Representative Farm Models: Thompson Seedless Grapes Jay E. Noel - PowerPoint PPT Presentation

Representative Farm Models: Thompson Seedless Grapes Jay E. Noel Director, California Institute for the Study of Specialty Crops, California Polytechnic State University Mechel Paggi Director, California Agribusiness Center, CSU, Fresno

Representative Farm Model Overview � Representative farm is the size of operation most likely to be in production in a given region. • NOT AVERAGE � Model’s Capabilities • A Decision Making tool • Policy Analysis • Market/Production Analysis � Several Interrelated Worksheets in Excel • Calculates Key Output Variables (KOVs)

Pro Forma Financial Worksheet � Income Statement 2005-2010 • KOV: Net Income � Statement of Cash Flows • KOV: Cash Flow Position � Balance Sheet • KOV: Debt to Asset Ratio, Net Present Value, Net Worth, Liquidity, etc

Representative Farm Models Capture Price and Yield Variability � Prices and Yields allowed to fluctuate around a given mean forecasted price and yield for each year being simulated. • Based on forecasted mean price and yield and historical price and yield variability. • Captures the yield and price risk involved in agricultural production. • One hundred price and yield combinations are selected around each year’s forecasted mean price and yield giving one hundred net revenue and cash flow estimates for each year in the simulation. • Allows for more “realistic” analyses

Thompson Seedless Model � Fresno Region � 115 acres in production; 120 owned on farm � Allows for any combination of Raisin and Green production � Any percentage of Green production can be contracted � Allows for either Well or District Water costs � Can switch the mean yield between low, medium, or higher yields (8.5,11,15 tons/acre)

Scenario Yields Tons/Acre Year Low Low Medium Medium High High Green Raisin Green Raisin Green Raisin Yield Yield Yield Yield Yield Yield 2006 8.5 2.04 11.03 2.65 15.01 3.6 2007 8.5 2.04 11.03 2.65 15.00 3.6 2008 8.57 2.06 11.13 2.67 15.14 3.63 2009 8.59 2.06 11.15 2.68 15.18 3.64 2010 8.61 2.07 11.18 2.68 15.21 3.65

Scenario Prices $/Ton Year Cash Market Contract Green Cash Market Green Price Price Raisin Price 2006 $99.00 $165.00 $929.60 2007 $99.00 $165.00 $939.40 2008 $99.00 $165.00 $950.28 2009 $99.00 $165.00 $960.75 2010 $99.00 $165.00 $971.25

Fresno Production Costs (numbers include overhead costs) Raisin Cultural Costs ($/acre) Green Cultural Costs ($/acre) Irrigate Well $121.00 Irrigate Well $121.00 Irrigate District $0.00 Irrigate District $0.00 Fertilize $100.00 Fertilize $50.00 Weed Control $35.00 Weed Control $20.00 Insect/Disease Control $125.00 Insect/Disease Control $125.00 Lube and Repair $32.00 Lube and Repair $32.00 Growth Regulator $0.00 Growth Regulator $0.00 Labor $300.00 Labor $300.00 Fuel $35.00 Fuel $35.00 Total Cultural Production Costs per Total Cultural Costs per Acre $683.00 acre $748.00 Raisin Harvest Costs ($/ton) Green Harvest Costs Picking $123.00 Picking ($/acre) $200.00 Rolling $28.00 Hauling ($/ton) $10.00 Box $12.00 Paper $25.00 Hauling $10.00 Turning $28.00 Total Harvest Costs per ton (Paper Drying) $226.00

Loan Information � Land Loan • $200,000 principle remaining in 2005 at 7.5% interest rate • Amortized over 15 years • Net Income accounts for interest payments • Cash Flow accounts for principle payments � Operating Loan • The interest on operating loans is built into cultural costs.

UCD Production Costs Raisin Cultural Costs ($/acre) Green Cultural Costs ($/acre) Irrigate $121 Irrigate $170 Fertilize $8 Fertilizer $16 Weed Control $9 Weed Control $80 Insect/Disease Control $64 Lube and Repair $32 Insect/Disease Control $97 Growth Regulator $0 Lube and Repair $13 Fuel $30 Tie Vines $11 Labor $427 Total Cultural Costs ($/acre) $691 Labor $436 Raisin Harvest Costs ($/acre) Fuel $70 Harvest $120 Total Cultural Costs ($/acre) $893 Bin Handling $173 Green Harvest Costs ($/acre) $345 Haul $11 Total Harvest Costs (Drying on vine) $304

Scenarios Break Even Analyses Using Fresno Production Costs 50% Green 50% Raisin Production 0% Contracted Green � Production • Low Yields (8.5), Medium Yields (11), High Yields (15) 50% Green 50% Raisin Production 50% Contracted Green � Production • Low Yields, Medium Yields, High Yields 100% Green 0% Contracted Green Production � • Low Yields, Medium Yields, High Yields

Net Income Break Even Analysis 50% Green 50% Raisin 0% Contracted Green Production Low Yields Net Income Medium Yields Net High Yields Net Income Income 100% 100% 100% 90% 90% 90% 80% 80% 80% 70% 70% 0.71 70% 60% 60% 60% 1.00 0.94 50% 50% 50% 40% 40% 40% 0.00 30% 30% 30% 20% 20% 20% 0.29 10% 10% 10% 0.00 0.06 0.00 0.00 0% 0% 0% Net Income 2006 Net Income 2006 Net Income 2006

Net Income Break Even Analysis 50% Green 50% Raisin 50% Contracted Green Production Low Yield Net Income Medium Yield Net High Yield Net Income Income 100% 100% 100% 90% 90% 90% 80% 80% 80% 70% 70% 70% 60% 60% 60% 0.94 1.00 50% 50% 1.00 50% 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0.00 0.06 0.00 0.00 0.00 0.00 0% 0% 0% Net Income 2006 Net Income 2006 Net Income 2006

Net Income Break Even Analysis 100% Green 0% Contracted Green Production 8.5 tons/acre 11 tons/acre 15 tons/acre Net Income Net Income Net Income 100% 100% 100% 0.21 90% 90% 90% 0.30 0.00 80% 80% 80% 0.59 0.00 70% 70% 70% 60% 60% 60% 50% 50% 50% 0.00 0.79 40% 40% 40% 0.70 30% 30% 30% 0.41 20% 20% 20% 10% 10% 10% 0% 0% 0% Net Income 2006 Net Income 2006 Net Income 2006

2010 Cash Flow Break Even Analysis 100% Green 0% Contracted Green Production 2010 Cash Flow 2010 Cash Flow 2010 Cash Flow 8.5 tons/acre 11 tons/acre 15 tons/acre 0.00 0.00 100% 100% 100% 0.10 0.00 90% 90% 90% 80% 80% 80% 70% 70% 70% 0.76 60% 60% 60% 1.00 50% 50% 50% 0.90 40% 40% 40% 30% 30% 30% 0.00 20% 20% 20% 0.24 10% 10% 10% 0% 0% 0% Cash Flow 2010 Cash Flow 2010 Cash Flow 2010

’06 – ’10 Net Present Value Break Even Analysis 100% Green 0% Contracted Green Production Net Present Value Net Present Value Net Present Value 8.5 tons/acre 11 tons/acre 15 tons/acre 100% 0.01 0.00 100% 100% 90% 90% 90% 0.24 80% 80% 80% 0.00 70% 70% 70% 60% 60% 60% 0.86 0.99 50% 50% 50% 40% 40% 40% 0.76 30% 30% 30% 20% 20% 20% 0.00 10% 10% 10% 0.14 0% 0% 0% NPV NPV NPV