Transcript Flats

Making Cents of Greenhouse
Production Cost
Ben Beale
Extension Educator-MCE
St. Mary’s County
Why do we care?
• Rising population base of affluent
suburbanites in reach of Maryland growers
Source: Census 2000 analyzed by the Social Science Data Analysis Network (SSDAN).
1953-Agricultural land
1982
1992
Greenhouse and nursery crops: Wholesale cash
receipts
2002
2000
1998
1996
1994
1992
0.0
5.0
10.0
15.0
Billion dollars
Nursery and other greenhouse
Floriculture
20.0
Production trends of floriculture crops
6,000
Million $
5,000
4,000
3,000
2,000
1,000
0
1994
1995
1996
1997
1998
1999
2000
2001
bedding and garden plants
potted flowering plants
foliage plants
cut flowers
propagative material and cut greens
2002
2003
Floriculture crops: Average sales per grower
1,600,000
1,400,000
Dollars
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
West
South
Midwest
Northeast
Maryland
350,000
300,000
250,000
200,000
Maryland
150,000
100,000
50,000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
ERS Data. $ in 1000. Greenhouse and Nursery Crops
Now for the Bad News!
• The majority of small
businesses fail within
the first 2 years.
• Most folks starting a
greenhouse do so
because they enjoy
growing, not the
business side.
Does all this math have you stressed out??
Try ancient
yoga techniques
Does all this math have you stressed out??
Try ancient
yoga techniques
…or Alabama
yoga techniques
Example Budget
Gross Revenue: The total sales of product or services from the enterprises. Revenue can be
calculated with the following formula: Price x Units Sold= Gross Revenue
Variable Cost: Cost items that vary with production volume. Examples of
such items include fertilizer, seed, fuel, electricity, piece-work labor charges,
pesticides, packaging cost, and custom charges.
Fixed Cost: Those cost that you will incur regardless of whether you
produce any output.. These cost are determined using the DIRTI 5 method
which includes Depreciation, Interest, Repairs, Taxes, and Insurance.
Often a piece of equipment or building will be used for more than one
enterprise. In these cases it is important to estimate the percentage of use
for each enterprise and allocate the cost accordingly.
Net Income: Net income is the money left after
subtracting variable and fixed cost. This is the bottom
line.
NET INCOME = Revenue – (Variable + Fixed Costs)
GREENHOUSE BEDDING PLANTS (30'X100' DOUBLE
PERLAYER
ACRE PLASTIC)
FOR YEAR 2008
ITEM
UNIT
QUANTITY
PRICE
GROSS INCOME
BEDDING PLANTS
FLATS
3040
$12.00 $
$
TOTAL GROSS INCOME
$
VARIABLE COSTS
SOIL MIX
3.8 cu ft bags
58
$19.35 $
PLUGS
FLATS
3040
$3.25 $
FLATS
FLATS
3040
$0.51 $
INSERTS
FLATS
3040
$0.27 $
PLASTIC COLOR TAGS
PACK
16,500
$0.02 $
20-20-20 All Purpose
25# BAG
11
$21.00 $
LIQUID FEED NUTRIENTS
POUND
50
$1.00 $
PLASTIC COVER (40'X100'-2LAYERS-$640/3YRS)
YEAR
1
$213.00
BANROT
POUND
4
$31.00 $
INSECTICIDES, MITICIDES
n/a
1
$182.57
HEATING FUEL
GALLON
800
$3.15
UTILITIES (ELEC. )
MONTH
4
$100.00
HAULING
FLATS
2100
$0.20
LABOR
HOURS
600
$9.50 $
$
INTEREST ON OPERATING CAPITAL
TOTAL VARIABLE COSTS LISTED ABOVE
NET INCOME OVER VARIABLE COSTS LISTED ABOVE
FIXED/OVERHEAD COSTS - METHOD: CUSTOM RATEX
(DO NOT DUPLICATE COSTS LISTED ABOVE)
Derreciation
Interest on Fixed Cost
Insurance
Repairs
Taxes
1
TOTAL
36,480.00
36,480.00
1,122.30
9,880.00
1,550.40
820.80
330.00
231.00
50.00
$213.00
124.00
$182.57
$2,520.00
$400.00
$420.00
5,700.00
-
6.5% $
$
$
DIRTI-5
765.18
24,309.25
12,170.75
$
$
$
$
1,600.00
1,400.00
600.00
1,800.00
$400.00
$0.00
$0.00
$50.00
$5,850.00
$30,159.25
$6,320.75
$
$
$
$
15.00
4,041
10,341
15,441
LAND CHARGE
ACRE
1
$50.00
TOTAL FIXED COST LISTED ABOVE
TOTAL VARIABLE AND FIXED COST LISTED ABOVE
NET INCOME OVER VARIABLE & FIXED COSTS LISTED ABOVE
PRICES
NET INCOME ABOVE VARIABLE AND YIELDS
$
9.00 $
12.00
FIXED COSTS LISTED ABOVE FOR
2280 $
(9,639) $
(2,799)
VARIOUS YIELDS AND PRICES
2700 $
(5,859) $
2,241
3040 $
(2,799) $
6,321
Typical Cost Example
• 30ft. X 100ft. Poly house
• Raise bedding plants by the flat
• House filled in February and empty by
June 10.
• 2 rounds of typical plants on 6 week
schedule
Space per House
3 ft isle down center.
2 ft isle on ends
7 walkways 1 ft. wide
13.5
12
30
100
Space Utilization/Flats per House
• 30ft. * 100ft:
3000 sq. ft.
• Isle ways are:
408 sq. ft.
• Usable space is: 2592 sq. ft
• 86% space efficiency ratio
Flats per House
• Standard 1020 flats are 11 x 22 inches, or
1.7 sq. feet
• 2592 available sq. ft. divided by 1.7 sq. ft.
per flat = 1520 flats
• Considering a plan for 2 rounds of plants,
we will estimate total production at 3040
flats
Gross Income Potential
Gross Income Potential
Price
$
9.00 $
12.00 $
15.00
% Sold
# Flats
75%
2280 $ 20,520.00 $ 27,360.00 $ 34,200.00
90%
2700 $ 24,300.00 $ 32,400.00 $ 40,500.00
100%
3040 $ 27,360.00 $ 36,480.00 $ 45,600.00
Plant Material
• Wide variety of plant material available
• Assuming annual plug plants grown from seed
and transplanted to flats
• Impatiens: 490 tray : $33.20
Sample Annual Plug Prices
490 tray 275 tray per piece cost
Begonia
$ 34.32
$ 0.0700
Celosia
$ 27.64
$ 0.0564
Impatiens
$ 33.20
$ 0.0678
Marigold
$ 31.21
$ 0.0637
Petunia
$ 27.64
$ 0.0564
Snapdragon
$ 31.21
$ 0.0637
Zinnia
$ 38.72 $ 0.1408
Plant Material
•
•
•
•
Impatiens: 490 tray : $33.20
490 plugs will fill how many flats?
490 tray will fill 10 flats
33.20 per tray / 10 flats = 3.32
Flat Type Cell per Flat Flats per 490
606
36
13.6
806
48
10.2
1204
48
10.2
1206
72
6.8
Flats and Inserts
• Standard 1020 flats
– Sold by case of 100
– $51.00 per case or 51 cents a piece
• Inserts:
– Available in multiple size combinations
– Size description: 606, 806, 1206• First #: # of trays; Second #: Cells per tray
– $27.20 per case or 27 cents a piece
Substrate
• High quality soil-less substrate is critical
• Using peat base potting soil with Bacillus subtilis
for increased root rot protection
• Bedding Plant type potting soil will contain:
–
–
–
–
–
–
–
Peat Moss
Perlite
Vermiculite
Wetting Agent
Bacillus subtilis
Macro and micro nutrients
Lime
Determining Amount of Potting Soil
Needed
• Using the chart, 3.8 cu ft bag will fill 53
806 flats
• 3040 flats will require 58 bags
(3040 / 53 = 57.3 bags)
Container per Bag Potting Soil
Container Type
Flats
Size
804
806
1203
1204
Per Cubic
Per 3.8
Foot
cubic ft bag
5.9
7.1
5.9
6.7
44
53
44
50
Fertilizer Cost
• Using a constant feed 100 ppm N program
• Will use a standard 20-20-20 at rate of 6.7
ozs. per 100 gallons water
• Estimate 4 applications per week over 12
weeks
• Estimate water use at ½ gallon water per
square foot
Fertilizer Cost
• ½ gallon per sq ft times 2600 sq ft = 1300
gallons per watering
• 1300 gallons applied 4 times a week for 12
weeks is (1300x4x12) 62,400 gallons
• At a rate of 6.7 ozs per 100 gallons, you
will need 4180 ozs. (62,400/100 x 6.7) or
261 lbs or 11 bags of 20-20-20 fertilizer
Greenhouse Plastic
• Assuming 4 year plastic replacement
value.
• Using Tufflite IV 6 mil fro top
• Using Tufflite IV 6 mil infrared for bottom
• 30 ft wide house will need 40 wide foot
plastic
• Total cost $640.00 over 3 years=213.00
year
Crop Management Products
• Will vary for each operation, depending
upon season, management, climate, luck,
etc…
• Estimates provided are for an average
season with average problems.
Crop Management Products
• Disease Control
– Clearys 3336
– Heritage
– Daconil
• Insect Control
– Marathon
Crop Protection Program
Product
Ounces
Rate per needed for
100
2500 sq ft Cost per
#
Applications
gallons
house
ounce
Total Cost
Clearys 3336
Heritage
Daconil W. Stik
2 16 ozs
2 2 oz
2 22 ozs
8
1
11
1.75 $
43.25 $
0.585 $
28.00
86.50
12.87
Marathon II
2 1.7 oz
0.85
32.47 $
55.20
Total
$ 182.57
Heating Expenses
• Most accurate estimates are from past
experience in each house.
• Seasonal variation will change fuel usage
dramatically
• Example uses LP gas through 1 heater
• Assume seasonal use of 800 gallons total
Fixed Cost
• Those items that do not change with level
of production
• Often Calculated with DIRTI-5 Method
– Depreciation
– Interest
– Repairs
– Taxes
– Insurance
Depreciation
•
•
•
•
$18,000 greenhouse construction cost
Expected life of 10 years
Value at 10 years: 2,000
16,000 / 10 = $1600
Insurance
• $600.00 for general liability and hazard
policy for equipment
Taxes
• Includes property tax rate of $300 and
license fee of $100 for total of $400
Repairs
• Can be significant, especially in an
emergency
• Plan for at least 10% construction cost
each year
• $1800 per year
Interest
• Include interest on total money invested
• In this example, assume an interest
payment of 7% times $20,000 investment=
$1400
Enterprise Budgets:
• Determine profitability of one enterprise versus
another.
• Understand breakeven cost and pricing points
for that enterprise
• Understand input structure such as labor inputs,
shelf space pricing structure, raw material
inputs, fixed equipment cost per dollar returned.
• Plan crop rotation schedules and product mix
Enterprise Budget
Price
(Revenue)
Contribution
Variable Costs
Break-even
Fixed Costs
Profit
Slide Adapted from: Dr. Wen-fei Uva
Department of Applied Economics and Management
Cornell University
Revenue
• Price x Units Sold=
Gross Revenue
ITEM
GROSS INCOME
BEDDING PLANTS
TOTAL GROSS INCOME
UNIT
FLATS
QUANTITY
3040
PRICE
TOTAL
$12.00 $ 36,480.00
$
$ 36,480.00
Variable costs: Cost items that vary
with production volume.
ITEM
UNIT QUANTITY
GROSS INCOME
VARIABLE COSTS
SOIL MIX
3.8 cu ft bags
58
PLUGS
FLATS
3040
FLATS
FLATS
3040
INSERTS
FLATS
3040
PLASTIC COLOR TAGS
PACK
16,500
20-20-20 All Purpose
25# BAG
11
LIQUID FEED NUTRIENTS
POUND
50
PLASTIC COVER (40'X100'-2LAYERS-$640/3YRS)
YEAR
1
BANROT
POUND
4
INSECTICIDES, MITICIDES
n/a
1
HEATING FUEL
GALLON
800
UTILITIES (ELEC. )
MONTH
4
HAULING
FLATS
2100
LABOR
HOURS
600
INTEREST ON OPERATING CAPITAL
TOTAL VARIABLE COSTS LISTED ABOVE
NET INCOME OVER VARIABLE COSTS LISTED ABOVE
1
PRICE
$19.35
$3.25
$0.51
$0.27
$0.02
$21.00
$1.00
$213.00
$31.00
$182.57
$3.15
$100.00
$0.20
$9.50
TOTAL
PER PIECEPercent
$ 1,122.30 $
$ 9,880.00 $
$ 1,550.40 $
$
820.80 $
$
330.00 $
$
231.00 $
$
50.00 $
$213.00 $
$
124.00 $
$182.57 $
$2,520.00 $
$400.00 $
$420.00 $
$ 5,700.00 $
$
-
0.37
3.25
0.51
0.27
0.11
0.08
0.02
0.07
0.04
0.06
0.83
0.13
0.14
1.88
3.7%
32.8%
5.1%
2.7%
1.1%
0.8%
0.2%
0.7%
0.4%
0.6%
8.4%
1.3%
1.4%
18.9%
6.5% $
765.18 $
$ 24,309.25 $
$ 12,170.75
0.25
8.00
2.5%
80.6%
Fixed Cost: (Overhead) Expenses that do
not vary with level of production
GREENHOUSE BEDDING PLANTS
PER ACRE FOR YEAR 2008
ITEM
UNIT QUANTITY PRICE
TOTAL PER PIECE
Percent
Depreciation
$ 1,600.00 $ 0.53
5.3%
Interest on Fixed Cost
$ 1,400.00 $ 0.46
4.6%
Insurance
$ 600.00 $ 0.20
2.0%
Repairs
$ 1,800.00 $ 0.59
6.0%
Taxes
$400.00 $ 0.13
1.3%
LAND CHARGE
ACRE
1 $50.00
$50.00 $ 0.02
0.2%
TOTAL FIXED COST LISTED ABOVE
$5,850.00 $ 1.92
19.4%
Net Profit: Revenue-Variable CostFixed Cost
NET INCOME ABOVE VARIABLE AND
FIXED COSTS LISTED ABOVE FOR
VARIOUS YIELDS AND PRICES
YIELDS
$
2280 $
2700 $
3040 $
9.00
(9,639.25)
(5,859.25)
(2,799.25)
$
$
$
$
12.00
(2,799.25)
2,240.75
6,320.75
$
15.00
$ 4,040.75
$ 10,340.75
$ 15,440.75
Break Even Analysis
Fixed Costs ($)
Unit Costs ($)
=
+
Variable Costs ($)
Units Produced (lbs, dozens, bag)
Slide Adapted from: Dr. Wen-fei Uva
Department of Applied Economics and Management
Cornell University
Breakeven Analysis
Variable Costs per Unit Sold
$24,309 / 3040 = $7.99
Consider discontinue if
below this number
Overhead Costs per Unit Sold $5850 / 3040 = $1.92
Need to cover this
number
Total Cost per Unit
Breakeven price
$30,159/ 3040 = 9.91
$7.99 + $1.92 = $9.91
Profit per Unit Sold
$ 12.00- 9.91 = $2.09
Profit factor
Slide Adapted from: Dr. Wen-fei Uva Department of Applied Economics and Management Cornell University
Remember good financial management
can help avoid surprises…
Remember good financial management
can help avoid surprises…
http://aede.ag.ohio-state.edu/people/moore.301/index.htm
So get ready, hold on and enjoy the ride. The trying is half
the fun.
And after all the hard work, you get to reap the benefit of your
efforts!
The End