Re-engineering Post-harvest Processing for Export Profits

Australia Can Export Apples Competitively

Re-engineer post harvest processing for export: four processes

Pack intoExport Bins

Store Directly Into Reefer

Mechanize Tipping And Grading

Remove DPA

Post-harvest processing and shipping costs for export

Post-harvest processing and shipping costs for export $/kg

Cost to Remove DPT Residues From Facilities Negligible

Mechanized Cost to tip/grade/pack into export bins and reefer 0.05

Rental Cost of Collapsible Export Bins 0.10

Shipping CIF to Asia/Europe 0.40

Total 0.55

Class A Apples Delivered CIF Europe AUD 80c or USD 56c/kg;USD0.84/kg CIF (90t/ha @90% packout, net before juicing sales)

Traditional Packing in Cartons Pack Directly in Export Bins

$/kg Running Total Running Total $/kg

Capital 0.206 0.206 0.206 0.206

Fixed Op 0.266 0.472 0.472 0.266

Variable Op 0.178 0.650 0.650 0.178

Tipping & CA 0.44 1.090

0.800.15

Packing 0.45 1.540

CIF AUD 0.400 1.940 1.200 0.400

CIF USD 1.358 0.850

USD Cost Delivered to Asia or Europe

AUD Cost Packed in Export Bins but not

Shipped

Cost at Farmgate: Capital Intensive for

90% Packout

Post-harvest processing costs for export: from $89c to 15c/kg

$-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Normal Export Pack

Packing

Tipping & CA

Export Bins

Traditional Packing Includes Tipping, CA, Packing Labor and Carton Costs

Direct, Mechanized Packing For Export Virtually Eliminates Packing, Carton and CA Costs

Combined post-harvest processing and export costs fall from $1.33 to $0.55/kg

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Normal Export Pack

CIF AUD

Packing

Tipping & CA

Export Bins

Traditional Packing Includes Tipping, CA, Packing Labor and Carton Costs

Direct Packing For Export Cuts Packing, Carton and CA Costs, So Cost to Process and Deliver Apples to Importing Countries Falls from AUD $1.33 to AUD $0.55/kg

Total Costs to Deliver Grade A Apples to Europe/Asia CIF: AUD 1.90 falls to $1.20/kg: or only USD 0.84/kg @ AUDUSD 70c

$-

$0.50

$1.00

$1.50

$2.00

$2.50

Normal Export Pack

CIF AUD

Packing/Ex-Bin

Tipping & CA

Variable Op

Fixed Op

Capital

Traditional Packing Includes Tipping, CA and Packing Labor and Carton Costs

Direct Packing For Export Cuts Packing, Carton and CA Costs Reducing over AUD cost to deliver apples to importing countries from AUD $1.91 to AUD 1.20

Profit From Export: From $0.92 to $1.66/kg Based On Last Year’s Ave. CIF Export Price for Australian Apples of 2.86/kg

$-

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Normal Export Pack

Profit

CIF AUD

Packing/Ex-Bin

Tipping & CA

Variable Op

Fixed Op

Capital

Why Not Build a Post-Harvest Export

Industry to Put a Floor Under the Australian

Apple Market?

END: Additional appendices follow

Appendix: Detailed Costs: Grading and Packing for Export

Packing for Export

Equipment 1,700,000 1,700,000

Lifetime 15 15

Depreciation 113,333 113,333

Interest: 5 vs 8% 85,000 136,000

Maintenance 20,000 20,000

Shed 600m2 @$40/m2 24,000 24,000

Subtotal Equip Costs 242,333 293,333

Shifts (6 day) 2 1

People/shift 7 7

hours/shift 48 48 apples/hr lanes rows/sec sec/hr apples/hr

Capacity/hr/lane 4 4 48,000 10 1 3600 36,000

Lanes 6 6

Production/week shift 2304 1152

Operating Weeks 20 20

Production tons 46,080 23,040

Labor Rate/hr 20 22

Labor Costs 268,800 147,840

Total Costs 511,133 441,173

Costs/ton 11.09 19.15

Overcome High Labor Costs by Investing Big in Best Practices

Per Hectare

Cap

Cost Life Interest Dep Cost/y $/kg Net USD

Capital 6%

Land 5000 -50 300 -100 200 0.002 0.002

Perm Water 12000 -20 720 -600 120 0.001 0.001

Irr Infra 3000 50 180 60 240 0.003 0.002

Irr Local 2000 20 120 100 220 0.003 0.002

Evap Cooling 2500 20 150 125 275 0.003 0.003

Trellis 15000 50 900 300 1200 0.015 0.011

Netting Infra 5000 40 300 125 425 0.005 0.004

Netting/Extend Day 12000 10 720 1200 1920 0.024 0.018

Extend Day 8000 10 480 800 1280 0.016 0.012

Trees 50000 40 3000 1250 4250 0.052 0.041

Bins 22500 10 1350 2250 3600 0.044 0.034

Incubation 20000 40 1200 500 1700 0.021 0.016

Equipment 8000 10 480 800 1280 0.016 0.012

Cap Costs Total 165,000 9,900 6,810 16,710 0.206 0.160

Conclusion: Australia Could Export Apples Competitively

• Invest in best practices both to increase labor productivity and to reduce unit production costs

• Improve export logistics to reduce costs further, e.g. by packing directly for export

• If production and exports are increased then economies of scale should reduce costs further

• Good Australian innovation can also help reduce costs

• Work with the local community to find and train cost-effective labor for both orchards and nurseries

Export Model: Double Click on Table to Change Values

Per Hectare Cap Cost Life Interest Dep Cost/y $/kg Net USD Total

Capital 6%

Land 5000 -50 300 -100 200 0.002 0.002

Perm Water 12000 -20 720 -600 120 0.001 0.001

Irr Infra 3000 50 180 60 240 0.003 0.002

Irr Local 2000 20 120 100 220 0.003 0.002

Evap Cooling 2500 20 150 125 275 0.003 0.003

Trellis 15000 50 900 300 1200 0.015 0.011

Netting Infra 5000 40 300 125 425 0.005 0.004

Netting/Extend Day 12000 10 720 1200 1920 0.024 0.018

Extend Day 8000 10 480 800 1280 0.016 0.012

Trees 50000 40 3000 1250 4250 0.052 0.041

Bins 22500 10 1350 2250 3600 0.044 0.034

Incubation 20000 40 1200 500 1700 0.021 0.016

Equipment 8000 10 480 800 1280 0.016 0.012

Cap Costs Total 165,000 9,900 6,810 16,710 0.206 0.160 0.160

Total Fixed Op 21,529 0.266 0.206 0.366

Total Variable 14,400 0.178 0.138 0.504

Pack Export Bin 28,350 0.350 0.271 0.775

Export CIF 32,400 0.400 0.310 1.085

Yield t/ha AUDUSD Tip $/kg Pack $/kg Packout

90 0.775 0.30 0.05 90%

20-30 times more employment per ha

0

5

10

15

20

25

30

35

Arable Dairy Orchard

Employment per 100ha

30-50 times more income /export per 100 ha

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Arable Dairy Orchard

Income/100ha

50-60 times more income per ML irrigation water used

0

5000

10000

15000

20000

25000

Arable Dairy Orchard

Income/Megaliter of Water

Summary Grower Metrics and Assumptions

Tons/Ha $/Ton Revenue/Ha ML/Ha $/ML H2O/Revenue Employ/Ha

Wheat 8 250 2000 8 200 80% 1

Dairy 8 400 3200 8 200 50% 1.5

Apple 80 1250 100,000 5 200 1.0% 30

Australian Apples Are on the Wrong Side of Trade (due to import of concentrate)

-150%

-100%

-50%

0%

50%

100%

150%

Beef Wheat Milk Apple Wool

Australian Exports as Share of Production

SWOT Analysis of Australian Pome Fruit Export Capability

SWOT ANALYSIS

Strengths:Widely Available Affordable LandPlenty Affordable Water for OrchardsMatching Grower ExpertiseIP and Branding Track RecordMatching Capital: Labor Productivity

Weaknesses:High Labor Costs to GrowHigh Packing CostsFruit FlyLack Critical Mass to Export ReliablyNursery Industry too Small for Growth

Opportunities:Improve Logistics/Costs to ExportSecure LT Export Contracts in North Local & Fed Seek Ag Employ/Export Demand for Clean Fruit (GV & TAS)Demand from Asia, Cider, Fresh Juice10x+ Income/Employ for Land/Water

Threats:More Countries Restrict DPAUnable to Control Fruit FlyUnwilling to Compete with NZUnwillingness to Grow for ExportDrought of Epic ProportionsWar or Trade Wars