| | Business summary | Production targets | Financial benchmarks | Capital investment | Market factors | Cash flow projections - strawberry enterprise 7 acres | Snapshot enterprise budget 7 acre strawberry enterprise - year 5 | Sensitivity analysis | Risk factors | Management strategies
Business Summary
This factsheet provides economic information on establishing and operating a U-pick strawberry enterprise. This information was generated by a group of strawberry producers who arrived at a consensus on investment, production, costs and revenues.
The enterprise is a 7 acre strawberry operation with 3 acres of harvestable production, 2 acres in preparation and 2 acres of yard and parking lot. Ninety per cent of the production is taken as U-pick with the remaining 10 per cent marketed in farmers' markets.
This information is intended as a business planning tool. Managers will have to assess all the key production and financial variables that would influence the success of their enterprise.
Production Targets
| Production per acre (average) | 7,300 lbs. |
| Labour | $1,170/acre |
Strawberries are an intensely managed crop requiring precise timing. Because of the short season, yield and quality hinge on the timely management of all cultural practices. Production planning should be based on achieving target production by the fifth year.
Newly established operations will require two years of field preparation. Fields must be clean and weed free prior to planting in the second year. Failure to have weeds under control will impact yields and labour requirements during production.
A 50/50 mix of day neutrals and June bearers is suggested to capture both U-pick and farmers' markets.
Irrigation is essential for high yields, good quality and frost control. Access to a reliable source of water of adequate quantity and quality is needed.
Financial Benchmarks
| Gross operating profit per acre | $ 2,831 |
| Labour costs as aÿpercentage of gross revenues | 12% |
Capital Investment
The investment reflects a developed enterprise capable of generating approximately $50,000 in gross revenues. It is not a startup enterprise.
| . | Investment |
| Machinery | . |
| Tractor - 60 hp | $25,000 |
| Weed sprayer | $3,900 |
| Transplanter | $2,000 |
| Rototiller | $3,500 |
| Fertilizer spreader | $500 |
| Rake | $1,000 |
| Mower | $1,200 |
| Cultivator | $500 |
| Refrigerator | $4,000 |
| Quad & wagon | $5,000 |
| Truck & topper | $30,000 |
| Harrows | $300 |
| Irrigation lines | $5,000 |
| Irrigation pump | $1,500 |
| Total Machinery | $83,400 |
| . | . |
| Buildings & Other | . |
| Signage | $4,000 |
| Storage shed | $12,500 |
| Sales centre | $12,000 |
| Dugout | $7,000 |
| Parking lot | $6,250 |
| Washrooms | $1,250 |
| Total Buildings & other | $44,000 |
| . | . |
Total Investment
(plus land @ $200/acre/year) | $127,400 |
Market Factors
Market assessment and development are critical to the success of a strawberry operation. This enterprise direct markets to its customers through U-pick and farmers' markets. The primary market is U-pick, with 90ÿperÿcent of the sales. The planting of day neutral varieties provides some cash flow for the first year of planting.
Location is critical for a U-pick operation. Ideal sites are located within 50 km of an urban centre or along a major transportation route. Rural locations must rely on farmers' market sales to supplement lower U-pick revenues.
Cash Flow Projections - Strawberry Enterprise 7 Acres
Cash flow must be looked at separately from revenue and expenses to assess the viability of the enterprise. Year to year variations in prices and yields will affect cash flow. Individuals investing in a strawberry enterprise will require sufficient start-up capital to meet cash outflows until sales are made. New operators may require longer time to learn marketing techniques, weed control, establish customers and manage labour.
. | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Cash Outflows | . | . | . | . | . |
| Total Capital Investment | $127,400 | - | - | - | - |
| Total Cash Operating Expenses1 | $2,776 | $8,750 | $17,107 | $24,917 | $31,104 |
| Personal Withdrawals | $5,000 | $5,000 | $5,000 | $5,000 | $5,000 |
| Annual Debt Payments | $5,442 | $5,442 | $5,442 | $5,442 | $5,442 |
| Total Cash Outflows | $140,618 | $19,192 | $27,548 | $35,358 | $41,545 |
| . | . | . | . | . | . |
| Cash Inflows | . | . | . | . | . |
| Borrowed Capital | $38,220 | . | . | . | . |
| Equity Capital | $89,180 | . | . | . | . |
| Start Up Capital | $35,000 | . | . | . | . |
| Total Cash Revenues | - | - | $18,320 | $35,495 | $50,380 |
| Total Cash Inflows | $162,400 | - | $18,320 | $35,495 | $50,380 |
| . | . | . | . | . | . |
| Net Cash Flows | $21,782 | $ (19,192) | $ (9,228) | $137 | $8,835 |
| . | . | . | . | . | . |
| Cumulative Cash Flows | $21,782 | $2,590 | $ (6,638) | $ (6,502) | $2,333 |
| . | . | . | . | . | . |
| Debt level is not likely to exceed 30%. | . | . | . | . | . |
Critical cost variable
Labour - Hired labour is a significant cost component in strawberry enterprises. Field work is usually hired while owners superviseÿpickers.
| Crop | Labour | Number of Hours | Total Cost |
| Planting | Hoeing | 24 | $756 |
| | Placing irrigation | 16 | $168 |
| | Deblooming | 8 | $84 |
| | Irrigation | 8 | $84 |
| | Winterize irrigation | 8 | $84 |
| First year production | Weedwipe | 20 | $210 |
| | Hand weeding | 32 | $336 |
| | Irrigation | 64 | $672 |
| | Winterize irrigation | 8 | $84 |
| Second year production | Weedwipe | 20 | $210 |
| | Hand weeding | 64 | $672 |
| | Irrigation | 64 | $672 |
| | Winterize irrigation | 8 | $84 |
| Third year production | Weedwipe | 16 | $168 |
| | Hand weeding | 32 | $336 |
| | Irrigation | 48 | $504 |
| | Remove irrigation | 8 | $84 |
*Weedwiping is not commonly used on larger acreages. Its use will depend on the effectiveness of mechanical and chemical control.
Snapshot Enterprise Budget 7 Acre Strawberry Enterprise - Year 5
| Projected Revenues | No. | Price | Revenues | Your Snapshot |
| U-pick sales | 19,800 lb | $2.10/lb | $41,580 | . |
| Farmers' market sales | 2,200 lb | $4.00/lb | $8,800 | . |
| . | . | . | . | . |
| Total Projected Revenues | . | . | $50,380 | . |
| . | . | . | . | . |
| Projected Direct Costs | . | . | . | . |
| Plant material | . | . | $1,500 | . |
| Fertilizer | . | . | $910 | . |
| Chemicals | . | . | $485 | . |
| Custom Work (straw spreading) | . | . | $3,565 | . |
| Equipment operating & maintenance | . | .. | $462 | . |
| Marketing costs | . | . | $2,640 | . |
| Picking costs | . | . | $1,100 | . |
| Containers | . | . | $330 | . |
| Professional development | . | . | $1,000 | . |
| Advertising | . | . | $2,000 | . |
| Utilities | . | . | $1,000 | . |
| Other Pest Control | . | . | $100 | . |
| Windbreaks | . | . | $200 | . |
| Interest on operating loan2 | . | . | $551 | . |
| U-pick supervision3 | . | . | $7,560 | . |
| Total Projected Direct Costs | . | . | $23,403 | . |
| . | . | . | . | . |
| Projected Indirect Costs | . | . | . | . |
| Insurance | . | . | $450 | . |
| Labour | . | .. | $5,850 | . |
| Land rental | . | . | $1,400 | . |
| Depreciation on machinery4 | . | . | $1,811 | . |
| Depreciation on buildings | . | . | $3,308 | . |
| Total Projected Indirect Costs | . | . | $12,819 | . |
| . | . | . | . | . |
| Total Projected Direct & Indirect Costs | . | . | $36,222 | . |
| . | . | . | . | . |
| Gross Operating Profit | . | . | $14,158 | . |
| . | . | . | . | . |
| Interest on Investment5 | . | . | . | . |
| Buildings and equipment | . | . | $660 | . |
| . | . | . | . | . |
| Total Projected Economic Costs | . | . | $36,882 | . |
| . | . | . | . | . |
| Return to Management6 | . | . | $13,498 | . |
Sensitivity Analysis
The profitability of a strawberry enterprise will be influenced by changes in production and market prices.
The table below lists the changes to return to management as market prices for strawberries vary.
| Change in Strawberry Prices | Return to Management |
-20% | $3,422 |
-10% | $8,460 |
0% | $13,498 |
+10% | $18,536 |
+20% | $23,574 |
Average production for strawberry enterprises is 7,300 pounds per acre. The following table shows the changes to return to management as production varies.
| Production Per Acre | Return to Management |
8,030 | $9,590 |
7,665 | $8,754 |
7,300 (average) | $7,918 |
6,935 | $7,082 |
6,570 | $6,246 |
Definitions
1Cash operating costs: Direct costs + insurance
2Interest on operating: The interest on an operating loan, at 7% for 6 months.
3 U-pick supervision: Labour contributed by the owner-operator, valued at $10.50/hour.
4 Depreciation: The reduction in the value of an asset over its lifetime.
5 Interest on Investment: The cost of investing in capital assets rather than in a financial investment. Valued at 5.89% on machinery and buildings.
6 Return to Management: An amount left to compensate the owner-operator for risk and management.
Risk Factors
Individual operators must address the following risk factor:
- Water - adequate rainfall or availability of irrigation isÿnecessary.
- Perishability
- Weather - adequate snowfall is required for winter protection. Late spring frosts can damage flowers and reduce yields.
- Insects - strawberries are susceptible to attack from a number of insect pests.
- Diseases
- Labour
Management Strategies
Key management strategies that will contribute to the production and economic performance:Analyse the local market and nearby grower competitor
- Develop a marketing strategy to capture the U-pick market. Farmers' market sales can generate higher revenue but constitute a lower sales volume.
- Plant a mix of day neutrals and June bearers to capture both markets.
- Fields must be clean and weed free to reduce competition.
- Management of hired labour is essential to achieve average production.
For more information, contact:
Alberta Farm Fresh Producers Association
1-800-661-2642
Alberta Agriculture and Food Production and Marketing
Crop Diversification Centre - South, Brooks
Alberta Ag-Info Centre
1-866-882-7677
Visit our website
Publications
"Commercial Strawberry/RaspberryIndustry" AgVentures, 1998. Agdex 230/830-1
The following people contributed to the preparation of this factsheet:
- Alberta Farm Fresh Producers Association
- Dean Dyck, P. Ag., Financial Business Analyst, Red Deer
- Lloyd Hausher, Provincial Fruit Industry Development Specialist, Brooks
Source: Agdex 230/821-1. March 2004. |
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