Strawberry Profit$...Profit Planning Tools for an Alberta Strawberry Enterprise

 
 
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 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 a˙percentage of gross revenues12%

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 90˙per˙cent 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 supervise˙pickers.

CropLabourNumber of HoursTotal Cost
PlantingHoeing
24
$756
Placing irrigation
16
$168
Deblooming
8
$84
Irrigation
8
$84
Winterize irrigation
8
$84
First year productionWeedwipe
20
$210
Hand weeding
32
$336
Irrigation
64
$672
Winterize irrigation
8
$84
Second year productionWeedwipe
20
$210
Hand weeding
64
$672
Irrigation
64
$672
Winterize irrigation
8
$84
Third year productionWeedwipe
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 PricesReturn 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 AcreReturn 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 is˙necessary.
  • 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.
 
 
 
 
For more information about the content of this document, contact Duke.
This information published to the web on March 1, 2004.