Economics of Grove Management

Citrus ExpoAugust 2020

Ariel SingermanAssistant Professor / Extension Economist

Citrus Research and Education Center (CREC)singerman@ufl.edu

(863) 956-8870

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida, 2019/20

Source: University of Florida, IFAS, CREC

Costs represent a mature grove (10+ years old) including resetsCost peracre ($)

Weed Management 249.96Foliar Sprays 522.81Fertilizer 410.51Pruning (topping, hedging, chop/mow Brush) 53.84Irrigation1 192.41Total Cultural Costs without Tree Replacement 1429.53

Tree Replacement (6 trees) 292.46Total Cultural Costs with Tree Replacement 1721.99

Weed Management

$25014%

Fertilizer$41124%

Pruning $543%

Irrigation$19211%

Tree Replacement

$29217%

Insecticides$19511%

Fungicides$443%

Nutritionals$1167% Bactericides

$111%

Ground Applications

$1398%

Aerial Applications

$181%

Foliar Sprays$52331%

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Cost of Production for Processed Oranges in Southwest Florida by Program

220

141

58

171

10

204

528

33

201

281250

195

44

116

11

158

411

54

192

292

0

100

200

300

400

500

600

$ pe

r acr

e

2018/19 2019/20

Total Cost of Production per Acre for Processed Oranges in Southwest Florida, 2019/20

Cost per acre ($)Total Cultural Costs 1721.99Other Costs Interest on Operating (Cultural) Costs 86.10

Management Cost 136.69Property Tax/Water Management Assessment 28.73Interest on Average Capital Investment 121.55

Total Other Costs 373.06Total Costs 2095.05

Source: University of Florida, IFAS, CREC

45,000

95,000

145,000

195,000

245,000

Boxe

s (1,

000)

Orange Production in Florida

Source: USDA-NASS

USDA 2019/20 Forecast

2004 HurricanesCharlie (Aug 13, 2004)Frances (Sept 5, 2004)Ivan (Sept 15, 2004)

Jeanne (Sept 26, 2004)

Wilma (October 24, 2005)

Freeze (February 2006)

Irma (September 12, 2017)

6.54

6.116.24

5.27

5

6

7

Poun

d So

lids

per B

oxFlorida Oranges Pound Solids per Box

Valencias E & MSource: FDOC

0

50

100

150

200

250

300

350

400

450

500

Mill

ion

SSE

Gal

lons

Total: Brazil+Mexico Brazil MexicoSource: USDA-NASS

Orange Juice Imports from Brazil and Mexico into U.S.

0.50

1.00

1.50

2.00

2.50

3.00

$ pe

r PS

Non-Valencia Valencia

Delivered-in Prices for Processed Oranges in Florida

Source: USDA-NASS, FDOC

Weed Mgmt.$250

Sprays$523

Fertilizer$411

Pruning $54

Irrigation$192

Tree Replacement

$292

0

200

400

600

800

1000

1200

1400

1600

1800

$ pe

r acr

e

Total Cost:$1,722 per acre

Source: CREC, UF/IFAS

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Weed Mgmt.$250

Sprays$523

Fertilizer$411

Pruning $54

Irrigation$192

Tree Replacement

$292

0

200

400

600

800

1000

1200

1400

1600

1800

$ pe

r acr

e

Total Cost:$1,722 per acre

If price $1.02/PS,breakeven cost is

$488 per acre

Loss: $1,234 per acre

Assuming 5.41 pounds solids per box; harvesting $2.97 per box; FDOC assessment $0.07 per box

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Price per pound solids delivered-in (in dollars)0.85 1.02 1.25 1.50 1.90 2.05 2.18 2.50 2.53

Cost per acre (in dollars) Yield per acre (in boxes) needed for breakeven

488 313 197 131 96 67 61 56 47 46600 385 242 161 118 83 75 69 57 56700 449 282 188 138 97 87 80 67 66800 513 323 215 158 111 99 91 76 75900 577 363 242 177 124 112 103 86 85

1000 642 404 269 197 138 124 114 95 941100 706 444 296 217 152 137 126 105 1031200 770 484 322 236 166 149 137 114 1131300 834 525 349 256 180 161 149 124 1221426 915 575 383 281 197 177 163 136 1341585 1017 640 426 312 219 197 181 151 1491600 1027 646 430 315 221 199 183 153 1501700 1091 686 457 335 235 211 194 162 1601722 1105 695 463 339 238 214 197 164 1622095 1344 845 563 413 289 260 239 200 197

Breakeven Yield for Early and Mids

Assuming 5.41 pounds solids per box; harvesting $2.97 per box; FDOC assessment $0.07 per boxSource: CREC, UF/IFAS

Weed Mgmt.$250

Sprays$523

Fertilizer$411

Pruning $54

Irrigation$192

Tree Replacement

$292

0

200

400

600

800

1000

1200

1400

1600

1800

$ pe

r acr

e

If price $1.25/PS, breakeven cost is

$840 per acre

Loss: $882 per acre

Assuming 6.11 pounds solids per box; harvesting $3.05 per box; FDOC assessment $0.07 per box

Total Cost:$1,722 per acre

Cultural Cost of Production per Acre for Processed Oranges in Southwest Florida by Program

Price per pound solids delivered-in (in dollars)1.00 1.25 1.40 1.60 1.80 2.03 2.20 2.36 2.60

Cost per acre (in dollars) Yield per acre (in boxes) needed for breakeven

500 167 111 92 75 63 54 48 44 39555 186 123 102 83 70 60 54 49 43700 234 155 129 105 89 76 68 62 55840 281 186 155 126 107 91 81 75 66900 301 199 166 135 114 97 87 80 70

1000 334 221 184 150 127 108 97 89 781100 368 243 202 165 140 119 107 98 861200 401 266 221 180 152 129 116 106 941300 435 288 239 195 165 140 126 115 1021400 468 310 258 210 178 151 136 124 1101500 502 332 276 225 190 162 145 133 1171600 535 354 294 240 203 173 155 142 1251700 569 376 313 255 216 183 165 151 1331722 576 381 317 259 219 186 167 153 1352095 701 464 386 315 266 226 203 186 164

Breakeven Yield for Valencias

Assuming 6.11 pounds solids per box; harvesting $3.05 per box; FDOC assessment $0.07 per boxSource: CREC, UF/IFAS

500

1,000

1,500

2,000

2,500

3,000

3,500

$ pe

r acr

e

Revenue Valencia Total Cost Cultural Cost

Revenue and Cost per Acrefor Processed Valencia Oranges in Southwest Florida

• Cultural and total cost of production for 2019/20 estimated at $1,722 and $2,095 per acre, respectively. Down $125 and $175 compared to last year, respectively; largest reductions in fertilizer and nutritionals

• Those reductions are a response to the significant decrease in prices this season

• Taking into account only cultural cost, on average, growers sustained a loss of $1,234 and $882 per acre for early and mids and valencias, respectively

• Taking into account total cost, on average, growers sustained a loss of $1,606 and $1,254 per acre for early and mids and valencias, respectively

• Reducing cost of production to adjust to lower prices will have long-run consequences on grove productivity

Summary

• A high percentage of fruit will be out of contract in 2020/21

• Production is down in Brazil and in Mexico

• Processors that were not in the market this season likely to come back (due to their contracts with suppliers abroad expiring)

• Contract prices: What cost of production do they cover? Any margin left?

• Would an industry-wide advertising program stimulate demand?

• How to increase brix to compete with Mexico?

• Impact of Covid-19 on supply and demand

Considerations for 2020/21

Thank you for attention

My contact info:Citrus Research and Education Center

singerman@ufl.edu(863) 956-8870

www.crec.ifas.ufl.edu/economics/