Australia Pipfruit Industry Orchard Business Analysis and Model

Transcription

1 NOVEMBER 2009 FUTURE ORCHARD 2012 WALK Australia Pipfruit Industry Orchard Business Analysis and Model Data collected by Ross Wilson, Steve Spark, Craig Hornblow and Kevin Manning Data compiled and report produced by Ross Wilson, Carla Emms and Deanna Corbett All of AGFIRST Introduction The objective of this modeling exercise was to determine the productivity and economic performance of the Australian pipfruit industry. This involved the collection of physical and financial data from 23 sets of orchard accounts, representing all pipfruit growing regions across the country. This data was then analysed and statistically compiled into an industry model (refer to the last three pages of this report). This model captures the current performance of the industry and provides: a benchmark for individual orchard comparisons, a tool for modeling different scenarios such as changes in markets and production, a means of benchmarking industry performance internationally. The model is based on an 88 ha property, of which 30 ha is planted in pipfruit. The data represents the 2008 crop. The model is published in full within the appendix of these notes. These notes should be read in conjunction with the accompanying presentation. The following summarizes the main points of the model under the following headings; Production and income Costs Net result International comparisons Production and income The model orchard comprises 8 apple varieties and 2 pear varieties; Fuji, Golden Delicious, Granny Smith, Jonathan, Pink Lady, Red Delicious, Royal Gala, Sundowner, and Packhams and WBC pear varieties. In 2008 the orchard picked a total of 2,719 bins (1,087 tonnes). Of this, around 69% (750 tonnes) was Class 1 fruit, and the remainder split almost evenly between Class 2 and process markets. Gross production The average gross production for the model is 36.3 tonnes per hectare. This level of yield is higher than what has been published as an industry average in the past (25-30 tonnes per hectare), which is probably due to the fact that the orchards analysed as part of the model were above average businesses. This average yield in the model is calculated across all blocks planted on the orchard, not just mature plantings, which should also be noted.

2 A large range in yield by variety can be observed, as seen in Figure 1 below. Granny Smith is the highest producer at an average of 44.4 tonnes per hectare. Jonathan is the poorest performing apple variety in terms of yield, at just 28.3 tonnes per hectare. WBC pears average just 19.5 tonnes per hectare in gross yield % Gross yield (tonnes/ha) % 60% 50% 40% 30% 20% 10% Class 1 recovery (%) 0 0% Gross yield Class 1 recovery Figure 1: Gross yield and class 1 recovery of the model orchard by variety While average production figures for the model are fair, when analyzing the individual orchard information that makes up this model, it is apparent that there is a range of performance within Australian orchards just as there is in any industry. Figure 2 below shows this range in gross yield for just one variety in the model Royal Gala. The average for the model is 30.4 tonnes per hectare, but individual orchard performance for the 22 growers with this variety ranges from 9 to 69 tonnes per hectare. While some of these lower yielding blocks may be young, the challenge is to raise the yield target across all blocks and reduce the number of under-performing orchards.

3 Model Gross yield (tonnes/ha) Figure 2: Range in Royal Gala gross yield across individual orchards within the model Recoveries The average Class 1 recovery for this model is 69%. A further 16% is Class 2 fruit, leaving 15% of harvested yield for processing. Again the variation in Class 1 recovery from orchard to orchard is large, as can be seen in Pink Lady, for example, in Figure 3. Here the average recovery for Pink Lady is 69% but ranges from 45% to over 90%. 100% 90% 80% Class 1 recovery (%) 70% 60% 50% 40% 30% 20% 10% 0% Model Figure 3: Range in Pink Lady Class 1 recovery across individual orchards within the model Returns The average Class 1 return achieved by the model is $1.88 per kilogram. For Class 2 fruit the average return is $0.86 per kilogram, and $0.13 for processing fruit. The 2008 year of study was recognized as a higher return year and may be above the long term average. The variety with the highest average return is Pink

4 Lady at $2.24 per kilogram, closely followed by Fuji at $2.19. The lowest paying varieties are the two pear varieties, and Granny Smith apples. Class 1 returns per kilogram by variety for the model are outlined in Figure 4 below. $2.50 $2.00 Class 1 return ($/kg) $1.50 $1.00 $0.50 $0.00 Figure 4: Average Class 1 returns by variety for the model Revenue The average revenue from fruit production in the model is $52,825 per hectare (before post-harvest costs are deducted). With the variability between orchard yield performance, recovery, and price, this figure ranges from $21,000 to over $110,000 per hectare for individual orchards. This is the largest variation between different orchard business s and needs to be the primary focus of each orchard business going forward. As an orchard gate return, the average revenue for the model is $34,073 per hectare (with a range of $19,000-$85,000 per hectare). These figures can be seen in Figure 5 below.

5 $120,000 $100,000 Revenue ($/ha) $80,000 $60,000 $40,000 $20,000 $0 Model Orchard gate revenue Post-harvest cost Figure 5: Range in revenue across individual orchards within the model Costs of production The total on-orchard production cost for the model is approximately $600,800, which is around $20,000 per hectare. A further $562,574 of post-harvest expenses are then incurred, bringing the total cost of production to just over $1.16 million. The breakdown of production costs on a per hectare and per gross kilogram basis is shown in Table 1 below, and explained further in the following text. Table 1: Average costs of production for the model Cost per hectare ($/ha) Cost per gross kilogram ($/kg) Total 38, Less post-harvest costs 18, Orchard gate costs 20, Composed of Labour 11, Working expenses 5, Overheads 2, NB These costs do not include wages of management or depreciation Post-harvest costs At a total cost of $0.52 per gross kilogram ($207 per 400 kilogram bin), post-harvest costs represent 48% of total production costs on a gross kilogram basis. This is the total cost for packing, packaging, coolstorage, freight to market and additional costs such as waxing and Smartfresh Labour cost The total labour cost for the model is $11,778 per hectare, which consists of all labour expenses on the orchard - harvesting, pruning, thinning, employment levies and other tasks. Harvesting is the principal labour expense for the model, averaging $0.10 per kilogram ($39.11 per 400 kilogram bin). Pruning and thinning are both around $1,700 per hectare on average, and other wages comes to $3,363 per hectare. These labour costs do not include an allowance for the owner/operators time.

6 Orchard working expenses Orchard working expenses for the model average $5,900 per hectare. The largest expense is weed and pest control (sprays and chemicals) at $2,250 per hectare. Repairs and maintenance are also a significant expense at $1,070 per hectare, followed by fuel at $853 per hectare. Orchard overheads Orchard overheads for the model are an average of $2,340 per hectare. A large proportion of this in the model is the cost of water. This is an expense for only some regions of Australia but is so significant in those regions that it has to be included in an Australian industry model. Non-cash items The model also has some non-cash expenses such as depreciation and wages of management. Depreciation on plant and equipment for the model is $51,150 or $1,705 per hectare. Wages of management is a calculation that allows for the owners contribution to the business and represents the opportunity cost of their time. For this model, wages of management is calculated to be $55,000. After allowing for non-cash items, the total cost of production for the model comes to $1.27 million. This equates to $42,300 per hectare or $1.17 per gross kilogram. The total orchard gate cost of production (which includes depreciation and wages of management but excludes post-harvest costs) is $707,000, which equates to $23,570 per ha and $0.65 per gross kilogram. Net result This model orchard returns a cash operating surplus of $14,045 per hectare. After interest, rent/lease costs, depreciation and tax are allowed for, the net orchard profit after tax is $7,155 per hectare or $0.20 per gross kilogram of production. The range in orchard profit after tax varies significantly between individual orchards in the model as can be seen in Figure 6 below, which also shows the average (green line), upper (blue line) and lower quartiles (red line) of this data.

7 $60,000 $50,000 $40,000 NTP ($/ha) $30,000 $20,000 $10,000 $ $10,000 Figure 6: Range in net trading profit across individual orchards within the model For this 30 hectare planted orchard, around $47,000 is spent on capital purchases such as new machinery and just under $64,000 is spent on orchard development approximately 4% of total revenue (6% of orchard gate revenue). Average drawings are $55,000. International comparisons International comparisons are historically very difficult to achieve accurately due to the different ways countries record their costs. For the purposes of this study AgFirst have attempted to standardize cost breakdown as accurately as the data source allows. Readers need to treat this data as a guideline only. Where monetary values are stated, these have been converted to Australian dollars at the current exchange rate at the time of writing (1 AUD = NZD, EUR, USD). As can be seen in Table 2 below, the cost of producing a kilogram of Class 1 apples in Australia is higher than the other countries studied. However assuming other countries were able to export fruit to the Australian market, the CIF costs (shipping, insurance, in market costs) these exporting countries would incur would bring some equivalence.

8 Table 2: Cost of producing a kilogram of Class 1 apples (in AUD) in comparison to other pipfruit growing countries Australia New Zealand Chile Italy USA China On-orchard costs Post Harvest Costs CIF costs 2 N/A N/A N/A N/A Total Post-harvest costs are to the point of market in Australia, Italy, USA, China and to free on board for NZ and Chile 2 CIF costs are the costs in getting the fruit to market (USA) and in market costs for NZ and Chile. It does not include commissions or promotion. Figure 7 shows the graphical illustration of this data, with on-orchard production costs broken down further into labour costs, working expenses and overhead expenses. $2.50 Cost of producing 1 kilogram of Class 1 fruit $2.00 $1.50 $1.00 $0.50 $0.00 Aus (36 t/ha) NZ (56 t/ha) Chile (50 t/ha) Italy (55 t/ha) USA (42 t/ha) China (16 t/ha) Labour cost Working expenses Overhead expenses Post-harvest costs CIF costs Figure 7: International comparison of production costs Although the Australian average cost of production is high by international standard, there is a significant proportion of Australian growers that have costs of production similar to NZ, Italy and USA as demonstrated in Figure 8 below. Although the average FOB cost of production is $1.55/Class 1 kg, 9 of the 23 business s analysed had cost of production at close to $1.00/Class1 kg.

9 Cash orchard expenditure per c1kg $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ Figure 8: Range of Cost of production for the 23 business s studied. Figure 9 below depicts labour input across several pipfruit-growing countries on a per hectare and per Class 1 tonne basis. Per ha is the bar graphs and per tonne is the line graph Labour hours per ha Labour hours per Class 1 tonne 0 Australia Chile NZ USA South Tyrol 0 Figure 9: International comparison of orchard labour hours Figure 8 shows that Australia is similar to USA and South Tyrol in terms of labour hours spent per hectare. It is also comparable to USA and New Zealand in terms of hours spent per marketable tonne.

10 The countries that show a differential between the bar and the line point on Figure 6 represent higher yields per hectare. For example, South Tyrol has only a slightly lower labour input per hectare compared to Australia, but labour hours per tonne are much lower as yields are higher. Reducing labour input is not always the answer to increasing labour efficiency. The primary focus for increasing labour efficiency in the Australian pipfruit industry is to increase marketable yield per hectare. Summary AgFirst strongly believe that the Orchard Business Analysis carried out in 2009 has produced a robust set of data that individual orchard owners and the industry alike can use for a multitude of purposes. Data on its own is purely academic ~ the real strength of this project will be how the data is used to identify strengths and weakness and therefore lead to continual improvement. One year s set of data is highly useful however AgFirst would recommend the industry repeat this exercise annually, to be able to measure change and keep track of the industries performance. AUSTRALIA PIPFRUIT ORCHARD MODEL A model has been created as is shown on the following three pages. It brings all of the data into a consolidated form for better understanding. The model reflects a typical Australian orchard in terms of orchard size, production and financial outcome. The year studied was predominately The financial result is the income received for the 2008 crop and the expenses to grow the 2008 crop. Its is not a pure financial year. It is an owner operator property. Of the 23 business s studied, 5 packed their own fruit and the remaining 18 had their fruit contract packed. Post harvest costs are a weighted average of the two methods. Term used that may need explanation include: TCE: Tray carton equivalent = 18.4kg packed weight and 18.0 kg sale weight. Bin = 400 kg fruit weight

11 AUSTRALIA PIPFRUIT ORCHARD MODEL 2008 Total Area (Owned and leased) ha 88.0 Planted Area ha 30.0 Unproductive plantable area ha 0.0 Productive planted area ha 30.0 Effective Area ha 30.0 Total Crop (tce) tce 60,427 Total Crop (kgs) kg 1,087,684 Class 1 Crop (tce) tce 41,766 Class 1 Crop (kgs) kg 751,796 Bins (400kg) 2,719 Wages of Management $ $55,000 INCOME 2008 Actual $ WHOLE PER PER PER PER PER PER ORCHARD PLANTED TCE BIN KG TCE KG HA GROSS GROSS CLASS 1 CLASS 1 Pipfruit income 1,584,750 52, Other orchard income Total Orchard Income 1,584,750 52, Post harvest costs 562,574 18, Orchard Gate Income 1,022,176 34, Orchard working expenses 600,822 20, Cash operating surplus 421,354 14, Interest 52,590 1, Rent &/or lease 10, Depreciation 51,150 1, Orchard profit before tax 306,664 10, Taxation (@ 30%) 91,999 3, Orchard profit after tax 214,665 7, add back Depreciation 51,150 1, Off-orchard cash income 64,320 2, Discretionary cash 330,135 11, Applied to: Net capital purchases 47,010 1, Development 63,480 2, Drawings 54,570 1, Principal repayments 5, New borrowings Introduced funds Cash Surplus/Deficit 159,885 5, Orchard surplus for reinvestment 211,245 7,

12 AUSTRALIA PIPFRUIT ORCHARD EXPENDITURE 2008 Total Area (Owned and leased) 88.0 Planted Area 30.0 Total TCE 60,427 Total KG 1,087,684 Class 1 TCE 41,766 Class 1 KG 751,796 Bins (400KG) 2,719 ORCHARD WORKING EXPENSES 2008 Actual $ WHOLE PER PER PER PER PER PER ORCHARD PLANTED TCE BIN KG TCE KG HA GROSS GROSS CLASS 1 CLASS 1 Packing and Packaging 412,111 13, Coolstorage & Freight (coolstore to market) 134,752 4, Freight (orchard to packhouse) 15, TOTAL POST-HARVEST COSTS 562,574 18, Hand harvesting 106,351 3, Pruning 51,030 1, Thinning 51,060 1, Other wages 100,890 3, Employment levies 44,010 1, TOTAL LABOUR EXPENSES 353,341 11, Weed & pest control 67,590 2, Pollination 1, Fertiliser & lime 17, Electricity 7, Vehicles 12, Fuel 25, Repairs and maintenance 32,100 1, Sundry expenses 11, Frost protection Contract machine work 2, TOTAL OTHER WORKING EXPENSES 177,240 5, Rates 4, Water rates 21, General insurance 7, Crop insurance 2, ACC - owner 2, Communication 3, Accountancy 3, Legal & consulting 2, Levies and Compliance 8, Other administration 13, TOTAL OVERHEAD EXPENSES 70,241 2, TOTAL ORCHARD WORKING EXPENSES 1,163,397 38, Wages of management 55,000 1, Depreciation 51,150 1, TOTAL COSTS OF PRODUCTION 1,269,547 42, POST HARVEST COSTS 562,574 18, ORCHARD GATE COST OF PRODUCTION 706,972 23,

13 AUSTRALIA PIPFRUIT ORCHARD PRODUCTION & INCOME DETAILS 2008 Planted Area % AREA (HA) YIELD PER HA (TCE) YIELD PER HA (TONNES) GROSS YIELD (KGS) Gross Yield % CLASS 1 RECOVERY (%) CLASS 2 RECOVERY (%) Process RECOVERY (%) CLASS 1 RETURN ($/KG) CLASS 2 RETURN ($/KG) PROCESS RETURN ($/KG) REVENUE ($) Variety 30.0 Fuji 12% ,213 11% 64% 21% 15% ,568 Golden Delicious 5% ,265 5% 75% 12% 13% ,799 Granny Smith 12% ,797 15% 60% 13% 27% ,829 Jonathan 4% ,934 3% 76% 14% 10% ,150 Pink Lady 20% ,844 22% 69% 18% 13% ,755 Red Delicious 10% ,644 10% 76% 17% 7% ,721 Royal Gala 20% ,412 17% 75% 15% 10% ,033 Sundowner 7% ,940 8% 75% 12% 13% ,881 Packhams 6% ,243 6% 63% 13% 24% ,143 WBC 4% ,393 2% 52% 12% 36% ,871 Totals 100% ,087, % 69% 16% 15% $1.88 $0.86 $0.13 $1,584,750