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Economic Analysis of Producing Southern Highbush Blueberries in Soil in Georgia

Introduction
The Enterprise Budget
Analysis of Risk-Related Expected Returns and Costs
Conclusion
References

Acknowledgement

We are indebted to the Southern Small Fruits Consortium for providing funding for this study. The authors would like to thank Drs. D.S. NeSmith, Mark Rieger, Cesar Escalante and Curt Lacy, as well as all of the University of Georgia for their review and insightful comments. We are equally indebted to George Westberry, W.O. Mizelle, D. Stanaland, B. Celine, M. Mainland, B. Lisec, T. Cross and B. Strik for whom their work was used as a starting point for developing this research, and finally, to Alice H. Pitts.

Esendugue Greg Fonsah, Extension Economist – Fruits and Vegetables¹
Gerard Krewer, Extension Horticulturist – Fruit Crops²
Kerry Harrison, Extension Ag-Engineering ³
Michael Bruorton, Clinch County Extension Agent⁴

Introduction

Blueberries are a fast-emerging crop with a bright future in Georgia. However, blueberries, like other fruit crops, embrace price fluctuation. This price volatility depends on several factors, including the variety produced and sold (i.e., fresh or frozen), locality, aggregate productivity, targeted market and timing. As a result, profit margin is hard to determine. Estimating total costs of cultivating southern highbush blueberries would be beneficial in determining profitability. These costs include fixed (i.e., machinery, irrigation, recaptured establishment costs, land, overhead and management) and variable costs (i.e., pre-harvest, harvesting and marketing costs), respectively (Westberry et al., 1995).

Several blueberry orchards were visited to study blueberry operations and collect the necessary primary data needed to estimate the cost of production. Various blueberry specialists, including Extension Agricultural Economists, Horticulturists, Biological and Ag Engineers and County Agents, were visited to gather agronomic, irrigation and equipment data required for this estimate. Vendors of agricultural inputs (fertilizers, chemicals and equipment) were contacted to obtain the latest prices needed to generate variable and fixed costs components concomitantly. USDA, NASS and other publications were consulted to obtain historical information on productivity, marketing, price and the overall outlook of blueberries. The objectives of this study were to analyze the cost of production, project profit margin and analyze investment alternatives.

Three types of blueberries are produced in Georgia: northern highbush, southern highbush and rabbiteye. These varieties have similar and dissimilar characteristics. The northern highbush varieties perform better in cool climates and are rarely grown in Georgia. Southern highbush are adapted to South Georgia but grow best in high organic matter sands (min. 3 percent), sandy soils highly amended with pine bark or in pine bark beds. They ripen early and enjoy a good market window. The correct site selection can drastically reduce Phytophthora root rot and Botryosphaeria stem blight, which are a major variable cost component to the farmer (Smith, 2003; Fonsah et al., 2003). A number of insect pests also attack southern highbush and require treatment if they reach economic thresholds (Payne et al., 1993; Steck, et al., 1993). Rabbiteyes grow well in sandy, virgin pineland soil with moderate amounts of natural organic matter. They can also be grown on many soil types with the addition of organic matter.

Blueberries are one of only a few commercially grown native fruit crops. Although the production of highbush and rabbiteye blueberries as a planted crop dates back only about 100 years, wild lowbush blueberries have been commercially harvested for over 150 years. Modern highbush blueberry breeding started in New Jersey and New Hampshire in 1908. A farm in New Jersey was the first to grow, harvest and ship fruit from hybrid blueberry plants in 1916 (Steck and Payne, 1993). Prior to that, the crop was primarily harvested from the wild. It was not until the 1930s that many improved cultivars were successfully developed and introduced to North Carolina and Michigan (Steck and Payne, 1993).

Although the blueberry is a native of North America, several countries around the world are engaged in commercial production of this crop. Presently, the United States is the leading producer with 55 percent of the total world supply, a position that was held by Canada prior to the 1970s. Canada has a large acreage of wild lowbush blueberries and now produces 28 percent of the supply, with Poland producing 10 percent and the rest of the world 7 percent (Pollack and Perez, 2003).

The largest U.S. blueberry producing states are Maine and Michigan. These two states produce over 50 percent of the total U.S. production. Maine continues to dominate wild blueberry production with an average of 83 million pounds, equivalent to 30 percent of the total U.S. supply (wild and cultivated combined) from 2000 to 2003. Michigan produces about 20 percent of the total U.S. supply and is the largest producer of cultivated blueberries. In 2000, Michigan had 16,800 acres, representing 40 percent of the nation’s total cultivated acreage. Other states such as New Jersey, Oregon, Georgia, North Carolina and Washington together produced 40 percent of the nation’s total cultivated blueberry crop. For the past decade, other small-emerging production states include Indiana, New York, Alabama, Arkansas and Florida (Pollack and Perez, 2003; Florkowski, 2004).

Georgia Blueberry Industry Overview

Blueberries are a fast-emerging crop with a bright future in Georgia. Blueberries already rank 34th in the 2002 Georgia Agricultural Commodity rankings, generating about $29.6 million, equivalent to 0.34 percent of the total Georgia farm gate value for 2002. This also represents a 28 percent and 34.5 percent increase in farm gate value compared with 2001 and 2000 respectively (Figure 1).

Figure 1. Farm Gate Value Generated by the Georgia Blueberries Industry, 1999-2002.

Source: 2002 Georgia Farm Gate Value Report, AR 03-01

According to Pollack and Perez (2003), the overall cultivated blueberry production acreage in the United States has been fluctuating slightly. In 2001, total production acreage was 39,880, a 1 percent decrease from 2000, and a 2.8 percent increase in 2002 compared with 2001 (Figure 2). Additionally, yield also fluctuated from year to year, with 2001 being the best as 4,740 pounds per acre were recorded.

Figure 2. Total Blueberry Cultivated Bearing Acreage and Yield/Acre in the United States, 2000-2002.

Source: Noncitrus Fruits and Nuts 2002 Summary (2003) ASB, NASS, USDA, July, and 2002 Georgia Farm Gate Value Report, AR 03-01

Nationwide, cultivated blueberries are considered the second most important berry after strawberries. They generated over $200 million in farm gate value, equivalent to 13 percent of total berries produced in the United States from 2000 to 2002. Although strawberries generated over $1 billion over the same time period, the difference is largely due to the quantity produced. For instance, an average of 1.8 billion pounds of strawberries was produced compared with only 273 million pounds for cultivated blueberries. Prices for blueberries are higher than prices for strawberries (Pollack and Perez, 2003).

According to Krewer and NeSmith (2002), blueberry production in Georgia has experienced a steady growth since 1955, when virtually nothing was produced, to 4,600 acres in 2000. Blueberries are Georgia’s second most important fruit crop after peaches. Nationwide, Georgia ranks third in acreage and between fourth and fifth in total production of cultivated blueberries in the United States. The reasons for the impressive growth in blueberry production in Georgia are multifold, including:

1. The release of well-suited rabbiteye blueberry cultivars by the University of Georgia blueberry breeding program
2. The formation of the Georgia Blueberry Association Cooperative and creation of the first large-scale commercial planting and packing facility in the 1970s
3. The expansion of the Michigan Blueberry Growers Association Cooperative and penetration of the domestic and export markets in the 1980s and 1990s
4. The establishment of the new early season southern highbush blueberry industry in the mid-1990s

There has been a steady increase in overall production of blueberries in Georgia. For instance, an 18 percent increase was recorded for 2001 compared with 2000, while there was a 21 percent increase in 2002 compared with 2001. Presently, Georgia blueberry acreages stand at 8,054 compared to 6,639 acres for 2001 (Figure 3) according to Georgia Farm Gate Value Report (2002). However, the 2001 figure of 6,639 acres is 79 percent higher than the total bearing acreage reported by the Georgia Agricultural Statistics Service. A blueberry grower survey report shows that a total of 6,003 acres were planted in Georgia in 2002 (Florkowski, 2004).

Figure 3. Total Acreage and Farm Gate Value Generated by the Georgia Blueberry Industry, 2000-2002.

Source: Georgia Farm Gate Value Report, Various Issues, CSR No. 5, SR-01-07, AR 02-02 and AR 03-01

Blueberry production is centered in Southern Georgia. Bacon, Clinch, Appling, Ware and Wayne counties are the most productive areas thus far, supplying 36.4 percent, 19.5 percent, 10.4 percent, 9.2 percent and 4.7 percent of total Georgia blueberry production, respectively (Figure 4). Other producing counties in the top ten include Pierce, Jeff Davis, Colquitt, Union and Coffee, according to the 2002 Georgia Farm Gate Value Report.

Figure 4. Percentage Acreage of Georgia's Top Ten Blueberry Producing Counties, 2002.

Source: 2002 Georgia Farm Gate Value Report, AR 03-01

It is important to note that there is no correlation between acreage and farm gate value. Bacon County took the lead with 2,500 harvested acres but generated only $10.8 million, whereas Clinch County cultivated 1,000 acres and generated $5.8 million (Figure 5). The disparity in farm gate value was due to a greater amount of high value southern highbush production in Clinch County.

Figure 5. Total Farm Gate Values and Acreage Comparison of Georgia's Top Ten Blueberry Producing Counties, 2002.

Source: 2002 Georgia Farm Gate Value Report, AR 03-01

Furthermore, Pierce County cultivated 700 acres and generated $1.1 million (Figure 5), whereas Ware County cultivated 570 acres and generated $2.7 million (Figure 5). This discrepancy in farm gate value reflects a larger percentage of higher value southern highbush production in Ware County.

A USDA/ERS report revealed that from 2000 to 2003 Georgia supplied over 11 percent of the total cultivated blueberries produced in the United States (Pollack and Perez, 2003). Furthermore, a comparison of yields reveals a lower yield per acre than the United States average. Georgia’s yield has remained static and at a lower level than U.S. yields (Figure 6). This illustrates a need for Georgia producers to adopt and improve their agricultural practices, especially in the processed market. It also reflects weather-related problems in Georgia blueberry production.

Figure 6. Yield Comparison Between the United States and Georgia, 2000-2002.

Source: Noncitrus Fruits and Nuts 2002 Summary (2003) ASB, NASS, USDA, July, and 2002 Georgia Farm Gate Value Report, AR 03-01

The official Georgia Agricultural Statistics Service Report reveals that the highest yield for Georgia blueberries was obtained in 2000 with a reported 4,130 pounds per acre being produced (Figure 7). Thereafter, the yield per acre decreased 10.4 percent and 8.5 percent in 2001 and 2002, respectively. On the other hand, the best price was obtained in 2002 at an average of $1.02 per pound received. This price reflects about 90 percent rabbiteye production that ripens in June and July and has reduced the Georgia average price significantly. According to the growers and County Agents whose work provided information needed to carry out this research, southern highbush ripen in April and May and receive much higher prices of about $5.00 per pound compared to rabbiteye (personal communication).

Figure 7. Seasonal Average Price and Yield Trend of All Types of Blueberry Produced in Georgia, 1992-2002.

Source: Noncitrus Fruits and Nuts 2002 Summary (2003) ASB, NASS, USDA, July. www.nass.usda.gov/ga/cropests/blueberry.txt.

Georgia fresh blueberries continue to attract higher prices compared to previous years (Figure 8). ASB/USDA reports (2003) show that the 2002 price was $1.57 per pound compared with $1.25 in 2001. (Note that this price is for about 90 percent of rabbiteye blueberries.) The price for blueberries for processing per pound in 2002 was only $0.54 compared with $0.55 for 2001 and $0.75 in 2000 (Figure 8).

Figure 8. Fresh, Processed and Average Prices of All Types of Blueberries Produced in Georgia, 2000-2002.

Source: Noncitrus Fruits and Nuts 2002 Summary (2003) ASB, NASS, USDA, July

The estimated costs of producing southern highbush blueberries in soil in Georgia assumes that plants reach full potential yield in the fourth season. According to Krewer et al. (2003), this depends on how well the crop was taken care of during the establishment years, since it is a perennial crop.

There are three types of cultivation techniques utilized for southern highbush blueberries in Georgia: (1) culture in special, high-organic matter soils without amendments (spodic soils), (2) culture in well-drained soils with amendments and (3) pine bark bed culture. This economic analysis addresses culture in soil and soil with amendments. Other conditions necessary for optimum production include the following considerations: (a) pH between 4.0 and 5.2, (b) high organic matter (min. of 3–4 percent) and (c) installation of a permanent irrigation system (Krewer et al., 2003).

The Enterprise Budget

Assumptions

Although there are several ways of constructing a budget, this economic analysis adopted the risk-rated method. The risk-rated return assumes five different yields and prices per pound at the top of the budget, namely: “Best,” “Optimum,” “Median,” “Pessimistic” and “Worst.” The “Best” and “Worst” yield or price levels were expected to occur once in at least ten years. The “Median” yield and price level were expected 50 percent of the time. The “Optimistic” level would be surpassed about one year in six, while the “Pessimistic” level would occur one year in six (Fonsah et al., 2005).

It was assumed that full production was reached in the fourth year. Plant spacing was 4 by 10 feet. Variable interest rates of 6.25 percent of total operating/variable costs were used for each year. The cost per flat was based on custom packing. Temporary labor was contracted at a flat rate of $7 per hour. Harvesting yields were calculated based on a 95 percent fruit recovery rate, thus creating a 5 percent field and packing loss. The brokerage fee was 15 percent but included cooling and handling. The overhead and management fee was 15 percent of total operation/variable cost. Compounded recaptured costs were based on a 7 percent fixed interest rate and the expected life span of the farm under Georgia conditions was 20 years. Machinery and equipment operation calculations were based on an agricultural engineering estimate on 50 acres and a 7 percent fixed interest rate.

All equipment cost calculations included such items as percentage use for crop, purchase price, salvage value, life span, depreciation, interest, tax and insurance. All equipment was assumed to be new. Solid set irrigation was calculated based on 4 acres, a sprinkler spacing of 40 feet by 45 feet and an 8-inch well capable of pumping about 600 gallons/minute. Risk-rated marketing prices and yields were obtained from growers, County Agents and the MBG Marketing Inc., while input and equipment prices were obtained from vendor and machinery dealers, respectively (personal communication). The adopted variable interest rates for operating/variable costs were for the short-term loans, while the fixed interest rates used for machinery and compounded establishment costs were for the long-term loans.

Farm Input Prices

There are several factors that can influence prices of inputs, total cost of production and profit margin. Many farmers in Georgia need not invest in overhead irrigation materials or dig new wells since they already have them available. If so, that would significantly increase profitability because they would save the fixed cost aspect of the initial investment cost of installing the irrigation system and digging of the well. However, only the variable cost aspect, that is, maintenance and operating costs, will be incurred. Also, motor sizes (HP) were different depending on acreage. Quantity discounts for items such as packing supplies were factors that affected prices of inputs. The cost estimate in this budget reflects a combination of the current agricultural practices in Georgia and recommendations from UGA specialists. The prices were actual prices from vendors around the counties involved in blueberry production, and they excluded quantity discounts.

Estimated Annual Total Fixed Machinery Costs

Fixed machinery cost includes sprayers, rotary mowers, wagons, tractors, hedgers, trucks, spreaders, mulchers, harrows and V blades (Table 1). These costs, which included the percentage of use for southern highbush blueberries, purchase price, salvage value, life-span of equipment, depreciation, interest, tax and insurance, were calculated respectively. The calculation was based on 50 acres and a 7 percent fixed interest rate. Based on this study, the estimated fixed machinery cost per acre was $290.40.

Solid Set Irrigation Cost

The annual fixed cost of irrigation per acre was estimated at $657.81 and includes pipes and fittings, sprinklers, an eight-inch well that can handle 600 gallons per minute, a pump, a motor, installation and miscellaneous. This cost was also considered as a fixed cost item. The variable/operating cost component of the solid set irrigation was $284.81 per acre. This calculation was based on four acres and sprinklers with 40- by 45-inch spacing and a 50 HP motor size. The cost would have been extremely high if only one acre was used. For instance, the total annual fixed cost per four acres was $2,632.00, whereas the total annual fixed cost per acre was $657.81. The total irrigation operating/variable cost was $284.81, whereas the total annual fixed and operating costs were $942.62. Although the solid set system is relatively more expensive in terms of initial investment per acre, it is necessary for spring frost and freeze control (Table 2).

Yearly Costs and Returns

First Year Estimated Establishment and Maintenance Costs

The first year of producing southern highbush blueberries is very crucial in terms of workload and cost. This enterprise budget includes all costs and returns associated with producing southern highbush blueberries in Georgia. In this budget, a planting distance of 4' x 10' is utilized, thus equivalent to 1,089 plants per acre, costing $2,123.55.

Other expensive cost components in land preparation/operation are: stumping, pushing stumps and large limbs and burning, which costs $750 per acre depending on the number of stumps (the bottom part of a tree after it has been cut to the ground), chopping (cutting the tree into small pieces of 2 to 3 feet long), which costs $120 and milled pine bark, which costs $2,254 for 322 cubic yards. Fertility and both pre-emergence and post-emergence weed control costs were $232.84, while pest and disease control costs were $897.47. Total variable/operating costs for the first year amounted to $7,510.72, while the total fixed cost was $2,074.83. Fixed costs include a tractor, equipment, overhead, management and irrigation. The total establishment costs for year one, that is, the total variable and fixed costs, respectively, were $9,585.55 (Table 3).

Second Year Estimated Establishment and Maintenance Costs

In year two, spraying for Phytophthora root rot, mummy berry, leaf spot and other pest and disease control contributed heavily to the variable cost. Weed control and irrigation had a major impact on the total variable cost. The total variable/operating cost was $1,481.31, which is five times lower than year one. It was assumed that 500 pounds would be harvested in year two, equivalent to 145 flats (3.3 pounds containing 12–125 g clamshells) with a 95 percent pack-out rate.

The total harvesting and marketing costs were $1,040.25, which includes harvesting, custom packing, cooling, handling and brokerage fees respectively. Fixed costs include tractor and equipment, overhead and management and irrigation, which altogether cost $1,170.42. The total establishment cost for year two is $3,691.99. Assuming a return from receipts of 475 pounds with a 95 percent pack-out rate and a selling price of $5.00 per pound (price provided by Georgia blueberry growers and County Agents), gross receipts would be $2,375.00, which reduces the total establishment cost in year two to $1,316.99 (Table 4).

Third Year Establishment and Maintenance Costs

In year three, Phytophthora root rot control was the largest variable cost component, $384.78 equivalent to 22.3 percent of the total variable/operating cost. However, chemicals for pest and disease control contributed to over 48.6 percent of the total variable cost, at $837.94. The pruning cost was $175, representing approximately 10.2 percent of the total variable cost. Chemicals for weed control cost were $125.40 or 7.3 percent of the total variable cost. Fertilizer cost was $108, while irrigation use was $284.81.

Total harvesting and marketing costs were $4,137.88 and included harvesting, custom packing, cooling, handling and brokerage fees. Fixed costs include tractor and equipment, overhead/management and irrigation, which altogether cost $1,206.76. The total cost for year three was $7,068.20. Assuming a return from receipts of 1,900 pounds with a 95 percent pack-out rate and a selling price of $5.00 per pound (price provided by Georgia blueberry growers and County Agents), gross receipts were $9,500 minus the actual total cost per acre of $7,068.20, which equals a net gain of $2,431.80 in year three (Table 5).

Compounded and Recaptured Establishment Costs

The total establishment costs for years 1, 2 and 3 were $9,585.55, $3,691.99, and $7,068.20, respectively. The fixed compounded interest rate was 7 percent. We used 20 years in our calculations because we believe that a well-managed southern highbush blueberry farm in Georgia would last that long before replanting would be necessary. The annual recapture establishment cost was $2,176.43 (Table 6).

Fourth Year – Full Production Costs

In the fourth year, the blueberry field is assumed to be in full production. The chemicals used for Phytophthora root rot control were still the largest variable cost component, $384.78 equivalent to 18.4 percent of the total variable cost. Chemicals for pest and disease control contributed to 39.1 percent of total variable cost, equivalent to $817.09. Annual pruning cost was estimated at $217, representing approximately 10.4 percent of the total variable cost. Chemicals for weed control—both pre-emergence and post-emergence—herbicides costs were $226.24 or 10.8 percent of the total variable cost. The fertilizer cost was $127, while the operating cost of irrigation use was $284.81. The total harvesting and marketing costs were $8,016.67, which included harvesting, custom packing, cooling, handling and brokerage fees. Fixed costs include tractor and equipment, overhead and management and irrigation, which altogether cost $3,438.48. Total cost per acre during this first full-production year was $13,547.35. Assuming a return from receipts of 4,000 pounds with a 95 percent pack-out rate and a selling price of $5.00 per pound for April and May (price provided by Georgia blueberry growers and County Agents), ripening southern highbush gross receipts would be $19,000. Subtract the actual total cost per acre of $13,547.35 to receive a net gain of $5,452.65 in year four (Table 7).

Analysis of Risk-Rated Expected Returns and Costs

Expected Returns from Total Acreage

Table 8 shows that the expected return or yield per acre for southern highbush blueberries in soil in Georgia was 4,000 pounds. This figure is based on actual grower experience (Mike Bruorton et al., 2003; personal communication). If only 95 percent of the fruits are recovered in the field or during harvesting, and the expected price is $5 per pound (price provided by Georgia blueberry growers and County Agents), the total return will be $19,000 per acre.

Risk-Rated Sensitivity Returns Over Total Costs

Table 9 shows sensitivity probabilistic chances of obtaining the various calculated risk-rated net return over total costs. The “Returns ($)” row of Table 9 depicts five sensitivity net returns possibilities based on different pessimistic and optimistic prices and yields. According to Westberry et al. (1995), “all net returns are determined from their relationship to the expected net return. They are not determined by multiplying prices and yields and subtracting total cost. Rather, they reflect the variability of prices and yields.” For instance, there was only a 6 percent chance of obtaining $15,140 per acre of southern highbush blueberries in soil in Georgia, whereas there was a 7 percent chance of earning a negative return ($-474). Furthermore, there was a 66 percent chance of earning the expected $5,456 per acre. The sensitivity risk-rated returns over total costs further depicted that the base budgeted net revenue was $6,456, with a 92 percent chance of making profit under Georgia conditions (Table 9). Table 9 shows that with a pessimistic yield of 3,000 pounds per acre sold at $4 per pound, the grower would earn a negative return of $-582. However, if the price was $5 per pound (price provided by Georgia blueberry growers and County Agents) with the same pessimistic yield of 3,000 pounds per acre, the grower would earn a positive return of $2,188.

Break-Even Analysis

It is very important how one interprets an enterprise budget. For instance, interpreting an economics budget means “opportunity cost on labor, capital, land and perhaps management were included in the expenses.” Therefore, determining our profit or loss margin refers to how much money was left after subtracting all expenditures including opportunity cost. An economic profit of zero means that we are generating just enough to cover labor, capital, land and other opportunity costs. The break-even analysis, or break-even point, is one method of determining whether or not the blueberry grower is earning money. It tells us that below this level, the grower starts losing money, and above this level, he or she starts earning money. For instance, Table 10 illustrates that if a Georgia grower sells his or her southern highbush blueberries below the break-even price of $3.39, he or she begins to lose money. At the same time, the minimum yield needed to either start losing or earning money—if sold at the price of $5 per pound (price provided by Georgia blueberry growers and County Agents)—is 2,709.47 pounds per acre (Table 10).

The break-even pre-harvest variable cost and per-pound yield/acre in this risk-rated return analysis were $0.52 and 418.44 pounds respectively. The break-even harvesting and marketing cost per pound and yield/acre were estimated at $2.00 and 1,603.33 pounds, while the break-even fixed cost per pound, were $0.86 and 687.70 pounds per acre respectively (Table 10).

Conclusion

Blueberries are a fast-emerging crop with a bright future in Georgia. Several blueberry orchards were visited to study blueberry operations and collect the necessary primary data needed to estimate the cost of production. Three types of blueberries are produced in Georgia: northern highbush, southern highbush and rabbiteye. These varieties have similar and dissimilar characteristics. The northern highbush varieties perform better in cool climates and are rarely grown in Georgia. Southern highbush are adapted to South Georgia, but grow best in high organic matter sands (min. 3 percent), sandy soils highly amended with pine bark or in pine bark beds. The objectives of this study were to analyze the cost of production, project profit margin and analyze investment alternatives.

Although blueberries are native to North America, several countries around the world are engaged in commercial production of this crop. Presently, the United States is the leading producer with 55 percent of the total world supply, a position that was held by Canada prior to the 1970s. Nationwide, cultivated blueberries are considered the second most important berry after strawberries. They generated over $200 million in farm gate value, equivalent to 13 percent of total berries produced in the United States from 2000 to 2002. Although strawberries generated over $1 billion over the same time period, the difference is largely due to the quantity produced.

In year one, the total operating/variable cost of growing southern highbush blueberries in soil in Georgia was estimated at $7,510.72 per acre. The total fixed cost was estimated at $2,074.83, and the total estimated establishment and maintenance cost for the first year was $9,585.55. In year two, the total variable cost was $1,481.31, which is five times lower than year one. The total harvesting and marketing costs were $1,040.25 and the fixed cost was $1,170.42. The total establishment cost per acre for year two was $3,691.99.

In year three, chemicals used for Phytophthora root rot control were the largest variable cost component at $384.78, equivalent to 22.3 percent of the total variable/operating cost. Chemicals used for pest and disease control contributed to over 48.6 percent of the total variable cost, equivalent to $837.94. Total harvesting and marketing costs were $4,137.88. Fixed costs include tractor, equipment, overhead, management and irrigation, which altogether cost $1,206.76. The total establishment cost for year three was $7,068.20. In the fourth year, the blueberry field was assumed to be in full production. Total harvesting and marketing costs were $8,016.67. This included harvesting, custom packing, cooling, handling and brokerage fees. Fixed costs include tractor, equipment, overhead, management and irrigation, which altogether cost $3,438.48. The total cost per acre during this first full production year was $13,547.35.

The fixed machinery cost per acre was $290.40, which included sprayers, rotary mowers, wagons, tractors, hedgers, trucks, spreaders, mulchers, harrows, V blades and charges for land. The total establishment costs for years 1, 2 and 3 were $9,585.55, $3,691.99 and $7,068.20, respectively. After compounding at the fixed rate of 7 percent for the expected 20-year lifespan of the farm under Georgia conditions, the annual recaptured establishment cost was $2,176.43 per acre.

The annual fixed cost per acre of solid set irrigation was estimated at $657.81 and included pipe and fittings, sprinklers, a well (8') capable of pumping 600 gallons per minute, a pump, a motor, installation and miscellaneous. The variable/operating cost component of the solid set irrigation was $284.81 per acre, while the total annual costs per acre (i.e., total operating cost plus total annual fixed costs) were $942.62. Although the solid set system was relatively more expensive in terms of initial investment per acre, it was necessary for spring frost and freeze control.

The expected return or yield per acre for southern highbush blueberries in soil in Georgia was 4,000 pounds. If only 95 percent of the fruits were recovered in the field or during harvesting and packaging and the expected price was $5.00 (price provided by Georgia blueberry growers and County Agents), the total return was $19,000 per acre. The sensitivity risk-rated net returns showed that there was only a 6 percent chance of obtaining $15,140 per acre of southern highbush blueberry in soil in Georgia, whereas there was a 7 percent chance of earning a negative return ($-474). Furthermore, there was a 66 percent chance of earning the expected $5,456 per acre. The sensitivity risk-rated returns over total costs further depicted that the base budgeted net revenue was $6,456 with a 92 percent chance of making a profit under Georgia conditions.

This study further illustrates that the break-even price and yield over pre-harvest variable cost per pound in this risk-rated return analysis were $0.52 and 418.44 pounds per acre. The break-even price and yield over harvesting and marketing costs per pound were at $2.00 and 1,603.33 pounds per acre while the break-even price and yield over fixed cost per pound were $0.86 and 687.70 pounds per acre. Additionally, the break-even price and yield over total budgeted cost per pound were $3.38 and 2,709.47 pounds per acre. At any price below $3.38, the grower is expected to start losing money, while at any price above this rate, the grower is expected to start earning money.

References

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Fonsah, E.G., G. Krewer, K. Harrison, and D. Stanaland (2005). “Estimated Costs and Economics for Rabbiteye Blueberries in Georgia.” AGECON 05–108. Department of Agricultural and Applied Economics, College of Agricultural and Environmental Sciences, University of Georgia, Tifton.

Florkowski, W.J (2004). Commercial Blueberry Inventory and Prospectus, Georgia 2002. UGA-Research Report Number 693. http://pubs.caes.uga.edu/caespubs/ES-Pubs/RR693.htm.

Krewer, G., and D.S. NeSmith (2002). “The Georgia Blueberry Industry: Its History, Present State, and Potential for Development in the Next Decade,” Acta Hort. 574:101–106.

Krewer, G., D.S. NeSmith, P. Brannen, B. Boland, D. Stanaland, and M. Bruorton. (2003). “Establishing Highbush and Rabbiteye Blueberries in Georgia.” (Unpublished manuscript).

Lisec, B., T. Cross, and B. Strik (1995). “Blueberry Economics: The Costs of Establishing and Producing Blueberries in the Willamette Valley,” Oregon State University Extension Service, EM 8526.

Payne, J.A., A.A. Amis, R.J. Beshear, R.J. Gagne, D.L. Horton, and P.M. Lyrene (1993). “New” Rabbiteye Blueberry Insects: Maggots, Midges, Thrips, and Root Weevils.” pp. 37–38. In: Proc., 6th Biennial Southeast Blueberry Conference and Trade Show, University Georgia Cooperative Extension Service, pg. 126.

Pollack, S., and A. Perez (2003). Fruit and Tree Nuts Outlook. ERS/USDA, FTS-305, July 30. Also see: http://www.ers.usda.gov/.

Smith, B.J. (2003). “Susceptibility of Southern Highbush Blueberry Cultivars to Phytophthora Root Rot and Botryosphaeria Stem Blight.” In: 11th Biennial Southeast Blueberry Conference Proceedings, Civic Center and Hyatt Regency, Savannah, Georgia, January 10–12.

Steck, G.J., and J.A. Payne (1993). “Blueberry Maggot, Rhagoletis mendax (Diptera: Tephritidae).” Entomology Circular No. 358, Florida Dept. Agriculture & Consumer Services, Division of Plant Industry, July/August.

Westberry, G.O., W.O. Mizelle, D. Stanaland, and G. Krewer (1995). “Economic Analysis of Producing Commercial Blueberries.” AECON-95-040. Department of Agricultural and Applied Economics, College of Agricultural and Environmental Sciences, University of Georgia, Athens.

Bulletin 1303/July, 2006

The University of Georgia and Ft. Valley State University, the U.S. Department of Agriculture and counties of the state cooperating. Cooperative Extension, the University of Georgia College of Agricultural and Environmental Sciences, offers educational programs, assistance and materials to all people without regard to race, color, national origin, age, gender or disability.

An Equal Opportunity Employer/Affirmative Action Organization Committed to a Diverse Work Force

Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, The University of Georgia College of Agricultural and Environmental Sciences and the U.S. Department of Agriculture cooperating.

J. Scott Angle, Dean and Director