Historic note
 Front Cover
 Back Cover

Group Title: Circular - University of Florida Institute of Food and Agricultural Sciences ; 458
Title: Budgeting a Florida citrus operation
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00067083/00001
 Material Information
Title: Budgeting a Florida citrus operation
Series Title: Circular
Physical Description: 15 p. : ; 28 cm.
Language: English
Creator: Abbitt, Ben, 1940-
Muraro, R. P
Spyke, Pete
Humphrys, Brooks
University of Florida -- Institute of Food and Agricultural Sciences
Florida Cooperative Extension Service
Publisher: Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Publication Date: 1979
Subject: Citrus fruit industry -- Costs -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
Statement of Responsibility: Ben Abbitt, Ron Muraro, Pete Spyke and Brooks Humphrys.
General Note: "9-7.5M-79"--P. 4 of cover.
Funding: Circular (Florida Cooperative Extension Service) ;
 Record Information
Bibliographic ID: UF00067083
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 51214352

Table of Contents
    Historic note
        Unnumbered ( 1 )
    Front Cover
        Front Cover
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
    Back Cover
        Back Cover
Full Text


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

site maintained by the Florida
Cooperative Extension Service.

Copyright 2005, Board of Trustees, University
of Florida

Circular 458

Budgeting A Florida
Citrus Operation

Ben Abbitt, Ron Muraro, Pete Spyke
and Brooks Humphrys

Florida Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville
John T. Woeste, Dean for Extension



Budgeting A Florida Citrus Operation

Ben Abbitt, Ron Muraro, Pete Spyke
and Brooks Humphrys


Managing a citrus operation requires making choices among many
different production practices. Performing an economic evaluation of
these practices requires records of yields and of materials and labor
used and a consideration of prices paid and received. A citrus enter-
prise budget systematically lists yields, product prices, quantities
and costs of materials, and cultural practice costs for a production pe-
riod [1].
With this systematic arrangement of data, growers can evaluate
the effects that changes in production methods will have on future
costs and revenues, and thereby facilitate physical and financial
planning. Thus, citrus enterprise budgeting is one management tech-
nique which can assist growers in their decision making.

A Citrus Enterprise Budget

An example budget (Table 1) is provided for round oranges.' The
cost and return figures represent the present general conditions in
Florida's processing (concentrate) citrus fruit industry [11]. Where
production practice differences exist between these data and specific
grove operations, practices can be adjusted to reflect the specific cit-
rus operation.
The example budget is used to explain the budgeting procedure. It
represents a 20-year-old, mature, irrigated round orange grove pro-
ducing fruit under top management and located in the central or
ridge area of Florida. Top management is defined as management de-
cisions based upon up-to-date production and price information with
good trees and land, and optimum timing of production practices. The
rootstock is rough lemon and the fruit is sold for processing. Tree
spacing is 25' x 25' (70 trees per acre) and yield per acre is estimated
at 333 boxes (90 lbs. or 13/5 bushel equivalents).

Abbitt was area economist, Food and Resource Economics Department, Uni-
versity of Florida, AREC, Lake Alfred. He is currently assistant general manager,
Florida Sugar Cane League, Clewiston. Muraro is area economist, Food and Re-
source Economics Department, University of Florida, AREC, Lake Alfred. Spyke is
county extension agent, Vero Beach. Humphreys is multi-county extension citrus
agent, Cocoa.
'Hamlin, Pineapple, Parson Brown and Valencia varieties.

The production practices are for a year-long period. Production
costs are derived from an annual survey of caretakers providing cus-
tom work for citrus growers [1]. Costs reported for each production
practice include both the caretaker's variable cost and fixed cost for
all resources used in the production period. Variable costs are out-of-
pocket, cash costs that are affected by production practices during the
production period. Outlays for fuel, fertilizer and spray materials are
examples of variable costs. Fixed costs are cash or non-cash costs that
are not affected by production practices during the production period.
Property taxes are a cash fixed cost while depreciation on an irriga-
tion system is a non-cash fixed cost. The sum of the caretaker's vari-
able and fixed costs is the grower's costs for hiring caretakers to
perform production practices in the production period.
It is assumed that the example grove has a permanent overhead ir-
rigation system. The following analysis breaks down the grove owner's
irrigation costs into variable (operating) cost and non-cash fixed (de-
preciation) cost categories.

Estimating Gross Revenue

Estimates of yield and price are necessary to determine expected
gross revenue from the citrus operation. In the example budget, a
projected gross revenue of$1,315.35is obtained by multiplying the
333 number of boxes expected for sale by the expected on-tree price
per box2 of $3.95 [11]. Yield estimates should be based on production
in previous years or, if records are unavailable, on published esti-
mates [7, 11, 13]. Price forecasts are published by the Florida Coop-
erative Extension Service [8] and Florida Citrus Mutual [5].

Schedule of Production Practices

A beginning step in constructing a budget is to list the production
practices (Table 1). For convenience, it is advantageous to also list all
practices in a month by month schedule as shown in Table 2 [11].
Doing so allows the grower to base his production practices on the
availability of needed resources.
The important office and grove practices that must be carried out
regarding any management decision originate from a schedule of
production practices. Timing can sometimes make a difference on the
effects a production practice has on fruit production. For example, the
timing of selected sprays directly influences the success of eliminat-
ing or reducing pests and diseases that affect tree vigor, yield, and
fruit quality. Building a schedule of production practices can help the

2Average price for fruit delivered to processing plants minus pick and haul charges.

Table 1. Estimated annual per acre costs and returns for a 20-year-old mature, irrigated, round orange grove on rough lemon
rootstock producing citrus for processing in central Florida 1977-78a



I. Gross revenue
II. Expected costs
Spray program
Weed control
Pruning (maintenance)
Chopping brush
Tree replacement and care
Pulltrees and remove
Prepare site, plant and ring
Bankand unbank
III. Management
IV Total specified costsd (II + 111)
V Return to land and trees (I IV)

333 boxes @ $3.95

Three spray applications

16-0-16,832 Ibs.
2 @ $3.89

/ ton @ $10.67
1 ton every third year

Krovar II, 2 Ibs./acre


($225/hr. + 8.5 acre/hr.) 3 years
($70.17/hr. 4 acre/hr.) + 2 years
Custom rate
13.2 inches/year

1.4 trees/acre
(Includes trees)
(Avg. 14 waterings)
(Includes application)

5% of gross sales




$ 3.57


- 48.55




$ 394.12
$ 921.23


aBased on custom rates. Costs should be adjusted to fit the individual grove situation. All costs are variable cash costs except where noted.
blncludes $73.00 per acre of fixed, non-cash costs; variable cash operating costs are $28.05 per acre.
'Other methods to estimate a management cost are used in the industry. Other selected methods will give different return to land and trees than reported
dDoes not include interest on grove valuation, land taxes, costs for cold protection, or opportunity cost of operating capital.

Table 2. Schedule of production practices in central Florida citrus groves

Post bloom
Summer oil
Fertilizer (custom)
Dolomite (custom)
Weed control
Hand (pulling vines)
Hegcing (custom)
Topping (custom)
Tree replacement
Pull trees
Prepare sites
Plant resets
Weed control

Jan. Feb. Mar. Apr.




May June July Aug. Sept. Oct. Nov. Dec.


x x X X


_______x ^

x X



aThis is a suggested schedule of practices. Actual practices would not necessarily be
performed on the exact schedule shown here.
bX = Month production practice is normally performed.

timeliness of most grove operations [10]. Growers can categorize de-
cisions they make by their importance. These decisions can then be
organized as to when, how, and who will carry them out, and how
much they will cost. For example, in the schedule of production prac-
tices, dead and diseased trees will be pushed up, removed from the
grove, and resets (young trees) planted between February and June.
Equipment should be readied and labor arranged before February so
the scheduling could be met. The indicated practices are easily trans-
lated into budgeted costs. For example, if 100 acres of grove were ex-
pected to average 1.4 resets per acre, then $4,082 would be necessary
for the job [100 acres x (40.82), Table 1].
Though not shown in Table 2, management and labor time (hours)
necessary for particular production practices can be derived. These
estimates, which should include "down time" for moving of equip-
ment and labor between groves can help growers in deciding whether
or not to contract out certain production practices on non-adjacent
and distant groves from their grove headquarters.

_I_ _

Budgeting and record keeping go hand in hand with the time tested manage-
ment tool-bootprints in the grove-in progressive Florida citrus operations.


Estimating Quantities, Prices and Costs of Inputs

The quantities per acre of the individual inputs3 such as spray ma-
terial and fertilizer required for each production practice should be
listed (Table 1). The previous year's production records can provide in-
put quantities actually used. Recommendations on spray applica-
tions and fertilization requirements can be obtained from the Florida
Cooperative Extension Service [6, 4].
Input prices are also needed to estimate the expected annual cost
for each production practice. They can be based on previous years'
prices, with adjustment for expected changes; on current prices sup-
plied by local dealers; or on price forecasts developed by USDA and
supplied by the Florida Cooperative Extension Service [8, 11].
The annual input cost for each production practice is calculated by
multiplying the input quantity by the expected price. For example,
the total input cost of the fertilization program in the example budget
is $48.55 per acre (832 pounds of 16-0-16 x $4.90/hundred pounds +
2 applications at $3.89/acre/application). The total budget input cost
for chemical weed control is $13.83 per acre (2 lbs. of Krovar II x
$5.08/lb. + 1 application at $3.67). Costs for other production prac-
tices are estimated in a similar manner.

Estimating Management Cost

Groves under contract to caretakers, corporations, and cooperatives
normally incur a management charge which represents the time and
expertise used in carrying out all the production practices in the
grove. The management charge is frequently estimated as 5% of gross
sales [3, 11]. This amounts to $65.77 in the example budget($1,315.35
x .05). Management costs calculated this way will fluctuate, since
yields and fruit prices vary. Other methods to estimate management
costs are also used in the industry [12]. For example, cooperatives
often charge a percentage of total production costs as the manage-
ment cost to grower members. These percentages vary among coop-
eratives and their members. Management cost to grower members of
cooperatives will.also differ from the management cost of owner-man-
aged groves. For instance, owner-managers who do not place a value
(cost) on time spent managing grove operations may not include a
management cost in their budgets. Thus, budgeted management costs
for different grove operations may vary widely.

'The use of trade names in this circular is solely for the purpose of providing specific infor-
mation. It is not a guarantee or warranty of the products named, and does not signify they
are approved to the exclusion of others of similar composition.

Estimated Total Costs

Total expected cost of the citrus enterprise is the sum of the annual,
individual production costs. Per acre production costs for fertiliza-
tion, weed control, mature, young and dead tree care, and manage-
ment in the example grove totaled $394.12, Table 1. Annual total
production costs will vary. For example, annual production costs in
1974-75 were $324.35 [11]. In recent years, production costs have
been increasing 1% to 2% per year. Future increases in these costs will
undoubtedly fluctuate; therefore, these expected fluctuations should
be taken into consideration when budgeting for future years.

Return to Unpaid Factors of Production

Return to unpaid factors, land and trees (the resources used and not
charged as costs) is the difference between total revenue and total
costs. In the example budget, subtracting the $394.12 total cost from
the $1,315.35 gross revenue gives a $921.23 net return to land and
trees. Annual net return to land and trees will vary. For example, an-
nual returns to land and trees in 1974-75 were only $175.00 [11]. Be-
tween 1957-58 and 1976-77 average per acre return to land and trees
has varied from a high of $480.00 to a low of -$22.00 [2]. Therefore,
caution should be exercised when estimating net returns to land and
trees into the future and using one year's returns as a benchmark for
decision making.

Management Applications
Break-even Price Over Total Costs

A break-even price over total costs in the example budget is that
price per box which would just return the grower his total production
costs. Why is this price important to the grower? If he estimates that
the price per box he will receive will be less than his expected costs to
produce that box, he may decide not to custom hire a caretaker. Con-
versely, if the estimated price per box will be greater than his ex-
pected production cost, he will probably decide to contract a caretaker
to perform desired production practices.
A break-even price for round oranges can be estimated from the ex-
ample budget. The formula to calculate the break-even price is:
Break-even Total Cost of Production
Price Expected Fruit Yield

Substituting the figures from the example budget into the formula,
$12 gives a break-even on-tree price of $1.18 per box. The
grower would just cover his total production costs ($394.12) if he re-
ceives $1.18/box for his fruit. At any price over $1.18/ box, the grower
would realize a profit while at any price under $1.18/box, would re-
sult in a loss. In the example budget, the $3.95/box would more than
recover the $1.18/box expected production costs.
This break-even price does not include a charge for interest on grove
valuation, land taxes, cold protection, or an opportunity cost for the
capital invested in the short run. If these costs were included in the
budget, the break-even price would be greater than $1.18/box.
Producing citrus is unique because an annual crop is grown on a
perennial tree. Young groves normally do not begin returning net in-
comes above total costs until approximately eight or nine years of age.
To mature, these trees must be cared for (production practices, Table
2) through the developing years. Therefore, it is generally accepted
that growers experience net returns below total costs in the early
years after planting. However, consideration should be given before
hiring caretakers to perform production practices in older groves
whose net returns are consistently lower than total costs.

Evaluating An Additional Spray

Budgets can be used to estimate the impact of proposed changes in
citrus production methods. For example, how much additional yield
(boxes) is needed to cover the extra cost of another spray application?
If another spray is applied, spray costs will increase by approximately
$27.57 [11]. If yield is to be used to pay the increased production costs,
the $921.23 net return to land and trees will be increased only if the
revenue from the sale of oranges is increased by more than $27.57. If
the expected selling on-tree price is $3.95/box, then seven additional
boxes must be sold ( 7 ) to recover the $27.57 extra cost. Given
the $27.57 increase in spray costs, eight or more boxes must be sold
to increase the $921.23 net return to land and trees.
Changes in the expected price of citrus will increase or decrease the
additional boxes required to cover the extra cost of the additional
spray application. For example, if the expected on-tree price per box
is $2.15, then almost thirteen additional boxes are required ( $ )-57
to cover the $27.57 extra spray cost. Conversely, if the expected on-
tree price per box is $4.50, then only six additional boxes are required
( $7 ) to cover the extra spray cost. The impact of other proposed
changes in production methods can be analyzed in a similar manner.

Credit Needs

Lenders prefer well documented loan requests. Budgets can show
the basis for the capital being requested, and be a help in estimating
the borrower's repayment capacity. The ability to repay the note as
prescribed in the mortgage contract is an indication of repayment ca-
pacity. In short, a budget can be the backbone of a grower's "financial
package" (balance sheet, inventory of resources, etc.) that is desired
by most agricultural lenders.

Points to Remember

A citrus budget is a tool that can aid growers in their phys.ic; 1 and
financial planning for an uncertain future. When production prac-
tices, yields, and prices are uncertain and ,pel -t ing huldgets must be
developed and revised, budget projections become i!c rea ingly nec-
essary. Estimated input costs and product prices from published re-
ports take on added value when combined with common sense and
experience as budgets are constructed.
A budget portrays a specific situation representing the costs and
returns from one production period and one particular operation. Pe-
riodically updating a budget can provide growers with accurate infor-
mation for physical and financial decision making. Budget updates
are more easily done if accurate, annual, and stcic.,ble records are
readily available.
The budget presented represents grove production practices and
yields whose cost and return figures reflect top management. The ex-
amples may serve as budgeting aids for any grower who completes a
budget worksheet form such as the one in Table 3.

Table 3. Citrus operation budgeting worksheet
Item Description Amount


Gross revenue
Expected costs
Spray program
Weed control
Pruning (maintenance)
Chopping brush
Tree replacement and care
Pull trees and remove
Prepare site, plant and ring
Bank and unbank
Total specified costs (II + III)
Return to land and trees (I IV)






Table 3. Citrus operation budgeting worksheet

I. Gross revenue
II. Expected costs
Spray program
Weed control
Pruning (maintenance)
Chopping brush
Tree replacement and care
Pull trees and remove
Prepare site, plant and ring
Bank and unbank
III. Management
IV. Total specified costs (II + III)
V. Return to land and trees (I IV)








Table 3. Citrus operation budgeting worksheet

I. Gross revenue
II. Expected costs
Spray program
Weed control
Pruning (maintenance)
Chopping brush
Tree replacement and care
Pull trees and remove
Prepare site, plant and ring
Bank and unbank
Ill. Management
IV. Total specified costs (I1 + 111)
V. Return to land and trees (i IV)




$ _

$ _





Sources of Information

1. Abbitt, Ben, Ron Muraro, and John Otte, "Budgets and Records
Can Help You Plan Your Citrus Operation," The Citrus & Vegeta-
ble Magazine, Vol. 41, No. 12, August 1978.
2. Abbitt, Ben and John Holt, "Investing in Agricultural Land? Be
Careful," Feature Article in Florida Food and Resource Economics,
September-October, 1978, No. 24, IFAS. Gainesville, Florida.
3. Abbitt, Ben and Ken Townsend, "Opportunity Costs in Citrus
Production: What Are They?", Lake Alfred AREC Research Re-
port CS 77-1, August 1977.
4. Agricultural Experiment Stations, "Recommended Fertilizers and
Nutritional Sprays for Citrus," Bulletin 536C, December 1972.
5. Florida Citrus Mutual, "The Triangle," Newsletter, published
monthly except month of July, Lakeland, Florida.
6. Florida Cooperative Extension Service, "Florida Citrus Spray
Guide, 1978," Circular 393-D, January 1978.
7. Florida Department of Citrus, "Estimated Florida Oranges,
Temple and Grapefruit Production, 1972--73 to 1978-79," Cir-
cular 72.5.
8. Food and Resource Economics Department, "Outlook and Prices
of Florida Products and Inputs" (in the November-December is-
sue annually), Newsletter, IFAS, University of Florida, Florida
Cooperative Extension Service, Gainesville, Florida.
9. Holt, John, "What Are Costs," paper presented at Citrus Grove
Management Seminar, Tavares, Florida, October 1969.
10. Holt, John. "How to Improve Citrus Management Decisions," pa-
per presented at Citrus Management Seminar, Winter Garden,
Florida, October 1970.
11. Muraro, R. P. and Ben Abbitt, "Budgeting Costs and Returns:
Central Florida Citrus Production, 1977--78," Economic Infor-
mation Report No. 88, IFAS, University of Florida, July 1978.
12. Muraro, Ron and Ben Abbitt, "A Listing of Custom Rates from
the 1978 Ridge and Indian River Citrus Caretaker Surveys," The
Citrus & Vegetable Magazine Vol. 42, No. 2, October 1978.
13. Savage, Zach, "Citrus Yield Per Tree by Age," Agricultural Ex-
tension Service Economic Series 60-8, November 1960.

K. R. Tefertlller, director, in cooperation with the United States
Department of Agriculture, publishes this Information to further the
purpose of the May 8 and June 30, 1914 Acts of Congress; and Is
authorized to provide research, educational information and other
services only to individuals and Institutions that function without regard to race, color,
sex or national origin. Single copies of Extension publications (excluding 4-H and Youth
publications) are available free to Florida residents from County Extension Offices.
Information on bulk rates or copies for out-of-state purchasers Is available from C. M.
Hinton, Publications Distribution Center, IFAS Building 664, University of Florida,
Galnesvllle, Florida 32611. Before publicizing this publication, editors should contact
this address to determine availability.

This publication was printed at a cost of
$550 or 7.3 cents per copy to inform residents
about budgeting a citrus operation. 9-7.5M-79

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