Economics Working Group Challenges and Accomplishments Eric Belasco
Economics Working Group – Challenges and Accomplishments Eric Belasco, Suzette Galinato, Tom Marsh, and Srinivasa Ponnaluru June 1 st, 2011
Overview � Enterprise Budgets �Tomatoes and lettuce under high tunnels for growers in WA � Production and Risk �Analysis of crop insurance and risk related issues. �Strategies for wind damage mitigation. � Cost-Benefit Analysis of BDM �Establishment of the monetary benefits (saving costs) and costs of the CBA. �CB Comparison of BDM film vs HDPE/LDPE film. 2
Enterprise Budgets � Accomplishments: ◦ Tomato �High tunnel �Open field ◦ Lettuce � To �High tunnel be accomplished: ◦ Lettuce �Open field ◦ Strawberry �High tunnel �Open field 3
Budget Benchmark �High tunnel as an add on to the existing farm. �Tunnel is 96 X 20 ft single poly, with 85% usable space � 2300 plants in 20 rows, at a 10 X 10’’ spacing � 75% marketable yield �Direct local sales, CSA, and local restaurants as market � 3 years of usable life on tunnel. �Drip irrigation
WA Enterprise Budget: High tunnel Lettuce Summary Gross returns 3450 Total Variable costs 1844. 11 Total Fixed costs 947. 45 Net Returns 658. 44 Gross returns Description Price Qty Total Lettuce heads 2 1725 3450 5
Variable costs Item Soil Preparation Spread compost Material Labor Till cover crop and compost Chisel plow Till beds Fertilizer Material Labor Irrigation Drip tape Labor Seeds Transplants Planting Seeds Unit Quantity Price ($) Total Costs ($) yard hour 21. 00 15. 00 165. 00 3. 50 2. 00 0. 09 73. 50 30. 00 14. 85 hour 165. 00 0. 09 14. 85 linear feet hour 0. 03 15. 00 1150. 00 0. 60 34. 50 9. 00 per 1, 000 pot hour 0. 01 0. 07 15. 00 2300. 00 5. 00 23. 00 161. 00 75. 00 6
Variable costs Item Unit Quantity Price ($) Production Costs Fungicide Herbicide Insecticide Irrigation water Irrigation power Tunnel temperature management Total Costs ($) month 10. 00 2. 00 hour 15. 00 0. 00 20. 00 225. 00 Picking Washing, grading (per pound) Supplies Packaging Hydro Cooling hour case 15. 00 1. 50 0. 25 3. 20 0. 80 18. 00 72. 00 270. 00 108. 00 18. 00 230. 40 57. 60 Delivery box 0. 5 72 36. 00 Harvest and Post-harvest Costs Marketing Maintenance and Repairs Irrigation System Maintenance and Repair Tunnel and Equipment Maintenance and Repairs Other Variable Costs Overhead (5% of variable costs) Interest on Variable Costs (7%) Total Variable Costs 45. 00 166. 00 82. 07 120. 64 1, 844. 11 7
Fixed costs Item Cost ($) Years Used Cost Per year ($) Fixed Costs Depreciation High Tunnel Hoop house 227. 20 Irrigation System Machinery and Equipment Annual Replacement Cost 36. 67 100. 00 Interest High Tunnel Hoophouse 43. 74 Irrigation System 4. 24 Machinery and Equipment 35. 61 Other Fixed Costs Permit Hoophouse set up and removal[1] hour 25 11 275. 00 Irrigation management hour 15 15 225. 00 Total Fixed Costs Total Cost Estimated Net Returns 0. 00 947. 45 2, 791. 5 6 658. 44 8
Production and Risk � Tasks accomplished: � Tasks to be accomplished: ◦ Identification of different crop insurance options available for specialty crops (in the open field & under high tunnel). ◦ Paper presentation at AAEA, Pittsburgh. ◦ Evaluate profitability with and without crop insurance. ◦ Evaluate profitability of using cover crops in high tunnel production, and compare BDM v conventional practices. 9
Wind Damage Mitigation High tunnels act as damage abatement input Wind speeds inside the tunnel are hypothesized to be lower than open field High winds can damage high tunnel structure and the crop. Extent of damage to HT depends on design, orientation, material and construction. 10
Wind Damage Mitigation Damage to crop depends on type, stage of crop. Product quality, quantity and time of maturity may also be affected. Objectives: To identify if statistically significant differences in wind speed exist with in and outside tunnel. To identify extent of damage to crops and the high tunnel stucture. 11
Cost-Benefit Analysis Tasks accomplished : ◦ The first three topics set the stage and provide information for the C-B analysis. ◦ Dynamic model that reflects benefits, costs and rates of decay of pollutant (BD plastic) in soil. ◦ The model can be used to assess net benefits associated with various rates of decay. 12
Cost-Benefit Analysis Tasks to be accomplished: ◦ Specify a damage function to model damages/effects on soil from BD plastic decay. ◦ Enumerate benefits and costs associated with high tunnels – Price premiums Yield differences Structural costs Labor costs Other associated costs. ◦ Sensitivity analysis. 13
Summary… Enterprise Budgets Production and Risk Cost-Benefit Analysis 14
Remaining Issues Specification of a damage function for CB analysis Obtain feedback on enterprise budgets Obtain cost info. regarding expenses for ◦ Initial high tunnel construction ◦ Maintenance costs for repairs from hail, wind, and flooding Ensure accurate use of field data (yields) 15
Thank you
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