Use of Interactive Budgets in Fruit Production

Transcription

1 Use of Interactive Budgets in Fruit Production Jennie Popp, Ph.D. Germán Rodríguez, Ph.D. Curt Rom, Ph.D. Elena Garcia, Ph.D. Heather Friedrich, M.S. Jason McAfee, M.S. Luke Freeman, M.S. Center for Agricultural and Rural Sustainability Division of Agriculture University of Arkansas Horticulture Industry Show Annual Meeting January 17, 2015 Fort Smith, AR

2 Fruit Production Budgets Tools used to assess costs and revenues associated with production Traditionally paper based Require large amount of information from producers to work

3 New CARS Decision Support Tools Interactive Budgeting: Computer based; User specifies input, tool automatically makes calculations User Friendly Little computer knowledge required Little data input needed True Decision Support Assess costs, revenues as well as breakevens (and for most tools, risk)

4 Fruit Production Decision Support Tools Available! Visit the Specialty Crop Section of the CARS website or

5 Fruit Production Decision Support Tools Coming Soon! Visit cars.uark.edu for release info

6 Presentation Objective Describe the benefits of CARS Decision Support Tools Walk through some examples using the strawberry budget

7 Traditional Budgets Calculate net returns for one year Are estimated on a one acre basis

8 Our Budgets Budget Tool/ Capability Apple Annual Calculations X X X X X Multi Year Calculations X X X X Variable Farm Size X X X X X High Tunnel and Field Options X X X X Breakeven Analysis X X X X X Sensitivity Analysis X X X X X Risk Analysis X X X X X What does this mean? Blackberry Blueberry Raspberry Strawberry

9 Capabilities Multi-year present value of net benefits In addition to giving annual return values, the tools calculate what the value of all net revenues generated over all years are worth today Variable Farm Size Can estimate costs and returns based on portions of an acre (e.g., 0.25 acre or 2.35 acres)

10 Capabilities: Breakeven Analysis Breakeven Point Point at which costs and revenues are equal Can be calculated for Breakeven Price Breakeven Yield

11 Breakeven Price Given yields and costs, what price do I need (on average over time) to break even? Total Cost Over Time Expected Yield Over Time Breakeven Price

12 Breakeven Yield Given market prices and costs, what yield do I need (on average over time) to break even? Total Cost Over Time Expected Market Price Over Time Breakeven Yield

13 Capabilities: Sensitivity Analysis What if? analyses How different values of an input impact final result What if: My yields over time are actually higher/lower than I predict? The market price for the fresh/processing market over time is higher/lower than I predict?

14 New Section: Risk Analysis A technique that calculates the probability of obtaining a net present value of returns greater than a specific dollar target What is the probability that I will earn a net present value greater than $90,000?

15 Importance of The Tool Allows the user to make more informed decisions by Comparing costs/revenues of different production practices Estimating impacts of changes in yield/prices on the solvency of the operation Assess the economic risk associated with a particular production system Assessments can be made hypothetically; without having to actually change practices

16 Decision Support Tool Example Sustainable Strawberry Production

17 Main Menu

18 User s Guide

19 Quick Start Menu

20 Start: User Input Tool can run two production systems (Field or High Tunnel):

21 User Input: Field Production Userform opens with default values

22 User Input: High Tunnel Production Userform opens with default values

23 User Input: Run Once data are entered or selected click run.

24 Summary The tool will generate total costs, gross revenues and net returns

25 How to Change Levels of Activity or Prices Click on a red button associated with any of the seven categories. The selected category will be highlighted on green.

26 How to Change Levels of Activity or Prices Here you can change: Activities Quantities Prices Once changed, the tool will recalculate all costs and returns

27 Breakeven Analysis Expected values using the input entered when high tunnel production was chosen. Summary of Breakeven yields and prices. Click the Breakeven Analysis Icon located in the summary page to see calculations in more detail. These calculations will be updated if initial inputs are edited or new input is entered.

28 Breakeven Analysis: Calculations

29 Sensitivity Analysis What if? analyses How different values of an input impact final result What if: My yields over time are actually higher than I expected? The market price for the fresh market over time is higher than I expected?

30 CASE 1 (Yield 1.50 lb/plant) CASE 2 What if yield increased by 0.10 lb/plant everything else constant

31 Risk Analysis The tool also calculates the risk associated with this operation by entering some require information.

32 Risk Analysis The tool also calculates the risk associated with this operation by entering some require information. BASELINE - Field COMPARISON SCENARIO EXAMPLE: suppose we change the production system from Field to High Tunnel

33 Risk Analysis By changing production systems, the likelihood of getting returns of $10,000 or more increases but there is a 95% change of obtaining negative net returns. Before Field Production After High Tunnel Production

34 Lots to this Tool! The capabilities of this tool are great But at the same time it can be used to answer very simple questions alone Built to be flexible, based on the needs of the user

35 Get Your Decision Support Tools for Apple and Strawberry Production Now! Take CD with you today Send an to CARS to request CD copy or go to for free download

36 Tools for Blackberries, Raspberries and Blueberries in Development Blackberry, Raspberry and Blueberry tools coming in spring Watch CARS website for announcements of releases

37 Visit Our Website Center for Agricultural and Rural Sustainability Look under Food Industry Program pages for more information

38 Thank You For more information Jennie Popp German Rodriguez Center for Agricultural and Rural Sustainability

39 Similar Example for Sustainable Apple Production

40

41 Quick Start Menu

42 Help Menu

43 User s Guide

44 Start Tool can be run two ways: User input Demo

45 Start Tool can be run two ways: User input Demo

46 By clicking on the Full Production Yield button, a new screen will appear that allows the user to change the expected yields for the fresh and processing markets for each production year.

47 Similarly, annual prices can be changed by clicking the Full Production Price button.

48 Run Once data are entered (or demo is chosen) click run.

49 Summary The tool will generate net returns for each year of production

50 How to Change Levels of Activity or Prices Click on a gray button associated with one of the years

51 How to Change Levels of Activity or Prices Here you can change - Quantities - Prices - Activities Once changed the tool will recalculate all costs and returns

52 How to Change Levels of Activity or Prices Added - Poultry Litter - 1 ton/acre - $12

53 Before After

54 Economic Analyses After Click on the Gray Economics Button at the top of the Summary screen

55 Economic Analyses Shows a Summary of the Current Situation and A Breakeven Analysis

56 CASE ONE Full Production - 45 lbs/tree; Fresh Market 80% ($1.0 lb...); Processed Market 10% ($0.15/lb.)

57 CASE TWO 5 lbs yield increase per tree each year Full Production 50 lbs/tree; Fresh Market 80% ($1.0/lb.); Processed Market 10% ($0.15/lb.)

58 CASE ONE Full Production - 45 lbs/tree Fresh Market 80% Processed Market 10% Constant Price CASE TWO 5 lbs yield increase per tree Full Production 50 lbs/tree Fresh Market 80% Processed Market 10% Constant Price

59 Comparing Cases Shows a Summary of the Current Situation and A Breakeven Analysis

60 CASE ONE Full Production - 45 lbs/tree Fresh Market 80% Processed Market 10% Total Costs $162,066 (18-yr) To breakeven - cover total costs lbs per tree each year or 209,942 lbs $162,066/209,942 lbs = $0.77/lb. Cover total costs but no profits However, producer is expecting: $1.00/lb. fresh market and $0.15/lb. processed market 45 lb... per tree/year With those prices and yields, the orchard will breakeven after 7 years or $67,902 After year 7, the orchard produces profit every year Net Profit $96,756 (18-yr) CASE TWO 5 lbs yield increase per tree Full Production 50 lbs/tree Fresh Market 80% Processed Market 10% Total Costs $163,731 (18-yr) To breakeven - cover total costs lbs per tree each year or 209,725 lbs $163,731/209,725 lbs = $0.78/lb. Cover total costs but no profits However, producer is expecting: $1.00/lb. fresh market and $0.15/lb. processed market 50 lb... per tree/year With those prices and yields, the orchard will breakeven after 6 years or $58,024 After year 6, the orchard produces profit every year Net Profit $127,457 (18-yr)

61 Risk Analysis We can calculate the risks associated with this operation by answering some questions under risk analysis

62 Yield Usage Fresh Price Processed Price Costs

63 Risk Analysis We can calculate the risks associated with this operation by answering some questions under risk analysis Suppose we raise most likely yields in the first three years by 5 lbs/ac

64 Risk Analysis If expected yield increases, we increase the likelihood of getting returns of $90,000 or more over the life of the orchard. Before With Higher Yields

65 Risk Analysis We can calculate the risks associated with this operation by answering some questions under risk analysis Suppose we raise our desired net returns to $100,000 over the life of the orchard?

66 Risk Analysis If expected returns increases, we decrease the likelihood of reaching that level Expecting $90K Expecting $100K