes Dollars
1957-58 493.6 116.4 213,138
1958-59 490.6 126.2 289,769
1959-60 508.2 125.7 220,021
1960-61 513.4 124.2 296,516
1961-62 548.1 153.7 247,258
1962-63 480.4 107.6 247,785
1963-64 455.3 89.6 331,889
1964-65 535.8 123.6 271,117
1965-66 596.4 140.5 222,418
1966-67 653.0 195.9 175,637

Source: USDA, Florida Crop and Livestock Reporting Service, "Florida Agricultural
Statistics, Citrus Summary, 1967 Issue," pp. 3-5.







IS THIS THE TIME TO INVEST?


There have been instances in re-
cent years in which individuals
have purchased groves and paid
for them with the returns from a
few crops of fruit as the groves in-
creased in value. Both the general
price situation and good yields
were favorable for such successes.
A productive grove in the hands
of a capable grower or manager
has always been a good invest-
ment, but low-producing groves
have seldom proven to be good
investments in the long run.
Average-producing groves may be-
come poor investments in-an eco-
nomic depression.
Groves which can be bought and
paid for quickly under favorable
circumstances can be lost just as


quickly under unfavorable condi-
tions. One or two years of low
yields or extremely low prices
would make difficult the payment
of the interest and principal on a
mortgage. It has been pointed out
that lower prices per box are ex-
pected as the supply of fruit in-
creases.
Some people believe that an eco-
nomic depression is impossible or
at least unlikely because of gov-
ernment efforts to support farm
income and safeguard the economy
generally. They may be right, but
pressure from increasing produc-
tion costs, taxes, higher interest
rates, larger supplies and substi-
tutes for citrus products could
place a severe strain on the in-
come of individual grove owners.


COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME ECO
(Acts of May 8 and June 30, 1914)
Agricultural Extension Service, Uhiversity of Florida, and United States
Department of Agriculture, Cooperating,
M. O. Watkins, Dean