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Cost competitiveness of apple production in British Columbia versus Washington State Lee, Mei Li 1985

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COST COMPETITIVENESS OF APPLE PRODUCTION IN BRITISH COLUMBIA VERSUS WASHINGTON STATE by MEI LI LEE A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE i n THE FACULTY OF GRADUATE STUDIES AGRICULTURAL ECONOMICS We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o the r e q u i r e d s t a n d a r d UNIVERSITY OF BRITISH COLUMBIA JULY 1985 © MEI LI LEE, 1985 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an advanced degree a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I agree t h a t t h e L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d by t h e head o f my department o r by h i s o r h e r r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department o f (\€TRiCULTURE ECONorvMes The U n i v e r s i t y o f B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date -SEPT. 5Q , tft^ DE-6 n / s n ABSTRACT The o b j e c t i v e of t h i s study i s to determine the cost of producing apples i n B r i t i s h Columbia and Washington State and then compare the estimated costs between the two regions. 0 conventional 'cost of production model, whereby long-run costs ( i . e . d e p r e c i a t i o n costs) have been included, i s developed to determine the average per acre and per pound cost of producing apples. The model assumes a representative orchard f o r B r i t i s h Columbia and Washington State. 0 set of c h a r a c t e r i s t i c s , along with a set of management schedules, are defined f o r each of the representative orchards. In keeping with the assumption that the re p r e s e n t a t i v e orchards include matut^e as well as tr e e s i n various establishment stages, each management schedule defines a set of operations f o r tr e e s of a s p e c i f i c age. There are nine schedules representing trees age one through mature. Aside from the type of operations performed, each management schedule a l s o s p e c i f i e s the number of times an operation i s executed, the type of machine(s) used, the machine and labour time required, and the m a t e r i a l / s e r v i c e cost involved. From the information provided i n the management schedules, a corresponding set of production cost schedules i s developed. These schedules show the depreciation, opportunity, insurance, r e p a i r and maintenance, f u e l and lu b r i c a n t , labour and m a t e r i a l / s e r v i c e costs associated with each operation. The theory of C a p i t a l Budgeting i s used here to provide a consistent and accurate estimation of the per hour or annual cost of machinery, equipment and b u i l d i n g s . For each schedule, the sum of the t o t a l cost per operation plus the overhead charges, i n t e r e s t on operating c a p i t a l , and rent and tan on land y i e l d the per acre cost of producing apples. A comparison based on the per acre cost by t r e e age i s performed to determine cost d i f f e r e n c e s that may e x i s t at t h i s l e v e l . On average (average of orchard block) per acre cost i s determined f o r B r i t i s h Columbia and Ulashington State based on the proportion of t r e e s of a s p e c i f i c age and i t s t o t a l cost. This average per acre cost i s compared, as well as the i n d i v i d u a l categories of costs ( i . e . labour) to determine where d i f f e r e n t i a l s e x i s t between the two regions. Based on an average per acre y i e l d , per pound cost of producing apples i s also c a l c u l a t e d . The e f f i c i e n c y r a t i o , t o t a l ouput v a l u e / t o t a l input value, i s c a l c u l a t e d and compared to provide an i n s i g h t i n t o B r i t i s h Columbia's producers a b i l i t y to extract p r o f i t s from inputs. i i i ACKNOWLEDGEMENTS I would l i k e to express my a p p r e c i a t i o n to George Kennedy f o r h i s comments, suggestions and guidance over the course of t h i s study. In ad d i t i o n , 1 would l i k e to thank the other past and present members of my committee, Tim Hazledine, George Eaton and Cameron Short, f o r t h e i r c o n s t r u c t i v e c r i t i c i s m s and suggestions. T h i s t h e s i s a l s o b e n e f i t t e d from d i s c u s s i o n s with h o r t i c u l t u r i s t s , f i e l d r e p r e s e n t a t i v e s and producers i n B.C. and Washington State. S p e c i f i c a l l y , I would l i k e t o thank the f o l l o w i n g members of the B.C.M.0.F. members and the County Agents i n Washington State. Regional Farm Economist, B.C.M.A. F. Summerland A g r i c u l t u r e O f f i c e r , B.C.M.A.F. Summerland D i s t r i c t H o r t i c u l t u r i s t , B.C.M.A.F. O l i v e r Tree F r u i t S p e c i a l i s t , B.C.M.A. F. Kelowna A g r i c u l t u r e Products, B.C.M.A.F., V i c t o r i a Economist Douglas County Extension Agent, Washington State Yakima County Extension Agent, Washington State Wenatchee County Extension Agent, Washington State T h e i r a s s i s t a n c e i n obtaining data i s g r e a t l y appreciated. George Geldart Howard Joynt Tim Watson Mike Sanders Peter Gubbels Ray Hunter Brooke Peterson Paul Tvergyack i v Furthermore, I would l i k e to thank my s i s t e r s , brother and c l o s e f r i e n d s , e s p e c i a l l y Michael, f o r t h e i r support during the l a s t two turbulent years. F i n a l l y , I would l i k e to thank my parents, e s p e c i a l l y my mother, who s a c r i f i c e d so much to provide me with an opportunity to be educated. v T a b l e of C o n t e n t s 1 . CHAPTER I ; 1 1.1 I n t r o d u c t i o n .....1 1 .2 The P r o b l e m .2 1 .3 O b j e c t i v e 15 1.4 T h e s i s Guide . • 15 2. CHAPTER I I 17 2.1 The A p p l e I n d u s t r i e s In B.C. And Washington S t a t e . 17 2.2 V a r i e t i e s Grown ..19 2.3 O r c h a r d Comparison .....22 2.4 C l i m a t e And S o i l 26 2.5 H i r e d L a b o u r 27 2.6 P r o c e s s i n g and M a r k e t i n g 28 2.7 Government Support Programs 30 3. CHAPTER I I I . 34 3.1 L i t e r a t u r e Review 34 3.2 M e t h o d o l o g y 42 3.2.1 Data 45 3.2.2 Methods of E s t i m a t i o n 47 3.2.2.1 E s t i m a t i n g O w n e r s h i p and O p e r a t i n g C o s t s 59 3.2.3 P r o d u c t i o n Cost S c h e d u l e s 66 4. CHAPTER' IV 84 4.1 R e s u l t s 84 4.2 R e s u l t s From P r o d u c t i o n S c h e d u l e s 84 4.3 E s t i m a t e d P e r A c r e and Per Pound C o s t of P r o d u c i n g A p p l e s 89 4.4 R e s u l t s From S c e n a r i o s 93 v i 4.4.1 Input P r i c e S c e n a r i o 94 4.4.2 Acreage S c e n a r i o 98 4.4.3 D e n s i t y S c e n a r i o 101 5. CHAPTER V 103 5.1 Summary and C o n c l u s i o n s 103 5.2 L i m i t a t i o n s of the Study 108 5.3 F u r t h e r Research 110 5.4 P o l i c y I m p l i c a t i o n s 112 6. BIBLIOGRAPHY 114 7 . APPENDIX A 118 8. APPENDIX B 121 v i i LIST OF TABLES TABLE PAGE Table 1 Total Apple Production In B.C. compared to 4 Washington State, Canada, and the World, 1966-83. Table 2 Consumption, Exports and Imports of Fresh apples, 7 B.C. and Canada, 1960-83. Table 3 Average Producer Returns f o r Fresh and Processed 9 apples: B.C. vs Washington State, 1959-83. Table 4 Net Farm Income Insurance (FID and A g r i c u l t u r a l IS S t a b i l i s a t i o n (ASA) Payments to B.C. Apple Producers, 1973-64. Table 5 Proportions of Various V a r i e t i e s of apples £1 Produced i n B.C. and Washington State, 197£-81. Table 6 Number of Apple Trees i n B.C. By Age 23 Table 7 E f f e c t s Resulting from D i f f e r e n c e s i n Climate, 33 S o i l , Arable land, Labour, and Processing and Marketing. Table 8 Background Information,of An Average Commercially 44 Vi a b l e Orchard i n B.C. and Washington State. Tables 9-17 Management Schedules f o r Trees Age 1 Through 49-57 Mature, B.C. and Washington State. Tables 18-26 Production Schedules f o r Trees Age 1 Through 67-75 Mature, B.C. and Washington State. Table £7 Average Per Acre Y i e l d : B.C. vs. Washington State 82 Table £8 Total Cost Per Acre By Age of Trees: B.C. vs 85 Washington State, In 1984 Canadian D o l l a r s . Table £9 Comparing Production Costs: B.C. vs Washington 90 State, In 1984 Canadian D o l l a r s . Table 30 Production Costs Per Acre: B.C. vs Washington 96 State, In 1984 Canadian D o l l a r s . Table 31 Production Costs Per Pound: B.C. vs Washington 97 State, In 1984 Canadian D o l l a r s . v i i i Comparing Pr o d u c t i o n Costs: B.C. vs Washington S t a t e In 19B4 Canadian D o l l a r s . P roduction Costs Per Hectare: B.C. vs Washington Sta t e , In 1964 Canadian D o l l a r s . P roduction Costs Per Kilogram: B.C. vs Washington S t a t e , In 1984 Canadian D o l l a r s . 1 . CHAPTER I 1.1 INTRODUCTION A p p r o x i m a t e l y 80 p e r c e n t of a l l t r e e f r u i t p r o d u c t i o n i n the Okanagan V a l l e y of B r i t i s h Columbia i s a p p l e s ; o t h e r t r e e f r u i t s grown i n c l u d e c h e r r i e s , a p r i c o t s , peaches, prunes and p e a r s . In r e c e n t y e a r s , u nusual c o l d weather d u r i n g c r i t i c a l growth p e r i o d s has r e s u l t e d i n a r e d u c t i o n i n the c r o p and f r u i t s i z e . An example i s the 1984 a p p l e c r o p which c o n s i s t e d l a r g e l y of s m a l l f r u i t . Low farm gate p r i c e s and h i g h p r o d u c t i o n c o s t s have g e n e r a t e d renewed concern i n the t r e e f r u i t i n d u s t r y and i t s s u p p o r t i n d u s t r i e s r e g a r d i n g the f u t u r e of B r i t i s h Columbia's t r e e f r u i t i n d u s t r y . B.C. a p p l e o r c h a r d i s t s c l a i m t h a t t h e y a r e r e c e i v i n g f i v e c e n t s 1 a pound f o r a p p l e s t h a t c o s t t h i r t e e n c e n t s a pound t o produce (Country L i f e , 1983). Fear has been e x p r e s s e d i n the media t h a t t h i s 95 y e a r o l d i n d u s t r y may have t r o u b l e r e a c h i n g i t s 100th a n n i v e r s a r y (Noonan, 1985). As the s i n g l e most i m p o r t a n t i n d u s t r y i n the Okanagan V a l l e y , the economic and s o c i a l i m p a c t s would be enormous i f the i n d u s t r y c o l l a p s e d . I t has been e s t i m a t e d t h a t the average Okanagan o r c h a r d i s t c i r c u l a t e s a t l e a s t $50,000 from p e r s o n a l and o p e r a t i o n a l s p e n d i n g each year t h r o u g h the l o c a l V a l l e y economy (Noonan, 1983). P r o v i n c i a l l y , d i r e c t l y 1 F i v e c e n t s i s the market p r i c e p r i o r t o Farm Income Ins u r a n c e payments. 1 D 2 and i n d i r e c t l y , the t r e e f r u i t i n d u s t r y i n j e c t s about $750 m i l l i o n i n t o the economy a n n u a l l y (Country L i f e , 1985). T h i s i n d u s t r y c o n s t i t u t e d 11 p e r c e n t ($97,844,000) of B.C.'s t o t a l Farm Cash R e c e i p t s i n 1983 (B.C.M.A.F., 1984). I t i s ranked as the t h i r d most i m p o r t a n t s e c t o r w i t h i n the whole B.C. a g r i c u l t u r a l i n d u s t r y , b e h i n d d a i r y p r o d u c t s and c a t t l e , r e s p e c t i v e l y . The f u t u r e of the t r e e f r u i t i n d u s t r y l i e s i n i t s a b i l i t y t o compete w i t h o t h e r domestic and f o r e i g n p r o d u c e r s , e s p e c i a l l y p r o d u c e r s i n Washington S t a t e . The c u r r e n t s t a t e of the B. C. t r e e f r u i t i n d u s t r y has been q u e s t i o n e d w i t h r e s p e c t t o a p o s s i b l e d e c l i n e i n r e l a t i v e economic e f f i c i e n c y (Kennedy, 1980). The purpose of t h i s t h e s i s i s t o examine the h y p o t h e s i s t h a t B.C.'s r e l a t i v e economic e f f i c i e n c y i n p r o d u c i n g a p p l e s i s lower than t h a t of Washington S t a t e . 1.2 THE PROBLEM Due t o the s m a l l s i z e of B.C.'s a p p l e i n d u s t r y r e l a t i v e t o Washington S t a t e , a p p l e p r o d u c e r s i n B.C. a r e c o n s i d e r e d t o be p r i c e - t a k e r s i n both t h e domestic and f o r e i g n markets. The per u n i t market p r i c e of B.C. a p p l e s i s l a r g e l y 3 d e t e r m i n e d by Washington S t a t e because o f : 1) the s i z e of the a p p l e i n d u s t r y i n Washington S t a t e , 2) the c l i m a t i c c o n d i t i o n s , and 3) the homogeneity p r o p e r t y of a p p l e s by v a r i e t y . Washington S t a t e i s ranked as the number one producer of a p p l e s i n the U n i t e d S t a t e s . I t s annual p r o d u c t i o n a v e r a g e s a p p r o x i m a t e l y 30 p e r c e n t of t o t a l U.S. p r o d u c t i o n . Compared t o B.C., Washington S t a t e ' s a n n u a l p r o d u c t i o n a v e r a g e s (1966-1983) a p p r o x i m a t e l y s i x times g r e a t e r than B.C. C l i m a t i c a l l y , Washington S t a t e tends t o be warmer than the Okanagan V a l l e y . The warmer c l i m a t e i s c r i t i c a l , e s p e c i a l l y i m m e d i a t e l y f o l l o w i n g the blossom p e r i o d , s i n c e i t f r e q u e n t l y r e s u l t s i n l a r g e r f r u i t and e a r l i e r h a r v e s t s . The r e l a t i v e l y homogeneous appearance of a p p l e s by v a r i e t y c a u s e s consumers t o make pu r c h a s e s based on appearance and t a s t e r a t h e r than the o r i g i n of s u p p l y . Hence, i t i s i m p o r t a n t f o r B.C. t o be c o m p e t i t i v e w i t h Washington S t a t e , which i s c a p a b l e of s u p p l y i n g the same markets as B.C. Recent developments i n the a p p l e i n d u s t r y suggest t h a t B.C.'s a b i l i t y t o compete has d e c l i n e d . For example, d a t a i n T a b l e 1 show B.C.'s growth r a t e i n p r o d u c t i o n t o be much l e s s than t h a t of Washington S t a t e . T h i s t a b l e shows t h a t B.C.'s t o t a l p r o d u c t i o n , i n terms of p e r c e n t a g e s of Washington S t a t e ' s , averaged 21 p e r c e n t d u r i n g the p e r i o d 1966 t o 1970. T h i s average dropped t o 15 p e r c e n t d u r i n g 1979-83, a d e c r e a s e of 28 p e r c e n t . These s t a t i s t i c s c l e a r l y i m p l y t h a t Washington S t a t e ' s r a t e of i n c r e a s e i n a p p l e TABLE 1 TOTAL APPLE PRODUCTION IN B.C. COMPARED TO WASHINGTON STATE, CANADA, AND THE WORLD, 1966-1983. B.C.a WASH. STATEb B.C./WASH. CANADA3 B.C./CANADA WORLDc B.C./WORLD (MIL. LB) (MIL LB) (%) (MIL LB) [%) (MIL LB) <*) 1966 341.8 1590.2 21.5 948.2 36.0 36660.0 0.93 1967 303.1 1240.0 24.4 983.4 30.8 40142.0 0.76 1968 232.7 1240.0 22.7 904.1 25.7 38320.7 0.61 1969 271.2 1675.0 16.0 979.0 27.7 44272.0 0.61 1970 291.2 1320.0 22.1 877.6 33.2 40338.3 0.72 1971 190.2 1201.0 15.8 833.5 22.8 40221.4 0.47 1972 242.9 1390.0 17.5 868.8 28.0 42788.0 0.57 1973 321.0 1860.0 17.3 826.9 38.8 49689.7 0.65 1974 240.3 1775.0 13.5 890.8 27.0 47231.1 0.51 1975 366.4 2200.0 16.7 985.6 37.2 51308.1 0.71 1976 380.8 2308.0 16.5 901.8 42.2 67391.4 0.57 1977 314.6 2083.0 15.1 921.7 34.1 64048.6 0.50 1978 331.7 2170.0 15.3 998.9 33.2 68972.4 0.48 1979 333.4 2619.0 12.7 959.0 34.8 80048.0 0.42 1980 463.5 3005.0 15.4 1218.5 38.0 77816.7 0.60 1981 445.5 2760.0 16.1 920.3 48.4 70372.6 0.63 1982 386.7 2615.0 14.8 1053.0 36.7 1983 429.8 3000.0 14.3 1068.9 40.2 SOURCES: a B.C.H.A.F., Production Of Tree F r u i t Crops Together With An Estimate Of Farm V a l u e s . Note: Does not include crabapples, 1979-81. b United States Department Of Agriculture. Agricultural S t a t i s t i c s , Washington, D.C., U.S.Government Printing Office. c FAO Production Yearbook. FAO, Rome. 6 p r o d u c t o n has been g r e a t e r - than B.C.'s. T h i s i m p l i c a t i o n i s c o n f i r m e d by examining B.C. and Washington S t a t e ' s growth i n p r o d u c t i o n over the p e r i o d 1966 t o 1982. Based on f i v e year averages (1966-70 and 1979-83), B.C.'s t o t a l a p p l e p r o d u c t o n showed an i n c r e a s e of 43 p e r c e n t w h i l e Washington S t a t e r e v e a l e d an i m p r e s s i v e 98 p e r c e n t i n c r e a s e . In Canada, B.C.'s t o t a l a p p l e p r o d u c t i o n as a p e r c e n t a g e of a l l Canadian p r o d u c t i o n has i n c r e a s e d 11 p e r c e n t d u r i n g the same p e r i o d . However, compared t o the W o r l d , the p e r c e n t a g e of B.C.'s t o t a l p r o d u c t i o n has d e c l i n e d by 27.5 p e r c e n t . Annual t o t a l a p p l e p r o d u c t i o n i n B.C., Washington S t a t e and the World a r e graphed i n F i g u r e 1. Compared t o Washington S t a t e and the World, B.C.'s i n c r e a s e i n t o t a l p r o d u c t i o n began f a l l i n g b e h i n d d u r i n g the m i d - s e v e n t i e s . The tremendous i n c r e a s e i n p r o d u c t i o n e x p e r i e n c e d by both Washington S t a t e and the World d u r i n g the y e a r s 1978-80 d i d not o c c u r i n B.C. In c o n t r a s t t o t h e e r r a c t i c f l u c t u a t i o n s shown by Washington S t a t e and t h e World i n . the l a t e s e v e n t i e s , changes i n B.C.'s a n n u a l p r o d u c t i o n have been r e l a t i v e l y s m a l l . At a time when Washington S t a t e and the World a r e i n c r e a s i n g t h e i r p r o d u c t i o n a t an a c c e l e r a t e d r a t e , B.C.'s r e l a t i v e l y s t a b l e p r o d u c t i o n growth becomes a matter f o r c o n c e r n . S t a b l e p r o d u c t i o n growth i s a c o n c e r n as the t o t a l Canadian consumption of f r e s h a p p l e s i s i n c r e a s i n g a t a h i g h e r r a t e , as shown i n T a b l e 2. S i n c e 1960, t o t a l Canadian consumption of f r e s h a p p l e s has r i s e n a t an i n c r e a s i n g r a t e . 7 TABLE 2 CONSUMPTION, EXPORTS AND IMPORTS OF B.C. AND CANADIAN FRESH APPLES, 1960-1983 TOTAL EXPORTS FROM EXPORTS FROM IMPORTS TO IMPORTS TO CANADIAN B.C. CUSTOMS5 CANADA3 B.C. CUSTOMS" CANADA3 CONSUMPTION3 (MIL LB) (MIL LB) (MIL LB) (MIL LB) (MIL LB) 1960 344 n o 52 1961 347 100 58 1962 535 124 50 1963 574 146 37 1964 542 145 62 1965 533 129 64 1966 473 118 55 1967 434 155 46 1968 557 157 71 1969 580 130 62 1970 538 38.4 104 24.8 92 1971 566 34.4 102 23.2 82 1972 507 26.4 99 26.6 88 1973 541 60.0 118 25.2 94 1974 663 50.6 78 29.6 136 1975 690 49.0 86 35.6 148 1976 683 69.6 99 25.8 176 1977 574 73.8 106 30.0 147 1978 622 83.8 124 36.8 164 1979 619 81.0 121 44.0 212 1980 572 85.4 133 53.0 173 1981 696 112.2 166 44.4 240 1982 651 126.8 155 61.2 236 1983 136.6 51.0 SOURCES: 3 S t a t i s t i c s Canada, Supply and Disposition of Selected Food Groups. b B.C. Ministry of Industry and Small Business Development, B.C. External Trade Report, 1970-83. 8 From an annual consumption of 344 m i l l i o n pounds i n 1960, t o t a l consumption of f r e s h a p p l e s has reached 651 m i l l i o n pounds i n 1982, an i n c r e a s e of 89 p e r c e n t . E x p o r t s of f r e s h a p p l e s from Canada averaged 131 m i l l i o n pounds d u r i n g the s i x t i e s . In the s e v e n t i e s , average e x p o r t s of f r e s h a p p l e s from Canada d e c l i n e d t o 103 m i l l i o n pounds. The average e x p o r t s of f r e s h a p p l e s from Canada i n c r e a s e d t o 151 m i l l i o n pounds i n the e a r l y e i g h t i e s , 1980-82. T h i s average i s 15 and 46 p e r c e n t h i g h e r than the av e r a g e s of the s i x t i e s and s e v e n t i e s , r e s p e c t i v e l y . Data on e x p o r t s of f r e s h a p p l e s from B.C. c u s t o m s 2 suggest t h a t an i n c r e a s i n g amount of f r e s h a p p l e s e x p o r t e d from Canada are b e i n g e x p o r t e d through B.C. From an average of 33 m i l l i o n pounds (1970-73), e x p o r t s of f r e s h a p p l e s from B.C. have i n c r e a s e d t o an average of 125 m i l l i o n pounds (1981-83), an i n c r e a s e of almost 280 p e r c e n t . Canadian i m p o r t s of f r e s h a p p l e s have reached an average of 216 m i l l i o n pounds i n r e c e n t y e a r s , 1980-1982. The a v e r a g e s imported i n the e a r l y s e v e n t i e s (1970-72) and s i x t i e s (1960-62) a r e 87 and 53 m i l l i o n pounds, r e s p e c t i v e l y . In j u s t over two decades, i m p o r t s of f r e s h a p p l e s have i n c r e a s e d 307 p e r c e n t . S i m i l a r t o e x p o r t s , i m p o r t s of f r e s h a p p l e s through B.C. c u s t o m s 3 have been i n c r e a s i n g r a p i d l y over the p e r i o d 1970-82. The import and consumption d a t a on f r e s h a p p l e s suggest t h a t the demand f o r 2 The f r e s h a p p l e s e x p o r t e d from B.C. need not o r i g i n a t e i n B.C. 3 N o t a l l f r e s h a p p l e s imported through B.C. customs are consumed i n B.C. 9 TABLE 3 AVERAGE PRODUCER RETURNS FOR FRESH AND PROCESSED APPLES: B.C. VS. WASHINGTON STATE, 1959-83 AVE. PRICE TO WASH. STATE PRODUCERS* (US CENTS/LB) AVE PRICE TO WASH. STATE PRODUCERS' (CAN CENTS/LB) AVE. PRICE TO B.C. 0 PRODUCERS2.b (CAN CENTS/LB) REAL AVE PRICE TO B.C. PRODUCERS3 (CAN CENTS/LB) REAL AVE. PRICE TO WASH. STATE PRODUCERS4 (US CENTS/LB) 1959 4.48 4.30 3.30 10.60 13.90 1960 5.54 5.37 3.90 12.40 17.00 1961 5.61 5.68 4.80 15.10 17.06 1962 4.90 5.24 4.00 12.50 14.70 1963 3.54 3.82 3.20 9.80 10.50 1964 4.69 5.06 3.60 10.80 13.70 1965 5.62 6.06 4.60 13.50 16.20 1966 4.95 5.33 3.90 11.10 13.86 1967 7.24 7.81 5.30 14.50 19.72 1968 7.93 8.54 6.60 17.40 20.73 1969 2.93 3.06 3.50 8.80 7.27 1970 5.07 5.12 4.30 10.50 11.87 1971 6.20 6.14 4.60 10.90 13.92 1972 8.21 8.13 4.80 10.90 17.85 1973 8.40 8.40 6.10 12.80 17.20 1974 9.30 9.10 6.80 12.90 17.14 1975 6.10 6.20 3.50 6.00 10.30 1976 9.20 9.07 5.40 8.10 14.70 1977 13.00 13.78 8.80 13.00 19.50 1978 12.60 14.15 10.00 13.50 17.56 1979 12.70 14.56 10.30 12.80 15.90 1980 8.20 9.39 6.10 6.90 9.05 1981 10.90 12.71 8.86 8.86 10.90 1982 9.50 11.30 6.22 5.30 8.93 1983 11.40 13.50 7.64 6.33 (10.30 ' Average annual exchange rates are used. 2 Excludes payment from support programs. .3 Deflated by the annual Canadian CPI for all commodities (1981=100). 4 Deflated by the U.S. CPI for all commodities (1981=100). SOURCES: a Washington Crop and Livestock Reporting Service, Washington Agricultural Statistics. D Agriculture Canada, Farmbank data. B.C.M.A.F., Production Of Tree Fruit Crops Together With An Estimate Of Farm Values. Note: Net of subsidy payments. 10 f r e s h a p p l e s has been r i s i n g r a p i d l y and t h a t a p p l e p r o d u c e r s have not i n c r e a s e d p r o d u c t i o n t o the l e v e l of r i s i n g demand. A l t h o u g h t o t a l Canadian e x p o r t s of f r e s h a p p l e s have been r i s i n g , the i n c r e a s e i s not enough t o e x p l a i n the l a r g e i n c r e a s e i n i m p o r t s of f r e s h a p p l e s . Why has p r o d u c t i o n growth been r e t a r d e d i n B.C.? Growth i n p r o d u c t i o n can be g e n e r a t e d e i t h e r by expanding e x i s t i n g o r c h a r d s , e s t a b l i s h i n g new o r c h a r d s , or r e p l a c i n g o l d , l e s s p r o d u c t i v e t r e e s w i t h young, h i g h y i e l d i n g t r e e s . As noted by C a h i l l , o r c h a r d r e p l a c e m e n t , e s t a b l i s h m e n t , and e x p a n s i o n a r e l a r g e l y m o t i v a t e d by p r o f i t s or net market r e t u r n s ( t o t a l revenues minus t o t a l c o s t s ) . Assuming r a t i o n a l e n t r e p r e n e u r s , e x p a n s i o n w i l l be l e s s l i k e l y t o o c c u r i f p r o f i t l e v e l s a r e low. That Washington S t a t e and the World a r e expanding s u g g e s t s t h a t net market r e t u r n s t o p r o d u c e r s o u t s i d e B.C. must be g r e a t e r than those r e c e i v e d by B.C. o r c h a r d i s t s . The average market p r i c e s r e c e i v e d by B.C. and Washington S t a t e a p p l e p r o d u c e r s a r e shown i n T a b l e 3. For comparison p u r p o s e s , average market p r i c e s r e c e i v e d by p r o d u c e r s i n Washington S t a t e are a l s o shown i n Canadian d o l l a r s . T a b l e 3 r e v e a l s t h a t market p r i c e s r e c e i v e d by Washington S t a t e p r o d u c e r s have been and c o n t i n u e t o be above tho s e r e c e i v e d by p r o d u c e r s i n B.C. D u r i n g the l a s t decade, the d i f f e r e n c e between B.C. and Washington S t a t e ' s average market p r i c e has i n c r e a s e d . For example, the average p r i c e d i f f e r e n c e between the two r e g i o n s d u r i n g the p e r i o d 11 1971-75 i s 2.4 c e n t s per pound, but the same p r i c e d i f f e r e n t i a l i s almost double d u r i n g the p e r i o d 1976-82. In the l a t e s i x t i e s , the same p r i c e d i f f e r e n t i a l i s 1.76 c e n t s per pound. In r e a l terms, market p r i c e s have remained h i g h e r i n Washington S t a t e . In a d d i t i o n t o a d e c l i n e i n market p r i c e s , B.C. p r o d u c e r s a r e f a c e d w i t h i n c r e a s i n g p r o d u c t i o n c o s t s . The d i s p a r i t y between market p r i c e s and p r o d u c t i o n c o s t s i s r e f l e c t e d i n the net Farm Income I n s u r a n c e ( F I I ) payments. The p r o v i n c i a l Farm Income I n s u r a n c e ( F I I ) program p r o v i d e s a guarantee t h a t the p r o d u c e r s w i l l , a t the minimum, r e c e i v e a p r i c e e q u a l t o t h a t of p r o d u c t i o n c o s t s . The c o s t of p r o d u c i n g a pound of a p p l e s i s n e g o t i a t e d between p r o d u c e r s and the B.C. M i n i s t r y of A g r i c u l t u r e and Food (B.C.M.A.F.) r e p r e s e n t a t i v e s . " Under t h i s program payments a r e made to p r o d u c e r s when the p r i c e r e c e i v e d by p r o d u c e r s i s lower than the n e g o t i a t e d p r o d u c t i o n c o s t s . The p r i c e r e c e i v e d by p r o d u c e r s i s e s t i m a t e d as the market r e t u r n p l u s payments from the f e d e r a l A g r i c u l t u r a l S t a b i l i z a t i o n A c t (ASA). Both programs . a r e d i s c u s s e d i n d e t a i l i n Chapter I I . S i n c e i t s e x i s t e n c e i n 1973, the F I I program has been making payments t o a p p l e p r o d u c e r s almost a n n u a l l y . The net per pound F I I and ASA payments over the p e r i o d 1973 t o 1984 a r e shown i n T a b l e 4. The F I I payments have averaged 1.9 c e n t s per pound over t h e p e r i o d 1973-76 and 3.1 c e n t s per pound d u r i n g the p e r i o d 1980-83. Recent s u p p o r t payments have averaged 60 "The F I I p r o d u c t i o n model does not i n c l u d e any f i x e d c o s t a s s o c i a t e d w i t h owning the c a p i t a l a s s e t s . 12 TABLE 4 NET FARM INCOME INSURANCE (FII) AND AGRICULTURAL STABILIZATION (ASA) PAYMENTS TO B.C APPLE PRODUCERS, 1973-1984 AVE. FII PAYMENTS3 AVE. ASA PAYMENTSb (CENTS PER LB) (CENTS PER LB) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1.27 1.27 2.94 2.10 0.15 0.19 4.35 2.31 3.04 2.50 1.00 2.10 1.77 2.10 NOTE: The 1984 FII payment represents an i n i t i a l advancement only. SOURCES: 3 Crop Insurance S t a t i s t i c s , Crop Insurance Branch, B.C.M.A.F. b S t e l l a Murjesco, Agricultural Advisor, Agricultural S t a b i l i z a t i o n Board, Agriculture Canada, Ottawa. 13 p e r c e n t h i g h e r than t h o s e of the e a r l y s e v e n t i e s . Concern over t h e d i s p a r i t y between market r e t u r n s and p r o d u c t i o n c o s t s i n r e c e n t y e a r s i s f u r t h e r r e f l e c t e d by the ASA payments. Under t h i s program, two payments have a l r e a d y been made t o a p p l e p r o d u c e r s i n the past f o u r y e a r s . In c o n t r a s t , o n l y one payment was made d u r i n g the s e v e n t i e s . Support payments from F I I and ASA programs i n d i c a t e t h a t both l e v e l s of government view market r e t u r n s t o B.C. pr o d u c e r s as b e i n g low r e l a t i v e t o t h e i r c o s t s of p r o d u c t i o n . Are net market r e t u r n s i n B.C. as low as the da t a imply? Recent b e h a v i o u r of the a p p l e p r o d u c e r s s u g g e s t s t h a t the p r o f i t l e v e l s a r e below an a c c e p t a b l e s t a n d a r d . A number of a r t i c l e s w i t h q u o t e s or st a t e m e n t s made by members of the t r e e f r u i t i n d u s t r y have appeared i n v a r i o u s newspapers, e s p e c i a l l y C o u n t r y L i f e , i n r e c e n t y e a r s . The most f r e q u e n t r e c u r r i n g theme has i d e n t i f i e d the d e c l i n e i n net market r e t u r n s . The measures t h a t o r c h a r d i s t s have employed t o demonstrate t h e i r d i s s a t i s f a c t i o n can be t r a c e d t h rough these a r t i c l e s . F o r example, i n October 1983, a d e m o n s t r a t i o n was o r g a n i z e d by t r e e f r u i t p r o d u c e r s i n the Okanagan V a l l e y t o p r o t e s t low market r e t u r n s on f r u i t s . L a t e r , i n November, r e p r e s e n t a t i v e s of producer o r g a n i z a t i o n s met w i t h the then F e d e r a l M i n i s t e r of A g r i c u l t u r e t o d i s c u s s the p o s s i b i l i t y of imposi n g a t a r i f f on f r u i t e n t e r i n g B.C., and p o t e n t i a l e x p a n s i o n of the f e d e r a l Farm C r e d i t C o r p o r a t i o n t o a s s i s t p r o d u c e r s who 1 4 f a c e d r e f i n a n c i n g of t h e i r debt l o a d s (Noonan, 1983). A l l of t hese measures s t r o n g l y i n d i c a t e low net market r e t u r n s t o o r c h a r d i s t s as an i s s u e r i s i n g i n i m p o r t a n c e . Why i s t h e r e a d i s p a r i t y between market p r i c e s and p r o d u c t i o n c o s t s ? As suggested p r e v i o u s l y , a d e c l i n e i n r e l a t i v e economic e f f i c i e n c y c o u l d be the essence of B.C.'s problem. An i n d i c a t o r of economic e f f i c i e n c y i s market r e t u r n s . G i v e n the s t r u c t u r e of B.C's i n d u s t r y , whereby p r i c e s r e c e i v e d by p r o d u c e r s a r e net of p r o c e s s i n g and m a r k e t i n g c o s t s , market r e t u r n s p r o v i d e an i n d i c a t i o n of the e f f i c i e n c y of the p r o c e s s i n g , d i s t r i b u t i n g , and m a r k e t i n g s e c t o r s t h r o u g h t h e i r a b i l i t i e s t o o b t a i n a h i g h e r p r i c e or produce/market a t a lower p r i c e . At the p r o d u c t i o n l e v e l , economic e f f i c i e n c y i s i n c o r p o r a t e d by e x amining net market r e t u r n s from employing a g i v e n v a l u e of i n p u t s . The s u g g ested d e c l i n e i n economic e f f i c i e n c y can o ccur at the farm, p r o c e s s i n g , d i s t r i b u t i n g , and/or m a r k e t i n g l e v e l w i t h i n the i n d u s t r y . Wherever i t o c c u r s , i t u l t i m a t e l y t r a n s l a t e s i n t o lower p r o f i t l e v e l s f o r p r o d u c e r s . The f a c t t h a t p r o f i t l e v e l s f o r B.C. p r o d u c e r s r e l a t i v e t o Washington S t a t e appear t o be f a l l i n g does not n e c e s s a r i l y i m p ly t h a t e f f i c i e n c y i s f a l l i n g a t the farm l e v e l i n B.C. However, i t may be and i f B.C. i s t o improve i t s r e l a t i v e e f f i c i e n c y a t the farm l e v e l an u n d e r s t a n d i n g of r e l a t i v e c o s t s i s r e q u i r e d . T h i s study a t t e m p t s t o p r o v i d e t h i s u n d e r s t a n d i n g . 9 15 1.3 OBJECTIVE The main o b j e c t i v e of t h i s study i s t w o - f o l d : 1) to d e t e r m i n e the average c o s t of p r o d u c i n g Red D e l i c i o u s a p p l e s i n both B.C. and Washington S t a t e ; and 2) to compare the average c o s t of p r o d u c i n g a p p l e s i n B.C. w i t h t h a t of Washington S t a t e . To a c h i e v e these g o a l s , a c o s t of p r o d u c t i o n model i s c o n s t r u c t e d t o d e t e r m i n e the average c o s t of p r o d u c i n g a p p l e s i n B.C. and Washington S t a t e . R e s u l t s o b t a i n e d are compared and d i s c u s s e d . P o l i c y i m p l i c a t i o n s a r i s i n g from the r e s u l t s a r e a l s o examined. 1.4 THESIS GUIDE Cha p t e r I I d e s c r i b e s the a p p l e i n d u s t r i e s i n B.C. and Washington S t a t e . I t i n c l u d e s a d i s c u s s i o n of the g eographic l o c a t i o n , v a r i e t i e s grown, and c h a r a c t e r i s t i c s of the o r c h a r d s i n the two r e g i o n s . Government and t a x programs, as they r e l a t e t o o r c h a r d s , i n B.C and Washington S t a t e a r e a l s o examined. 16 Chapter I I I c o n s i s t s of two s e c t i o n s . S e c t i o n one f o c u s e s on e x i s t i n g c o s t of p r o d u c t i o n s t u d i e s i n B.C. and Washington S t a t e . I t i n c l u d e s a d i s c u s s i o n of t h e o r e t i c a l i s s u e s and problems s u r r o u n d i n g c o s t of p r o d u c t i o n models. S e c t i o n two p r e s e n t s the methodology t h a t w i l l be a p p l i e d i n t h i s s t u d y t o c a l c u l a t e the c o s t of p r o d u c i n g a p p l e s . I t c o n c e n t r a t e s on the background a s s u m p t i o n s of the model, methods used t o d e r i v e o p e r a t i n g and c a p i t a l c o s t s , and d a t a s e t s . C h apter IV p r e s e n t s an a n a l y s i s of t h e r e s u l t s o b t a i n e d from the model. The a n a l y s i s i s p r e s e n t e d i n t h r e e s e p a r a t e s e c t i o n s . The f i r s t s e c t i o n f o c u s e s on r e s u l t s o b t a i n e d from p r o d u c t i o n s c h e d u l e s . S e c t i o n two compares th e per a c r e and per pound c o s t s e s t i m a t e d f o r B. C. and Washington S t a t e . I t i d e n t i f i e s the a r e a ( s ) i n which B.C.'s c o s t s are h i g h e r or lower than Washington S t a t e ' s . R e s u l t s o b t a i n e d from v a r i o u s s e n s i t i v i t y a n a l y s e s a r e examined i n s e c t i o n t h r e e . The c o n c l u s i o n s of the s t u d y are d i s c u s s e d i n Chapter V. T h i s c h a p t e r i n c l u d e s a d i s c u s s i o n on the l i m i t a t i o n s of t h i s s t u d y , p o l i c y i m p l i c a t i o n s and a r e a s of p o s s i b l e f u t u r e s t u d i e s . 2. CHAPTER I I 2.1 THE APPLE INDUSTRIES IN B.C. AND WASHINGTON STATE. Due t o c l i m a t i c f a c t o r s , a p p r o x i m a t e l y 90 p e r c e n t of B.C.'s a p p l e s a r e grown i n the Okanagan V a l l e y . G e o g r a p h i c a l l y , t h i s i n c l u d e s the area s t r e t c h i n g from Vernon south through Kelowna, P e a c h l a n d , Summerland, Keremeos, O l i v e r and Osoyoos. On av e r a g e , o r c h a r d s i n the n o r t h e r n r e g i o n s , such as Vernon and Kelowna, a r e r e l a t i v e l y l a r g e r than those i n the s o u t h e r n r e g i o n s , O l i v e r and Osoyoos. The d i f f e r e n c e i s p a r t l y a t t r i b u t e d t o the a v a i l a b i l i t y of a r a b l e l a n d . In Washington S t a t e , a p p l e p r o d u c t i o n i s c o n c e n t r a t e d m a i n l y i n t h r e e r e g i o n s . Region one s t a r t s d i r e c t l y s o u t h of the Canada-US border c r o s s i n g near Osoyoos. T h i s r e g i o n i n c l u d e s O r o v i l l e , Omak, Okanogan, B r e w s t e r , Chelan and Wenatchee. Yakima and i t s s u r r o u n d i n g a r e a c o n s t i t u t e s the second o r c h a r d r e g i o n . Region t h r e e , l o c a t e d d i r e c t l y e a s t of the Columbia R i v e r , i s commonly r e f e r r e d t o as the Columbia B a s i n . The r e g i o n s t a r t s a t Grand Coulee and s t r e t c h e s s o u t h t o i n c l u d e E p h r a t a , Q u i n c y , Mattawa, O t h e l l o and Pasco. The average o r c h a r d s i z e i n r e g i o n one i s s i m i l a r t o t h a t of the Okanagan V a l l e y i n B.C., e s p e c i a l l y o r c h a r d s i n O r o v i l l e , Okanogan, and C h e l a n . The a v a i l a b i l i t y of a r a b l e l a n d i s a l s o a l i m i t i n g f a c t o r f o r t h i s r e g i o n . On 17 18 ave r a g e , p a r t l y as a consequence of more a r a b l e l a n d , o r c h a r d b l o c k s i n the Yakima a r e a a r e l a r g e r than those i n r e g i o n one. The l a r g e s t average o r c h a r d b l o c k s a r e l o c a t e d i n the Columbia B a s i n where the s u p p l y of a r a b l e l a n d i s abundant. T h i s study f o c u s e s on r e p r e s e n t a t i v e o r c h a r d s , as d e f i n e d i n Chapter I I I , l o c a t e d i n the Okanagan V a l l e y i n B.C. and the Columbia B a s i n i n Washington S t a t e . As noted p r e v i o u s l y , the m a j o r i t y of B.C.'s a p p l e s a r e produced i n the Okanagan V a l l e y ; hence, i t i s a p p r o p r i a t e t h a t the r e p r e s e n t a t i v e o r c h a r d s h o u l d be l o c a t e d i n t h i s V a l l e y . For Washington S t a t e , the Columbia B a s i n i s chosen f o r two r e a s o n s : 1) the a v a i l a b i l i t y of d a t a , and 2) i t i s the growth a r e a , both p r e s e n t l y and f o r the f u t u r e , f o r ap p l e p r o d u c t i o n i n Washington S t a t e . A l l e x i s t i n g e s t a b l i s h m e n t and p r o d u c t i o n c o s t s t u d i e s on a p p l e o r c h a r d s c o m p i l e d by r e s e a r c h e r s i n Washington S t a t e employ a r e p r e s e n t a t i v e o r c h a r d from the Columbia B a s i n (Hinman, Hunter, and Tukey, 1981, 1982, 1985). S i n c e p r o d u c t i o n d a t a f o r Washington S t a t e a re l a r g e l y l i m i t e d t o e x i s t i n g o r c h a r d s t u d i e s , the l o c a t i o n of t h i s s t u d y ' s r e p r e s e n t a t i v e o r c h a r d i s thus d e t e r m i n e d . In Washington S t a t e , r e c e n t p l a n t i n g s have o c c u r r e d p r e d o m i n a t e l y i n the Columbia B a s i n where a l a r g e s u p p l y of water has been made a v a i l a b l e a t r e l a t i v e l y low c o s t t o p r o d u c e r s . I t has been e s t i m a t e d t h a t , by the e a r l y 1990s, Washington S t a t e w i l l be c a p a b l e of p r o d u c i n g 4,654 m i l l i o n 19 pounds of a p p l e s a n n u a l l y (O'Rourke). T h i s i s a 36 p e r c e n t i n c r e a s e over the 1983 p r o d u c t i o n . Such a l a r g e i n c r e a s e i n a p p l e p r o d u c t i o n i s bound t o have an e f f e c t on B.C.'s a p p l e i n d u s t r y . Hence, i t would be u s e f u l t o compare t h e c u r r e n t e f f i c i e n c y of B.C.'s a p p l e p r o d u c t i o n w i t h t h a t of the Columbia B a s i n where e x p a n s i o n has o c c u r r e d v e r y r a p i d l y over the l a s t ten y e a r s . The c o s t e s t i m a t e d f o r the Columbia B a s i n can be extended t o the Yakima r e g i o n w i t h few a d j u s t m e n t s . 5 The c l i m a t e , i n p u t p r i c e s and management p r a c t i c e s i n t h e Yakima a r e a a r e s i m i l a r t o those of the Columbia B a s i n . More c o s t a d j u s t m e n t s are r e q u i r e d i f the model i s used t o r e f l e c t p r o d u c t i o n c o s t i n r e g i o n 1. For example, due t o t h e s m a l l e r o r c h a r d s i z e , the s e t of machinery may r e q u i r e an a d j u s t m e n t , i . e . the s i z e of the t r a c t o r . 2.2 VARIETIES GROWN 'Apple' i s a term t h a t makes no d i s t i n c t i o n among the v a r i e t i e s a v a i l a b l e t o p r o d u c e r s and consumers. However, s i n c e p r i c e s vary by v a r i e t y , i t i s u s e f u l t o examine the mix of v a r i e t i e s grown i n both B.C. and Washington S t a t e , as 5 H o r t i c u l t u r i s t s from Washington S t a t e . 20 i n T a b l e 5. T h i s t a b l e i n d i c a t e s t h a t , as a p e r c e n t a g e of a l l a p p l e s produced i n i t s r e s p e c t i v e ' a r e a , Red D e l i c i o u s i s the dominant v a r i e t y grown i n both B.C. and Washington S t a t e . On a v e r a g e , t h i s v a r i e t y c o n s t i t u t e s 41 and 63 p e r c e n t of B.C. and Washington S t a t e ' s t o t a l a p p l e p r o d u c t i o n , r e s p e c t i v e l y , over the p e r i o d 1972-83. In B.C., M c i n t o s h and S p a r t a n rank as the second and t h i r d v a r i e t i e s produced. In c o n t r a s t , t h e s e v a r i e t i e s do not appear t o be p o p u l a r w i t h growers i n Washington S t a t e , where Golden D e l i c i o u s and Winesap are ranked two and t h r e e , r e s p e c t i v e l y . Recent e s t i m a t e s of new Washington p l a n t i n g s , m a i n l y i n the Columbia B a s i n , suggest t h a t Red D e l i c i o u s w i l l remain the p r i m a r y v a r i e t y i n the near f u t u r e ( S w a l e s ) . However, i t has been s p e c u l a t e d t h a t Granny Smith may r e p l a c e Golden D e l i c i o u s i n i m p o r t a n c e . 6 T h i s i s p r i m a r i l y due t o h i g h e r market r e t u r n s f o r Granny S m i t h . Granny Smith can be grown i n the s o u t h e r n Okanagan of B.C. but i s not e x p e c t e d t o g a i n importance due t o c l i m a t i c r e s t r i c t i o n s . S i n c e Red D e l i c i o u s i s the dominant v a r i e t y produced i n B.C. and Washington S t a t e , t h i s s t u d y w i l l f o c u s on t h i s v a r i e t y . Thus, the term 'apple' w i l l be used t o r e f e r t o the Red D e l i c i o u s v a r i e t y . A l l c o s t s , y i e l d s and r e t u r n s d i s c u s s e d i n the remainder of the study a r e t h o s e a s s o c i a t e d w i t h t h i s p a r t i c u l a r v a r i e t y . 6 C o n v e r s a t i o n w i t h f i e l d r e p r e s e n t a t i v e s i n Washington S t a t e . 21 TABLE 5 PROPORTIONS OF VARIOUS VARIETIES OF APPLES PRODUCED IN B.C. AND WASHINGTON STATE, 1972-1981 (PERCENT OF TOTAL PRODUCTION) RED GOLDEN ROME WINESAP McINTOSH SPARTAN OTHERS5 DELICIOUS DELICIOUS BEAUTY 1972 B.C. 34.5 9.6 0.6 5.5 32.0 14.6 3.2 WASH. 57.0 31.0 2.5 8.0 a a 1.5 1973 B.C. 39.8 9.6 0.8 4.3 28.4 14.5 2.6 WASH. 64.2 24.6 2.4 6.0 2.8 1974 B.C. 40.1 13.4 0.6 4.4 22.4 16.1 3.0 WASH. 58.4 31.3 2.3 6.3 1.7 1975 B.C. 42.5 10.6 0.6 3.6 25.8 14.2 2.7 WASH. 65.9 24.9 2.0 5.9 1.3 1976 B.C. 40.5 11.1 0.6 2.6 25.9 16.6 2.7 WASH. 63.9 27.9 1.5 5.4 1.3 1977 B.C. 43.9 12.1 0.5 2.1 21.9 15.7 3.7 WASH. 61.0 30.3 1.8 5.2 1.7 1978 B.C. 41.9 11.8 0.5 1.4 25.0 16.8 2.6 WASH. 63.7 27.9 1.8 5.0 1.6 1979 B.C. 42.8 12.9 0.6 1.9 21.7 16.3 4.0 WASH. 64.2 29.3 1.3 3.5 1.7 1980 B.C. 42.8 12.0 0.5 1.5 24.7 14.1 4.3 WASH. 66.9 26.5 1.5 3.5 1.6 1981 B.C. 42.8 13.4 0.5 1.0 22.9 17.1 2.4 WASH. 65.5 28.0 1.4 3.4 1.7 1982 B.C. 41.9 12.4 0.4 0.7 25.0 16.6 3.0 WASH. n/a n/a n/a n/a n/a n/a n/a 1983 B.C. 42.9 11.1 0.5 0.4 24.6 17.4 2.9 WASH. n/a n/a n/a n/a n/a n/a n/a a Washington State produces very l i t t l e Mcintosh and Spartan. In both cases, production has been accounted for under Others. D For B.C., Others include summer apples, Tydeman's Red and Newtown. For Washington state, Others include Granny Smith, Gravenstein, Mcintosh, Spartan, Tydeman's Red, Johnathan, Winter Banana, Yellow Newtown and others. SOURCES: B.C.M.A.F., Production Of Tree F r u i t Crops Together With An Estimate Of Farm Values. Washington's Livestock and Crop Information Service. 22 2.3 ORCHARD COMPARISON A r e c e n t t r e e s u r v e y d e t e r m i n e d the age breakdown f o r a p p l e t r e e s i n B.C., as r e p o r t e d i n Table 6 (Dawson, Dau and A s s o c i a t e s ) . Out of a l l of the app l e t r e e s i n B.C., 15.3 p e r c e n t , 55226 t r e e s , a re aged 21 or o l d e r . When t r a n s f o r m e d i n t o a c r e s , 312.5 a c r e s out of a t o t a l of 2042 a c r e s of a p p l e s , the r e l a t i v e l y h i g h p r o p o r t i o n of o l d e r t r e e s poses a c o n c e r n because the a b i l i t y of a t r e e t o bear a f u l l c r o p g e n e r a l l y d e c l i n e s w i t h age. In a d d i t i o n , t e c h n o l o g i c a l changes have caused many o r c h a r d s throughout the w o r l d t o s h i f t toward h i g h d e n s i t y systems, over the l a s t decade. 7 S i n c e many of the o l d e r t r e e s a r e i n low d e n s i t y (100-200 t r e e s per a c r e ) systems, the h i g h p r o p o r t i o n of o l d e r t r e e s s u g g e s t s t h a t B.C. o r c h a r d i s t s a re f a l l i n g b e h i n d i n a d o p t i n g the new t e c h n o l o g y of h i g h d e n s i t y systems. A d e c l i n e i n the p r o p o r t i o n of o l d e r t r e e s can be a c h i e v e d by e i t h e r r e n o v a t i n g e x i s t i n g o l d e r o r c h a r d s , by i n c r e a s i n g new p l a n t i n g s , or b o t h . U n f o r t u n a t e l y , two f a c t o r s e x i s t t o h i n d e r t h e s e o p t i o n s . F i r s t , the c o s t of removing o l d t r e e s and bu y i n g new t r e e s i s q u i t e h i g h i n B.C. For example, a t $5.5 per t r e e , $1111 (202 t r e e s ) would be r e q u i r e d t o r e n o v a t e an a c r e . T h i s amount does not i n c l u d e l a b o u r and o t h e r c o s t s . A s i d e from the o u t l a y f o r e s t a b l i s h m e n t , an o r c h a r d i s t must a l s o f o r e g o the income 7 Mike Sanders, R e g i o n a l Tree F r u i t S p e c i a l i s t , B.C.M.A.F., Kelowna. 23 TABLE 6 NUMBER OF APPLE TREES IN B.C. BY AGE (1984 TREE SURVEY) AGE OF TREES 1-5 6-10 11-15 16-20 21-25 25+ TOTAL NO. OF TREES 103971 51340 75803 74968 28668 25668 361308 % OF TOTAL TREES 28.8 14.2 21.0 20.7 7.9 7.4 100 SOURCE: Dawson, Dau and Associates Limited, B.C. Tree F r u i t Orchard Condition, March 1984. 24 t h a t would o t h e r w i s e be made i f the l a n d was l e f t i n p r o d u c t i o n . Two, p r e s s u r e from a l t e r n a t i v e u s e s , such as r u r a l r e s i d e n c e s and r e c r e a t i o n , has d r i v e n and kept l a n d p r i c e s h i g h i n the Okanagan V a l l e y . Hence, s p e c u l a t i o n on f u t u r e development v a l u e has caused the l a n d p r i c e s i n t h i s a r e a t o be some of the h i g h e s t i n B.C. The h i g h l a n d p r i c e s reduce an o r c h a r d i s t ' s a b i l i t y t o r e n o v a t e due t o c a s h f l o w p roblems. A l t e r n a t i v e l y , l a n d s p e c u l a t i o n can reduce o r c h a r d r e n o v a t i o n i f the owner purchased p u r e l y f o r s p e c u l a t i v e r e a s o n s . In t h i s i n s t a n c e , s p e c u l a t i o n reduces the i n c e n t i v e t o r e n o v a t e . On the e x p a n s i o n s i d e , the h i g h i n v e s t m e n t r e q u i r e m e n t g e n e r a t e d by h i g h l a n d p r i c e s o f t e n r e s u l t s i n a c a s h f l o w problem. T o g e t h e r , h i g h r e p l a n t i n g c o s t s and l a n d p r i c e s have reduced e x p a n s i o n and r e n o v a t i o n of o r c h a r d s i n B.C. Recent e s t i m a t e s of t r e e s by age a r e not a v a i l a b l e f o r Washington S t a t e . However, e s t i m a t e s of the number of b e a r i n g and n o n b e a r i n g a p p l e t r e e s a r e a v a i l a b l e . The number of b e a r i n g and n o n b e a r i n g t r e e s , as i n d i c a t e d by the 1982 census s t u d y , a r e 14,898,543 and 8,162,875, r e s p e c t i v e l y . 8 In p e r c e n t a g e terms, they r e p r e s e n t 65 and 35 p e r c e n t of t o t a l a p p l e t r e e s i n Washington S t a t e . Depending on r o o t s t o c k s , b e a r i n g t r e e s a r e d e f i n e d as 5 or 6 year o l d t r e e s . I f b e a r i n g t r e e s a r e assumed t o be 5 y e a r s or o l d e r , then B.C.'s p r o p o r t i o n of n o n b e a r i n g t r e e s i s 28.8 p e r c e n t , a p p r o x i m a t e l y 6 p e r c e n t below t h a t of Washington S t a t e . 8 J e r r y M c C a l l , S t a t i s t i c i a n i n Charge, Crop and L i v e s t o c k R e p o r t i n g S e r v i c e , S e a t t l e , Washington S t a t e . 25 Three major f a c t o r s a r e a t t r i b u t e d t o the l a r g e number of new p l a n t i n g s i n Washington S t a t e , an average of 6631 a c r e s a n n u a l l y over the l a s t s i x y e a r s (O'Rourke). The f i r s t i s t he c o m p l e t i o n of the Grand Coulee Dam which i s c a p a b l e of s u p p l y i n g water t o a r e a s , m o s t l y i n the Columbia B a s i n , t h a t had none p r e v i o u s l y . The a c c e s s i b i l i t y of water and the low user f e e s have g e n e r a t e d many new p l a n t i n g s i n the Columbia B a s i n . Second, the demand f o r a l t e r n a t i v e uses i s not as i n t e n s e f o r o r c h a r d l a n d s i n Washington S t a t e as i n B.C. T h e r e f o r e , l e s s c a p i t a l investment i s r e q u i r e d f o r expanding and e s t a b l i s h i n g new o r c h a r d s . T h i r d , the t a x s t r u c t u r e i n Washington S t a t e p r o v i d e s an i n c e n t i v e f o r i n d i v i d u a l s or o r g a n i z a t i o n s t o i n v e s t i n o r c h a r d s . Trees between the age of one t o f i v e a r e a l l o w e d t o d e p r e c i a t e a t a r a t e of I 5 ( y e a r 1 ) , 22(year 2 ) , and 2 1 ( y e a r s 3-5) p e r c e n t ( A g r i c u l t u r e Canada, March 1984a). T h i s p r o v i s i o n encourages not o n l y e x p a n s i o n but a l s o r e n o v a t i o n s of e x i s t i n g o r c h a r d s . T h i s i s not a v a i l a b l e i n the B.C. t a x s t r u c t u r e . In a d d i t i o n , the annual c a p i t a l c o s t a l l o w a n c e r a t e s on o t h e r c a p i t a l a s s e t s a r e h i g h e r i n Washington S t a t e than i n B.C. ( A g r i c u l t u r e Canada, 1984a). O v e r a l l , these t h r e e f a c t o r s a c t t o encourage o r c h a r d i s t s i n Washington S t a t e t o expand and renova t e o r c h a r d s . One d i s a d v a n t a g e i s t h a t l a r g e c o r p o r a t i o n s may i n v e s t i n o r c h a r d s as a means t o i n c r e a s e a s s e t d e p r e c i a t i o n , as seen i n some i n s t a n c e s i n the Columbia B a s i n . Due t o the l a r g e s i z e of t h e s e i n v e s t m e n t s , v e r t i c a l i n t e g r a t i o n of p r o d u c t i o n , p r o c e s s i n g , and 26 m a r k e t i n g becomes a s t r o n g p o s s i b i l i t y . As a r e s u l t , the p r e s e n t c o m p e t i t i v e n e s s of the market system may be eroded. 2.4 CLIMATE AND SOIL C l i m a t e p l a y s an i m p o r t a n t r o l e i n d e t e r m i n i n g f r u i t s i z e . W i t h i n B.C., the n o r t h e r n r e g i o n s of the Okanagan V a l l e y are g e n e r a l l y c o o l e r than the s o u t h e r n r e g i o n s . The warmest a r e a s a r e O l i v e r and Osoyoos. The c l i m a t e i n these two a r e a s i s v e r y s i m i l a r t o a r e a s j u s t s o u th of the b o r d e r . But the c l i m a t e i n Washington S t a t e becomes much warmer than B.C. as one moves f u r t h e r south i n t o the Columbia B a s i n . The warmer c l i m a t e , e s p e c i a l l y r i g h t a f t e r the blossom p e r i o d , p r o v i d e s an advantage t o growers i n Washington S t a t e . In g e n e r a l , the Red D e l i c i o u s a p p l e s produced i n Washington S t a t e a r e l a r g e r and d a r k e r i n c o l o u r . The c l i m a t i c advantage a l s o g e n e r a t e s h i g h e r a n n u a l y i e l d s and e a r l i e r h a r v e s t s . One d i s a d v a n t a g e of e a r l y warm p e r i o d s i s h i g h e r r i s k of f r o s t damage 9, a r e s u l t of e a r l y growth. The s o i l i n the Okanagan V a l l e y i s c o n s i d e r e d t o be m a r g i n a l f o r o r c h a r d s . 1 0 The s o i l i s c h a r a c t e r i z e d by 9 F r o s t damage r e f e r s t o the damage r e s u l t i n g from the f o r m a t i o n of i c e c r y s t a l s i n the t i s s u e s of f l o w e r s or f r u i t s 1 C o n v e r s a t i o n w i t h Mike Sanders, D i s t r i c t Tree F r u i t 27 s h a l l o w t o p s o i l , pH imbalance and i s l a c k i n g i n c e r t a i n n u t r i e n t s . P r e s e r v a t i o n of t o p s o i l s i s an im p o r t a n t c o n s i d e r a t i o n t o o r c h a r d managers. The pH imbalance and n u t r i e n t problems t r a n s l a t e i n t o h i g h e r p r o d u c t i o n c o s t s . Due t o the l i m i t e d a v a i l a b i l i t y of a r a b l e l a n d , new p l a n t i n g s u s u a l l y o c c u r on o l d s o i l ( i . e . s o i l p r e v i o u s l y used f o r t r e e f r u i t s ) . U n l e s s t r e e s a r e t r e a t e d c h e m i c a l l y , the o l d s o i l w i l l cause r e p l a n t i n g d i s e a s e s t h a t can l e a d t o lower y i e l d s and improper growth of t r e e s . The c o s t of t h i s c h e m i c a l t r e a t m e n t i s e s t i m a t e d t o be $1.50 per t r e e w i t h 60 c e n t s g o i n g t o c h e m i c a l c o s t . In c o n t r a s t , the s o i l i n Washington S t a t e appears t o be q u i t e s u i t a b l e f o r t r e e f r u i t s . R e p l a n t i n g d i s e a s e s a r e not a problem s i n c e most new p l a n t i n g s o ccur on v i r g i n s o i l . In sum, the s o i l i n B.C. adds a d d i t i o n a l c o s t s , e i t h e r d i r e c t l y i n terms of c h e m i c a l s , fumigants and/or f e r t i l i z e r s or i n d i r e c t l y i n terms of reduced y i e l d s . 2.5 HIRED LABOUR Compared t o Washington S t a t e , the l a b o u r market i n B.C. c o n s i s t s of a r e l a t i v e l y l a r g e m i x t u r e of e t h n i c groups. No 1 0 ( c o n t ' d ) S p e c i a l i s t , B.C.M.A.F., Kelowna. 28 s i n g l e e t h n i c group dominates the market as i n Washington S t a t e . At c e r t a i n p e r i o d s of t h e c r o p y e a r , many young F r e n c h Canadians a r e a v a i l a b l e f o r work i n B.C. These are o f t e n u n s k i l l e d farm l a b o u r e r s . On the whole, the l a b o u r market c o n s i s t s of m o s t l y s k i l l e d l a b o u r e r s , e s p e c i a l l y d u r i n g the blossom and p r u n i n g p e r i o d . S i m i l a r l y , the l a b o u r market i n Washington S t a t e i s dominated l a r g e l y by s k i l l e d l a b o u r e r s . Most of the farm l a b o u r e r s are of Mexican o r i g i n who m i g r a t e from the s o u t h s e a s o n a l l y . For B.C. and Washington S t a t e , the s u p p l y of l a b o u r a t c r i t i c a l p e r i o d s does not appear t o be a problem. The l a b o u r market i n B.C. i s h i g h l y r e g u l a t e d by the F e d e r a l government. Minimum h o u r l y wages ar e s e t a n n u a l l y by government o f f i c i a l s . In a d d i t i o n t o these r e g u l a t e d wages, h e a l t h , unemployment i n s u r a n c e , p e n s i o n , and workers' compensation r e g u l a t i o n s a l s o e x i s t f o r farm workers i n B.C. The r e g u l a t e d b e n e f i t s make the o v e r a l l c o s t of h i r i n g a farm worker i n B.C. h i g h e r than i n Washington S t a t e . 2.6 PROCESSING AND MARKETING The m a j o r i t y of the a p p l e s produced i n B.C. a r e s h i p p e d t h r o u g h c o o p e r a t i v e p a c k i n g h o u s e s . In r e c e n t y e a r s , many 29 p r o d u c e r s have become d i s s a t i s f i e d w i t h the p a c k i n g h o u s e s , as a r e s u l t of low p r o d u c e r p r i c e s . Through the c o o p e r a t i v e system, producer p r i c e s are based on a p o o l i n g system. C o n s e q u e n t l y , the p r i c e r e c e i v e d by p r o d u c e r s i s not o n l y net of packinghouse expenses but a l s o an average p r i c e based on a l l a p p l e s s o l d d u r i n g a p a r t i c u l a r p e r i o d . Because of t h i s system of p o o l i n g , the q u a l i t y and grades of a p p l e s b e i n g s h i p p e d by the p r o d u c e r s become i m p o r t a n t f a c t o r s i n d e t e r m i n i n g producer p r i c e s . In t he p a s t , t h i s system of p o o l i n g has l e s s e n e d the i n c e n t i v e s f o r p r o d u c e r s t o improve the q u a l i t y of t h e i r a p p l e s . However, m o d i f i c a t i o n s of the p o o l i n g system a r e be i n g i n t r o d u c e d i n an attempt t o i n c r e a s e i n c e n t i v e s t o growers p r o d u c i n g a h i g h e r p r o p o r t i o n of t o p q u a l i t y f r u i t . In Washington S t a t e , a p p l e s are e i t h e r packed by i n d i v i d u a l p r o d u c e r s , c o o p e r a t i v e p a c k i n g h o u s e s or independent p a c k i n g h o u s e s . By s t r e s s i n g q u a l i t y , p a c k i n g h o u s e s have p r o v i d e d i n c e n t i v e s f o r p r o d u c e r s t o re n o v a t e or r e p l a c e t r e e s p r o d u c i n g low q u a l i t y f r u i t . Hence, i t may be a reason why p r o d u c e r s i n Washington S t a t e appear t o be more w i l l i n g t o r e n o v a t e t h e i r o r c h a r d s . 30 2.7 GOVERNMENT SUPPORT PROGRAMS One f e d e r a l s u p p o r t program, the A g r i c u l t u r a l S t a b i l i z a t i o n Act (ASA), e x i s t s t o a i d a p p l e p r o d u c e r s i n B.C. The g o a l of t h i s program i s t o gu a r a n t e e a l e v e l of market r e t u r n ( c a l c u l a t e d as a f i v e y e a r average) t h a t i s 90 or more per c e n t of e s t i m a t e d p r o d u c t i o n c o s t over a f i v e year p e r i o d . The an n u a l average per pound c o s t of p r o d u c i n g a p p l e s i s determined u s i n g a c o s t of p r o d u c t i o n model. The average t o t a l c o s t per pound i n c l u d e s v a r i a b l e c o s t s , r e n t on l a n d , i n t e r e s t on o p e r a t i n g c o s t s , and overhead c o s t s . T h i s program does not r e q u i r e a p p l e p r o d u c e r s t o pay any premium. Payments a r e based on the d i f f e r e n t i a l between market r e t u r n s and p r o d u c t i o n c o s t , as e s t i m a t e d by the model. The Farm Income I n s u r a n c e ( F I I ) program i s the main sour c e of p r o v i n c i a l a i d t o B.C. a p p l e p r o d u c e r s . The F I I program guarantees a market p r i c e e q u a l t o t h a t of p r o d u c t i o n c o s t . Market p r i c e i s e s t i m a t e d as p r i c e r e c e i v e d by p r o d u c e r s p l u s ASA payments. The a n n u a l c o s t s of p r o d u c t i o n a re n e g o t i a t e d t h r o u g h meetings between B.C.M.A.F. r e p r e s e n t a t i v e s and p r o d u c e r r e p r e s e n t a t i v e s . C o s t s o b t a i n e d from concensus meetings a r e used t o c a l c u l a t e the t o t a l per a c r e and per pound c o s t v i a the model d e v e l o p e d by the Crop I n s u r a n c e B r a n c h . T h i s p r o v i n c i a l program i s based on v o l u n t a r y p a r t i c i p a t i o n and r e q u i r e s 31 p a r t i c i p a n t s t o pay a premium based on average p r o d u c t i o n . The a n n u a l premium r a t e s v a r y from year t o year f o r both programs. The F I I premiums have averaged 1.1 c e n t s per pound over the p e r i o d 1973-1984. Two j o i n t f e d e r a l - p r o v i n c i a l programs a l s o e x i s t t o a i d B.C. a p p l e p r o d u c e r s . The f i r s t i s the Crop Insurance Program. T h i s program p r o v i d e s an o p p o r t u n i t y f o r p r o d u c e r s t o purchase i n s u r a n c e f o r t h e i r c r o p s a g a i n s t u n p r e d i c t e d e l e m e n t s . P a r t i c i p a n t s a r e r e q u i r e d t o pay an annual premium based on the p r o d u c t i o n b e i n g i n s u r e d . The second program p r o v i d e s a s s i s t a n c e t o p r o d u c e r s f o r d e v e l o p i n g and expanding i r r i g a t i o n f a c i l i t i e s i n B.C. T h i s program i s r e f e r r e d t o as the A g r i c u l t u r a l and R e g i o n a l Development S u b s i d i a r y Agreement. In Washington S t a t e , no d i r e c t p r i c e or c o s t s u p p o r t i n g programs e x i s t f o r o r c h a r d i s t s . Most government programs are i n d i r e c t programs such as the b u i l d i n g of dams and income t a x i n c e n t i v e s . An example i s t h e Columbia B a s i n P r o j e c t w hich i n c l u d e d the c o n s t r u c t i o n of the Grand Coulee Dam near Grand C o u l e e , a l a r g e hydro e l e c t r i c power g e n e r a t i n g complex. T h i s p r o j e c t p r o v i d e s a f u l l s u p p l y of i r r i g a t i o n water t o n e a r l y 517,000 a c r e s a t p r e s e n t and p l a n s have been d e v e l o p e d t o expand the i r r i g a t i o n t o a p p r o x i m a t e l y 1.1 m i l l i o n a c r e s i n the near f u t u r e (Dawson, Dau and A s s o c i a t e s ) . Water from t h i s p r o j e c t has been made a v a i l a b l e t o o r c h a r d i s t s w i t h i n the i r r i g a t i o n d i s t r i c t a t a low f e e . 32 Other forms of i r r i g a t i o n a s s i s t a n c e a r e a l s o a v a i l a b l e i n Washington S t a t e . The l e v e l of a s s i s t a n c e p r o v i d e d by the Bureau of R e c l a m a t i o n of the U.S. Department of I n t e r i o r t o i r r i g a t i o n d i s t r i c t s has v a r i e d from a g r a n t of 50% t o over 90% of the t o t a l p r o j e c t c o s t s . I n t e r e s t f r e e l o a n s t o p r o d u c e r s over a 40 year p e r i o d i s a n o t h e r form of a s s i s t a n c e . As s t a t e d p r e v i o u s l y , the d e p r e c i a b i l i t y of t r e e s p r o v i d e s an i n c e n t i v e f o r e x p a n s i o n and r e n o v a t i o n of o r c h a r d s i n Washington S t a t e . The d e p r e c i a t i o n a l l o w e d w i l l r educe the l e v e l of the o r c h a r d i s t ' s t a x a b l e income; hence, a lower l e v e l of income t a x . A summary t a b l e showing the e f f e c t s d i s c u s s e d i n t h i s c h a p t e r has been i n c l u d e d ( T able 7 ) . T h i s t a b l e shows how c l i m a t e , s o i l , l a n d , i n p u t p r i c e s , p r o c e s s i n g and m a r k e t i n g , and government s u p p o r t programs can a f f e c t growers i n B.C. TABLE 7 EFFECTS ON THE B.C. APPLE INDUSTRY AS A RESULT OF DIFFERENCES IN CLIMATE, SOIL, ARABLE LAND, INPUT PRICES, PROCESSING AND MARKETING AND GOVERNMENT SUPPORT PROGRAMS EFFECTS OF C l i m a t e - c o o l e r i n B.C S o i l - m a r g i n a l i n B.C, Land - l e s s a r a b l e l a n d i n B.C. Input P r i c e s - h i g h e r i n B.C. P r o c e s s i n g & M a r k e t i n g - p o o l i n g system i n B.C. Government Support Programs - l e s s s u p p o r t f o r i r r i g a t i o n development i n B.C. - F I I and ASA programs i n B.C. -Crop I n s u r a n c e program i n B.C. CONSEQUENCES TO B.C.'S APPLE INDUSTRY 1 - h i g h e r r i s k of f r e e z i n g damage t o t r e e s - l o w e r per a c r e y i e l d s - l a t e r p r o d u c t i o n than Wash, - s m a l l e r and l e s s dark f r u i t - h i g h e r c o s t from n u t r i e n t a p p l i c a t i o n - s h a l l o w top s o i l & pH imbalance r e q u i r e h i g h e r management s k i l l s - r e p l a n t i n g d i s e a s e s from o l d s o i l - h i g h e r l a n d p r i c e s as a r e s u l t of h i g h demand f o r r e c r e a t i o n and urban development -per a c r e wages are h i g h e r as a r e s u l t of government r e g u l a t i o n s - h i g h e r e s t a b l i s h m e n t c o s t as a r e s u l t of h i g h e r t r e e p r i c e s - h i g h e r m a t e r i a l c o s t s r e s u l t i n h i g h e r per a c r e and per pound c o s t of p r o d u c i n g a p p l e s - l o w e r producer r e t u r n s - reduced i n c e n t i v e t o improve q u a l i t y of f r u i t b e i n g s h i p p e d -higher i r r i g a t i o n and water f e e s - g u arantee a minimum annual average market p r i c e e q u a l t o t h a t of p r o d u c t i o n c o s t s -reduce l o s s e s from u n p r e d i c t e d elements 3. CHAPTER I I I 3.1 LITERATURE REVIEW One of the purposes of t h i s t h e s i s i s t o de t e r m i n e the c o s t of p r o d u c i n g a p p l e s i n B.C. and Washington S t a t e . For t h i s r e a s o n , e x i s t i n g c o s t of p r o d u c t i o n s t u d i e s of a p p l e o r c h a r d s i n B.C. and Washington S t a t e were examined. Three c o s t of p r o d u c t i o n models were found t o e x i s t f o r B.C. a p p l e o r c h a r d s . Each was d e v e l o p e d f o r a s p e c i f i c purpose. The f i r s t was developed by the Crop I n s u r a n c e Branch of the B.C.M.A.F. f o r d e t e r m i n i n g p r o d u c t i o n c o s t f o r the F I I program. The second was d e v e l o p e d by the Economics Branch of the B.C.M.A.F. f o r a n a l y s i s of p r o d u c t i o n c o s t s . A t h i r d model has been d e v e l o p e d r e c e n t l y by the S t a b i l i z a t i o n Board of A g r i c u l t u r e Canada f o r d e t e r m i n i n g payments f o r the ASA program. A l l t h r e e models employ a d i f f e r e n t approach t o e s t i m a t i n g c o s t s . For example, the models d e v e l o p e d t o d e t e r m i n e F I I and ASA payments a r e concerned m a i n l y w i t h v a r i a b l e or cash c o s t s . In c o n t r a s t , the model d e v e l o p e d by the Economics Branch i n c l u d e s f i x e d and economic c o s t s , as w e l l as v a r i a b l e c o s t s . Because the models a r e user s p e c i f i c , i t i s d i f f i c u l t t o compare r e s u l t s o b t a i n e d from one model w i t h a n o t h e r . 34 35 In c o n t r a s t , by law, each s t a t e i n the U n i t e d S t a t e s i s r e q u i r e d t o c o m p i l e c o s t of p r o d u c t i o n s t u d i e s f o r commodities (Hoffman and G u s t a f s o n , H a r r i n g t o n ) . C o n s e q u e n t l y , a r e l a t i v e l y comprehensive p r o d u c t i o n model has been d e v e l o p e d f o r g e n e r a t i n g p r o d u c t i o n s t u d i e s . T h i s model, r e f e r r e d t o as the Budget E n t e r p r i s e G e n e r a t o r 1 1 , p r o v i d e s a s t a n d a r d method of e s t i m a t i n g v a r i a b l e , f i x e d and economic c o s t s a s s o c i a t e d w i t h an e n t e r p r i s e . A l l Washington S t a t e ' s p r o d u c t i o n c o s t s t u d i e s on o r c h a r d s a r e g e n e r a t e d u s i n g t h i s model. Based on e x i s t i n g B.C. and Washington S t a t e o r c h a r d s t u d i e s , i t i s d i f f i c u l t t o compare e s t i m a t e d p r o d u c t i o n c o s t s between the two a r e a s because the approaches employed t o e s t i m a t e v a r i a b l e , f i x e d and economic c o s t s d i f f e r . G i v e n t h a t the second o b j e c t i v e of t h i s t h e s i s i s t o compare p r o d u c t i o n c o s t s , the development of a s t a n d a r d i z e d model i s n e c e s s a r y . The model s h o u l d s t a n d a r d i z e the methods employed t o c a l c u l a t e v a r i a b l e , f i x e d and economic c o s t s . C o m p a r a b i l i t y i s the u n d e r l y i n g o b j e c t i v e f o r s t a n d a r d i z i n g the c o s t c a l c u l a t i o n s . To f i n d the b e s t method e m p l o y a b l e , a l i t e r a t u r e s u r v ey was c o n d u c t e d . A l i t e r a t u r e s u r v e y r e v e a l e d t h a t two c o n v e n t i o n a l methods of e s t i m a t i n g p r o d u c t i o n c o s t have g e n e r a t e d c o n c e r n s (Hoffman and G u s t a f s o n , H a r r i n g t o n , Watts and Helmers, W a l r a t h ) . The c o n c e r n s r e v o l v e around a c o n c e p t u a l problem whereby c o n v e n t i o n a l methods compare l o n g run c o s t s , 1 1 A p u b l i c a t i o n t i t l e d Budget E n t e r p r i s e G e n e r a t o r p r o v i d e s guidance t o u s e r s of t h i s p r o d u c t i o n model. 36 i n c l u d i n g o p p o r t u n i t y c o s t , w i t h c u r r e n t r e t u r n s f o r p r o d u c t i o n . T h i s i s c o n s i d e r e d inadequate s i n c e some r e t u r n s from investment i n a g r i c u l t u r a l p r o d u c t i o n r e s o u r c e s , p r i m a r i l y c a p i t a l a p p r e c i a t i o n of far m l a n d , a r e n e g l e c t e d when t o t a l c o s t s a r e o n l y compared w i t h s h o r t run or c u r r e n t r e t u r n s from p r o d u c t i o n . The s e p a r a t i o n of a s s e t v a l u a t i o n used f o r economic c o s t a n a l y s i s i s c o n s i d e r e d e s s e n t i a l i f the c o s t s of p r o d u c t i o n r e s u l t s are t o be m e a n i n g f u l i n d i c a t o r s f o r p o l i c y m a k e r s i n d e t e r m i n i n g s u p p o r t l e v e l s (Hoffman and G u s t a f s o n ) . An a l t e r n a t i v e method proposed i s t o compare c u r r e n t r e t u r n s w i t h the v a l u e of i n p u t s used i n c u r r e n t p r o d u c t i o n and t o d i s t i n g u i s h the comparison from i n v e s t m e n t c o s t s which g e n e r a t e f u t u r e r e t u r n s . T h i s approach r e q u i r e s the e x c l u s i o n of c o s t items or p o r t i o n s of a c u r r e n t c o s t used t o g e n e r a t e f u t u r e r e t u r n s t o a s s e t s . For example, the o p p o r t u n i t y c o s t of l a n d s h o u l d be based o n l y on the c o n t r i b u t i o n of l a n d t o the c u r r e n t y e a r ' s p r o d u c t i o n . In a d d i t i o n t o the c o n c e p t u a l problem, o t h e r problems e x i s t a t the i n d i v i d u a l c o s t l e v e l s i n p r o d u c t i o n s t u d i e s . These problems i n c l u d e the c h o i c e of an a p p r o p r i a t e d i s c o u n t r a t e , the v a l u a t i o n of c a p i t a l g a i n s , v a l u a t i o n of l a n d and management, and o t h e r c o s t s . B u t , d e s p i t e a l l the problems s u r r o u n d i n g the c a l c u l a t i o n of some of the p r o d u c t i o n c o s t s , p r o d u c t i o n s t u d i e s do p r o v i d e some u s e f u l i n f o r m a t i o n , as l o n g as t h e i r weaknesses are r e c o g n i z e d . 37 As an economic a n a l y s i s , t h i s study makes use of the c o n v e n t i o n a l approach, ( i . e . i n c l u d e l o n g run c o s t s i n a s h o r t run a n a l y s i s ) t o e s t i m a t e c o s t s of p r o d u c t i o n a s s o c i a t e d w i t h a p p l e s . Having chosen the c o n c e p t u a l framework, problems and i s s u e s s u r r o u n d i n g l a n d c o s t s , o p e r a t o r l a b o u r , d i s c o u n t r a t e s and machinery c o s t s a re examined. A l t h o u g h s e v e r a l economic t h e o r i e s a r e a v a i l a b l e , no s t a n d a r d methods a r e found t o e x i s t f o r c a l c u l a t i n g l a n d c o s t s , d i s c o u n t r a t e s and many o t h e r c o s t s . However, two common methods of e s t i m a t i n g machine c o s t s were found. These methods a r e u s u a l l y r e f e r e d t o as the " T r a d i t i o n a l " and " C a p i t a l B u d g e t i n g " approaches. M a c h i n e r y c o s t s a r e u s u a l l y c l a s s i f i e d i n t o two broad c a t e g o r i e s known as ownership and o p e r a t i n g c o s t s . Ownership c o s t s c o n s i s t of d e p r e c i a t i o n c o s t , o p p o r t u n i t y c o s t or i n t e r e s t on i n v e s t m e n t , i n s u r a n c e c o s t , p r o p e r t y t a x e s , s a l e s t a x e s and ho u s i n g c o s t . These are c o s t s a s s o c i a t e d w i t h owning a p i e c e of machinery and must be p a i d even i f the f i r m i s not o p e r a t i n g . Hence, they a r e f r e q u e n t l y known as f i x e d c o s t s . O p e r a t i n g c o s t s a r e c o s t s a s s o c i a t e d w i t h usage of a machine or implement. They i n c l u d e r e p a i r c o s t , maintenance c o s t , l u b r i c a n t c o s t , f u e l c o s t , and l a b o u r c o s t . I n t h e Watts and Helmers' a r t i c l e , t hese c o s t s a re grouped d i f f e r e n t l y . They used the term a d j u n c t c o s t s t o i n c l u d e f u e l , r e p a i r s , maintenance, i n s u r a n c e , p r o p e r t y and s a l e s t a x e s , and o t h e r c a s h c o s t s . The o t h e r c a t e g o r y i s d e p r e c i a t i o n and i n t e r e s t c o s t . R e g a r d l e s s of the method of 38 g r o u p i n g , the same i s s u e s and problems s u r r o u n d i n g the methods of e s t i m a t i o n e x i s t . The t r a d i t i o n a l b u d g e t i n g approach e s t i m a t e s the a n n u a l c o s t of a d e p r e c i a b l e a s s e t u s i n g s t r a i g h t l i n e d e p r e c i a t i o n w i t h o p p o r t u n i t y c o s t based on m i d - v a l u e . The o t h e r f i x e d and v a r i a b l e c o s t s are e s t i m a t e d on an a n n u a l b a s i s as a f u n c t i o n of purchase p r i c e , m i d - v a l u e , or as an independent e s t i m a t e . The c a p i t a l b u d g e t i n g approach d i s c o u n t s f l o w s from p o i n t of o c c u r r e n c e d u r i n g the machine's l i f e . The sum of the d i s c o u n t e d f l o w s , net p r e s e n t c o s t , i s then p l a c e d on an a n n u a l b a s i s by a m o r t i z i n g the net p r e s e n t c o s t over the machine's l i f e . The main advantage c a p i t a l b u d g e t i n g has over t r a d i t i o n a l b u d g e t i n g i s the c a p a c i t y t o i n c l u d e f l o w s w hich a r e v a r i a b l e over t i m e . In a d d i t i o n , income t a x i n f l u e n c e s and i n f l a t i o n a r e c o n c e p t u a l l y e a s i e r t o i n c o r p o r a t e i n t o c a p i t a l b u d g e t i n g . Under the two a p p roaches, d e p r e c i a t i o n and o p p o r t u n i t y c o s t are h a n d l e d q u i t e d i f f e r e n t l y . M a t h e m a t i c a l l y , t r a d i t i o n a l b u d g e t i n g e s t i m a t e s o p p o r t u n i t y c o s t as f o l l o w s : (Watts and Helmers) (1 ) 0 C T = (V(0) + V ( n ) ) / 2 * r where OC T = the t r a d i t i o n a l b u d g e t i n g e s t i m a t e of o p p o r t u n i t y c o s t V ( i ) = v a l u e of the machine at age i n = s e l l i n g or replacement age 39 r = d i s c o u n t r a t e D e p r e c i a t i o n , D T , i s then g i v e n by (2) D T = (V(0) - V ( n ) ) / n A l t e r n a t e l y , c a p i t a l b u d g e t i n g e s t i m a t e s annual d e p r e c i a t i o n and o p p o r t u n i t y c o s t as 1 2 (3) D^ + OC = (V(0) - V(n) e " r n ) ( T n e ~ r i d i ) - 1 c c Q where D = a n n u a l d e p r e c i a t i o n e s t i m a t e d by c a p i t a l b u d g e t i n g OC = annual o p p o r t u n i t y c o s t e s t i m a t e d by c a p i t a l b u d g e t i n g e = 2.718 (base of n a t u r a l l o g a r i t h m ) The l a s t term i n e q u a t i o n ( 3 ) , ( f g e ~ r i d i ) ~ 1 , r e p r e s e n t s t h e a m o r t i z a t i o n f a c t o r r e q u i r e d t o b r i n g the c o s t i n t o t o d a y ' s d o l l a r s . As shown by Watts and He line r , d e p r e c i a t i o n p l u s o p p o r t u n i t y c o s t e s t i m a t e d by c a p i t a l b u d g e t i n g , D c + 0 C C , i s always g r e a t e r than d e p r e c i a t i o n p l u s o p p o r t u n i t y 1 2 The a n n u a l d e p r e c i a t i o n and o p p o r t u n i t y c o s t e s t i m a t e d by c a p i t a l b u d g e t i n g can be s e p a r a t e d as D c = {/[j D ( i ) e - r i d i } {fjj e ~ r i d i } ~ 1 0C C = {/j} O C ( i ) e ~ r i d i } { / J e ~ r i d i } ~ 1 40 c o s t e s t i m a t e d by the t r a d i t i o n a l approach, as l o n g as the r i s g r e a t e r than z e r o . The two e s t i m a t e s a r e e q u a l when r - 0 . Changes i n o p p o r t u n i t y c o s t caused by d i f f e r e n t machinery p r i c e f u n c t i o n s a re o f f s e t by changes i n d e p r e c i a t i o n t o m a i n t a i n the same combined c o s t under c a p i t a l b u d g e t i n g . D i f f e r e n c e s i n t r a d i t i o n a l and c a p i t a l b u d g e t i n g e s t i m a t e s of o p p o r t u n i t y c o s t under s t r a i g h t l i n e d e p r e c i a t i o n are e n t i r e l y due t o a m o r t i z i n g - d i s c o u n t e f f e c t s . The a d j u n c t c o s t s a r e t r e a t e d as a c o n s t a n t over the ownership p e r i o d i n t r a d i t i o n a l b u d g e t i n g . However, these c o s t s c o u l d be v a r i a b l e or c o n s t a n t i n the c a p i t a l b u d g e t i n g approach. C a p i t a l b u d g e t i n g e s t i m a t e s a n n u a l a d j u n c t c o s t s by a m o r t i z i n g the p r e s e n t v a l u e of the a d j u n c t c o s t s as f o l l o w s : (4) = ( ; n A ( i ) e " r i d i ) (/n e " r i d i ) " 1 c 0 0 where A c = annual a d j u n c t c o s t s under c a p i t a l b u d g e t i n g A ( i ) = a d j u n c t c o s t a t machine age i r = d i s c o u n t r a t e n = ownership l i f e of the machine e = 2.718 The f i r s t term, (/Q A ( i ) e _ r i d i ) , i s the d i s c o u n t e d p r e s e n t v a l u e of the a d j u n c t c o s t and the second, (/Q e ~ r i d i ) - 1 i s the a m o r t i z a t i o n f a c t o r . I f A ( i ) = A f o r a l l i , then A can 41 be shown t o e q u a l A, which i s the e s t i m a t e d c o s t under the t r a d i t i o n a l b u d g e t i n g a p p r o a c h . T h i s says t h a t i f the a d j u n c t c o s t s a re c o n s t a n t , t r a d i t i o n a l and c a p i t a l b u d g e t i n g e s t i m a t e s w i l l be i d e n t i c a l . In g e n e r a l , e s t i m a t e s o b t a i n e d from the two approaches do not i n d i c a t e s u b s t a n t i a l d i f f e r e n c e s . However, the d i f f e r e n c e s do i n c r e a s e as the d i s c o u n t r a t e i n c r e a s e s . E s t i m a t e s o b t a i n e d from the c a p i t a l b u d g e t i n g approach a r e c o n s i d e r e d t o be more a c c u r a t e s i n c e c a p i t a l b u d g e t i n g i n c o r p o r a t e s the concept of t i m e . 42 3.2 METHODOLOGY The c o s t of p r o d u c i n g a pound of a p p l e s can be e s t i m a t e d from one of t h r e e approaches: ( i ) a g e n e r a l c o s t s u r v e y among a p p l e o r c h a r d s , ( i i ) case s t u d i e s of s p e c i f i c o r c h a r d s , and ( i i i ) a s t u d y of a r e p r e s e n t a t i v e o r c h a r d . Depending on p a r t i c i p a t i o n , the f i r s t method i s commonly employed s i n c e i t p r o v i d e s a r e l a t i v e l y a c c u r a t e e s t i m a t e . However, the c o s t and time r e q u i r e d f o r such a study a r e r e l a t i v e l y h i g h . The e x i s t e n c e of a p r o v i n c i a l Farm Income In s u r a n c e program ( F I I ) i n B.C., whereby the government gu a r a n t e e s a market p r i c e e q u a l t o t h a t of e s t i m a t e d p r o d u c t i o n c o s t s , p r e c l u d e s t h i s approach s i n c e the F I I program p r o v i d e s an i n c e n t i v e f o r o r c h a r d i s t s t o - i n f l a t e a c t u a l p r o d u c t i o n c o s t s . Case s t u d i e s a r e q u i t e i n f o r m a t i v e , but ten d t o be h i g h l y f i r m s p e c i f i c . G i v e n t h a t i n d i v i d u a l o r c h a r d s t e n d t o v a r y i n management p r a c t i c e s , as a consequence of d i f f e r e n c e s i n s o i l t y p e s , v a r i e t y grown, topography and management s k i l l s , i t would be n a i v e t o assume r e s u l t s o b t a i n e d from a s p e c i f i c o r c h a r d would r e f l e c t a c c u r a t e l y t h e c o s t s of o t h e r o r c h a r d s . U s u a l l y , the t h i r d method r e q u i r e s a r e s e a r c h e r t o d e f i n e a t y p i c a l average f i r m t h a t c o u l d be found w i t h i n t h e i n d u s t r y . Hence, r e s u l t s o b t a i n e d would r e f l e c t an average c o s t f a c e d by p r o d u c e r s w i t h i n the i n d u s t r y . The major d i s a d v a n t a g e of t h i s method l i e s i n the 43 r e l a t i v e l y s u b j e c t i v e d e f i n i t i o n of an average o r c h a r d . However, t h i s problem can be overcome from d i s c u s s i o n s w i t h e x p e r t s w i t h i n the i n d u s t r y . The t h i r d approach, study of a r e p r e s e n t a t i v e o r c h a r d , i s c o n s i d e r e d most a p p l i c a b l e g i v e n the o b j e c t i v e s of t h i s s t u d y . From e x i s t i n g o r c h a r d p r o d u c t i o n s t u d i e s and d i s c u s s i o n s w i t h r e g i o n a l a g r i c u l t u r a l e c o n o m i s t s , government f i e l d r e p r e s e n t a t i v e s and h o r t i c u l t u r i s t s i n both B.C. and Washington S t a t e , a d e f i n i t i o n of a r e p r e s e n t a t i v e o r c h a r d i s d e r i v e d f o r each r e g i o n . In each c a s e , the o r c h a r d d e f i n e d i s c o n s i d e r e d r e p r e s e n t a t i v e of an average c o m m e r c i a l l y v i a b l e o r c h a r d t h a t i s o p e r a b l e by a s i n g l e o p e r a t o r . Each o r c h a r d i s assumed t o be an ongoing e n t e r p r i s e c o n s i s t i n g of t r e e s t h a t range from one year o l d t o mature. Mature t r e e s a re d e f i n e d as tho s e i n f u l l p r o d u c t i o n and are a t l e a s t n i n e y e a r s o l d . The l a n d base, s p a c i n g and v a r i e t y p l a n t e d of the i n d i v i d u a l r e p r e s e n t a t i v e o r c h a r d s a r e d e f i n e d i n Table 8. For B.C., the l a n d base, t r e e s p a c i n g , and v a r i e t y a r e b a s i c a l l y those used i n the B.C.M.A.F. a p p l e o r c h a r d c o s t s t u d i e s . (B.C.M.A.F., 1982, 1984) However, the c o m p o s i t i o n of the l a n d base a c c o r d i n g t o age of t r e e s has been m o d i f i e d . An a c r e of e i g h t year o l d t r e e s has been added i n keeping w i t h the assumption t h a t t r e e s mature i n year n i n e . 1 3 Keeping the r a t i o of e s t a b l i s h m e n t / m a t u r e t r e e s a t 1 3 A c c o r d i n g t o Tim Watson, D i s t r i c t H o r t i c u l t u r i s t , B.C.M.A.F, on average , t r e e s w i l l mature i n year n i n e . The age i n which the t r e e matures w i l l depend on r o o t s t o c k , t r a i n i n g and management p r a c t i c e s . TABLE 8 DEFINITION LAND BASE C o m p o s i t i o n of the o r c h a r d b l o c k T r e e removal T r e e s p a c i n g and v a r i e t y AVERAGE COMMERCIALLY VIABLE ORCHARD IN B.C. AND WASHINGTON STATE B.C. 22 a c r e s of land base - 0.5 a c r e s p e r s o n a l r e s i d e n c e - 1.5 a c r e s headlands, b u i l d i n g s , roadways, s t o r a g e a r e a s - 20.0 a c r e o r c h a r d block The 20 a c r e b l o c k c o n s i s t s of - 0.875 a c r e i n year 1 e s t a b l i s h m e n t s t a g e - 0.875 a c r e i n year 2 e s t a b l i s h m e n t s t a g e - 0.875 a c r e i n year 3 e s t a b l i s h m e n t s tage - 0.875 a c r e i n year 4 e s t a b l i s h m e n t and f i r s t p a r t i a l c r o p stage - 0.875 i n year 5 e s t a b l i s h m e n t and second p a r t i a l c r o p stage - 0.875 i n year 6 e s t a b l i s h m e n t and t h i r d p a r t i a l c r o p stage - 0.875 i n year 7 e s t a b l i s h m e n t and f o u r t h p a r t i a l c r o p stage - 0.875 i n year 8 e s t a b l i s h m e n t and f i f t h p a r t i a l c r o p s t a g e - 13 a c r e s f u l l c r o p p r o d u c t i o n on mature t r e e s - t r e e s b e i n g removed are i n a 30' x 30' s p a c i n g - T r e e s b e i n g p l a n t e d are i n a 12' x 18' s p a c i n g which a l l o w s f o r 202 t r e e s per a c r e - The s c i o n v a r i e t y i s spur Red D e l i c i o u s on a M2 or A2 r o o t s t o c k - P o l l i n i z e r s a r e i n t e r s p e r s e d throughout the o r c h a r d - Mature t r e e s a re i n the same s p a c i n g and on the same r o o t s t o c k WASHINGTON STATE 50 a c r e s of la n d base - 1.0 a c r e p e r s o n a l r e s i d e n c e - 3.0 a c r e s headlands, b u i l d i n g s , roadways, s t o r a g e a r e a s - 46.0 a c r e o r c h a r d b l o c k The 46 a c r e b l o c k c o n s i s t s of - 2 a c r e s i n year 1 e s t a b l i s h m e n t s t a g e - 2 a c r e s i n year 2 e s t a b l i s h m e n t s t a g e - 2 a c r e s i n year 3 e s t a b l i s h m e n t s t a g e - 2 a c r e s i n year 4 e s t a b l i s h m e n t and f i r s t p a r t i a l c r o p s t a g e - 2 a c r e s i n year 5 e s t a b l i s h m e n t and second p a r t i a l c r o p s t a g e - 2 a c r e s i n year 6 e s t a b l i s h m e n t and t h i r d p a r t i a l c r o p s t a g e - 2 a c r e s i n year 7 e s t a b l i s h m e n t and f o u r t h p a r t i a l c r o p s t a g e - 2 a c r e s i n year 8 e s t a b l i s h m e n t and f i f t h p a r t i a l c r o p s t a g e - 30 a c r e s f u l l crop p r o d u c t i o n on mature t r e e s - ground i s assumed t o be bush l a n d - Trees b e i n g p l a n t e d a r e i n a 9' x 18' s p a c i n g which a l l o w s f o r 284 t r e e s (269 r ed d e l i c i o u s , 15 p o l l i n i z e r s ) - The t r e e s a r e f r e e s t a n d i n g , s p u r Red D e l i c i o u s on s e e d l i n g o r M7A. Oregon Spur 1s the most common v a r i e t y of spur d e l i c i o u s - P o l l i n i z e r s a r e i n t e r s p e r s e d throughout the o r c h a r d - Mature t r e e s a re i n t h e same s p a c i n g and on the same r o o t s t o c k 45 0.53, the number of a c r e s of mature t r e e s remains unchaged at 13 a c r e s . A c c o r d i n g t o B.C.M.A.F.'s h o r t i c u l t u r i s t s and f i e l d r e p r e s e n t a t i v e s , the s i z e of the l a n d base (22 a c r e s ) and i t s c o m p o s i t i o n are r e p r e s e n t a t i v e of a p p l e o r c h a r d s i n the Okanagan V a l l e y . In the case of Washington S t a t e , the d e f i n e d l a n d base (50 a c r e s ) i s used f r e q u e n t l y i n o r c h a r d s t u d i e s c o m p i l e d by r e s e a r c h e r s i n t h a t S t a t e . (Hinman, Hunter and Tukey, 1981, 1982, 1985) The c o m p o s i t i o n of the l a n d base a c c o r d i n g t o age of t r e e s f o r Washington S t a t e i s based on the same e s t a b l i s h m e n t / m a t u r e t r e e s r a t i o as f o r B.C. The s p a c i n g and r o o t s t o c k s , i n each c a s e , a r e c o m p i l e d from e x i s t i n g a p p l e o r c h a r d s t u d i e s and v i s i t s w i t h e x t e n s i o n a g e n t s i n Washington S t a t e . 3.2.1 DATA In a c o s t of p r o d u c t i o n s t u d y , the s e t of p r o d u c t i o n d ata r e q u i r e d i n c l u d e s management p r a c t i c e s by age of t r e e s ; machine and l a b o u r hours per p r a c t i c e ; s e r v i c e o r m a t e r i a l c o s t s a s s o c i a t e d w i t h each p r a c t i c e ; average y i e l d s ; and o t h e r farm l e v e l c o s t s . G i v e n the d a t a r e q u i r e m e n t f o r t h i s s t u d y , a l i m i t e d amount was found t o be a v a i l a b l e . W ithout a 46 f u l l s c a l e or s e l e c t e d s u r v e y and the l i m i t e d a v a i l a b i l i t y of e x i s t i n g c o s t data a s s o c i a t e d w i t h each management p r a c t i c e , a l t e r n a t e approaches had t o be c o n s i d e r e d . One a l t e r n a t i v e was t o e x t r a c t d a t a from e x i s t i n g o r c h a r d p r o d u c t i o n s t u d i e s i n both B.C. and Washington S t a t e . T h i s r a i s e d the i s s u e of the q u a l i t y of da t a i n e x i s t i n g s t u d i e s . As noted e a r l i e r , t h r e e c o s t of p r o d u c t i o n models e x i s t f o r a p p l e p r o d u c t i o n i n B.C. The da t a used i n the Crop I n s u r a n c e model t o de t e r m i n e annual F I I payments were r e j e c t e d as a da t a source because of p o s s i b l e e x i s t e n c e of b i a s i n f a v o u r of the p r o d u c e r s . The reason i s t h a t the d a t a a re based on n e g o t i a t i o n s between r e p r e s e n t a t i v e s of government and p r o d u c e r s . The p r o d u c t i o n d a t a i n the model d e v e l o p e d and used by the Economics Branch of the B.C.M.A.F. a r e g a t h e r e d from consensus meetings between p r o d u c e r s , h o r t i c u l t u r a l i s t s , and f i e l d r e p r e s e n t a t i v e s . A b i a s may s t i l l e x i s t i n t h e s e d a t a , but i t w i l l be l e s s g i v e n the pre s e n c e of o t h e r o r c h a r d e x p e r t s . T h i s i n f o r m a t i o n p r o v i d e s a u s e f u l base f o r p r o d u c t i o n d a t a . Hence, u n l e s s s p e c i f i e d o t h e r w i s e , t h i s i s the B.C.M.A.F. model r e f e r r e d t o i n the remainder of t h i s s t u d y . To ensure t h a t the da t a a re r e l a t i v e l y a c c u r a t e , f u r t h e r i n p u t was o b t a i n e d from d i s t r i c t h o r t i c u l t u r i s t s , p a c k i n g h o u s e , f i e l d r e p r e s e n t a t i v e s , and r e g i o n a l a g r i c u l t u r a l e c o n o m i s t s . S i m i l a r p r o c e d u r e s were employed i n g a t h e r i n g the data s e t f o r the Washington S t a t e ' s r e p r e s e n t a t i v e o r c h a r d . 47 E x i s t i n g o r c h a r d p r o d u c t i o n s t u d i e s were used t o c o m p i l e management p r a c t i c e s , machine r e q u i r e m e n t s , l a b o u r r e q u i r e m e n t s and i n p u t c o s t s . As i n B.C., a d d i t i o n a l i n p u t was o b t a i n e d from both e x t e n s i o n and r e s e a r c h h o r t i c u l t u r a l i s t s and a g r i c u l t u r a l e c o n o m i s t s . From the da t a c o l l e c t e d and d i s c u s s i o n s w i t h f i e l d r e p r e s e n t a t i v e s , i t appears t h a t , d e s p i t e the mandatory s w i t c h t o m e t r i c , most i n d u s t r y p e o p l e s t i l l t h i n k and use the i m p e r i a l measurement system. To enhance the u s e a b i l i t y of t h i s r e p o r t , the i m p e r i a l measurements ( i . e . pounds, a c r e s ) a r e used. T h i s w i l l a l l o w i n t e r e s t e d p ersons i n Washington S t a t e t o more e a s i l y comprehend the co m p a r i s o n s . For c o m p l e t e n e s s , the r e s u l t t a b l e s a r e a l s o p r e s e n t e d i n m e t r i c i n Appendix A. 3.2.2 METHODS OF ESTIMATION Having d e f i n e d a r e p r e s e n t a t i v e o r c h a r d f o r B.C. and Washington S t a t e (Table 8 ) , an a s s o c i a t e d s e t of management p r a c t i c e s , a l o n g w i t h a set of machinery, equipment and b u i l d i n g s , were c o m p i l e d f o r each r e g i o n . For comparison p u r p o s e s , the d e f i n e d management p r a c t i c e s of the two r e g i o n s a r e p r e s e n t e d t o g e t h e r i n a s e r i e s of t a b l e s , T a b l e s 48 9 t o 17, r e f e r r e d t o as the management s c h e d u l e s . The s e t of management s c h e d u l e s c o n s i s t s of n i n e s e p a r a t e s c h e d u l e s d e p i c t i n g the p r a c t i c e s a p p l i e d t o t r e e s aged one t h r o u g h mature on a per a c r e b a s i s , i n B.C. and Washington S t a t e . The s c h e d u l e s a l s o i n c l u d e the type of machine used, machine h o u r s , l a b o u r hours, and m a t e r i a l / s e r v i c e c o s t s a s s o c i a t e d w i t h each o p e r a t i o n . For example, i n T a b l e 9, t r e e and r o o t removal o c c u r s once per a c r e and i s assumed to take the same amount of l a b o u r (48 hours per a c r e ) and r e q u i r e the same c o s t of s e r v i c e / m a t e r i a l ($250 per a c r e ) f o r both B.C. and Washington S t a t e . Ground p r e p a r a t i o n i s assumed t o r e q u i r e a t r a c t o r and r o t o v a t o r i n B.C. but i s assumed t o be custom h i r e d i n Washington S t a t e . In each c a s e , t h i s o p e r a t i o n o c c u r s t w i c e and the machine hours r e q u i r e d per a c r e i s 2.8 hours f o r B.C. and z e r o f o r Washington S t a t e . The s e r v i c e / m a t e r i a l c o s t a s s o c i a t e d w i t h ground p r e p a r a t i o n i s $20.74 Canadian d o l l a r s f o r Washington S t a t e and z e r o f o r B.C. For B.C., the o p e r a t i o n s / p r a c t i c e s , machine used, and s e r v i c e / m a t e r i a l c o s t s a re those d e f i n e d i n the B.C.M.A.F.'s 1982 and 1984 a p p l e o r c h a r d s t u d i e s . Machine hours r e q u i r e d per o p e r a t i o n a re e s t i m a t e d by t a k i n g the hours s t a t e d i n the B.C.M.A.F. s t u d i e s and s u b t r a c t i n g the p r o d u c t of the o r i g i n a l hours and 0.2. 1" The o b j e c t i v e of t h i s c a l c u l a t i o n i s t o e l i m i n a t e the time r e q u i r e d t o mount an implement or make an a d j u s t m e n t , which would have been i n c l u d e d i n the V* T h i s adjustment was suggested by Howard J o y n t , A g r i c u l t u r a l O f f i c e r , B.C.M.A.F., Summerland. v ; a T A B L E 9 BANA6EHENT S C H E D U L E FOR T R E E S I N Y E A R 1 E S T A B L I S H M E N T CROP S T A S E , B . C . AND HASHINjTTuI STATE OPERATION(*,h) MACHINE USED TINES USED PER ACRE MACHINE HOURS PER ACRE LABOUR HOURS PER ACRE SERVICE/ MATERIAL CCST ?ER ACRE B . C . (a) HASH.(b) B . C . ( a ) NASH.(b) B . C . ( a ) HASH.(b) B.C.(a,c)NASH.(b> B . C . ( a ) NASH.(b) Cars Cans (d) 1984 1984 Tree I Root Removal (e) 1 1 4 8 . 0 0 48.00 250.00 250.00 Ground P r e p a r a t i o n t r a c t o r r o t o v a t o r c u i t o a h i r e d 2 2 2.80 3.36 0.64 20.74 l a y o u t / s t a k i n g & stakes band l a b o u r hand labour t 3 B.00 1.50 4.65 0.12 P l a n t t r e t s t r a c t o r auoer rented UOhp t r a c t o r u / i l a n t e r 1 1 5.40 29.76 6.20 1131.00 1476.Bl Hauling p l a n t s pickup 1 1 . 0 0 1.20 f e r t i l i z e r A p p l i c a t i o n band l a b o u r hand labour 1 2 0 . 2 7 1.00 5.73 114.44 Handeeed 5 . 4 k g incut i i > band l a b o u r 1 0.50 30.00 Heeding hand h o l i n g hand l a b o u r 3 10.0B Suaaer t r a i n i n g t pruning hand labour 1 3.36 7.87 toning t r a c t o r SOttp •otter 8 0 i n t r a c t o r 60hp •otter lOBin 2 3 1 . 6 0 1 . 5 0 1.92 1.B0 N u t r i e n t A p p l i c a t i o n t r a c t o r 50hp o r c h . sprayer 3 0 . B 0 0 . 9 6 24.51 Thiodan 6 oz t r a c t o r 50hp o r c h . sprayer 1 0 . 2 6 0.32 2.52 Boron 25 l b s t r a c t o r SOhp f e r t . spreader 1 0 . 2 2 0 . 2 6 12.10 H e r b i c i d e A p p l i c a t i o n t r a c t o r 60hp w e d sprayer 2 0 . 6 6 0 . 8 0 17.25 I r r i g a t i o n 1 M a t e r 4ee U\ s o l i d s e t s o l i d set 14 14 168.00 168.00 1.50 3 . 0 0 70.00 34.99 House guard hand labour 1 0 . 4 0 : i o . « o Rodent c o n t r o l hand l a b o u r custoe a e r i a l I 1 0.46 2.29 20.37 6opher c o n t r o l t r a c t o r aOhp gopher eachine 1 0 . 2 5 0.30 5.61 Use of pickup pickup 1/2 ton pickup 1/2 ton 8.60 9.00 1 0 . 3 2 10.80 SOURCES: (a) B . C . t l . A . F . ' E s t i m a t e d Costs a * Returns: Apple Orchard Establishment and P r o d u c t i o n . ' Study No. 266, Nay 1964. (b) C o o p i l e d f r o e Hinaan, H.R.J Hunter, R. E . : and M e y , R. B. "1985 Cost trf E s t a b l i s h i n g An Apple Orchard Coluabia B a s i n , Nashington." C o l l e g e of A g r i c u l t u r e , Nashington State U n i v e r s i t y , P u l l a a n , Washington Extension B u l l e t i n 0960, January, 1985. (c) Labour hours per acre * eachine hours per acre * 1.2 Id) The exchange r a t e , 1984 aonthly noon average, i s 1.22 Can* per US*. (e) Labour and s e r v i c e / u t e r i a l c o s t s tor Nashington S t a t e are assueed t o be the sate as B . C . (f) An e s t i a a t e provided by Ted N. Van der B u l i k , A g r i c u l t u r a l Engineer, B . C . H . A . F . TABLE 10 MANAGEMENT SCHEDULE FOR TREES IN YEAR 2 ESTABLISHMENT STASE, B . C . AND WASHINGTON STATE OPERATION(a,b) MACHINE USED B . C . ( a ) NASH.(b) TINES USED PER ACRE B . C . ( a ) HASH, (b) MACHINE HOURS PER ACRE B . C . ( a ) HASH.(b) LABOUR HOURS PER ACRE B.C.(a,c>NASH.(b) SERVICE/ MATERIAL COST PER ACRE B . C I U HASH, (b) Cant Cant <d> 1"84 198* Replanting t 51 I p l a n t p o l l e r i z e r s hand labour t r a c t o r 60hp rent auger 1 1 1.00 0.75 3.20 56.56 J 175.AB Haul t « a t e r p l a n t s pickup 1 1.00 1.20 Pruning 1 t r a i n i n g hand labour hand labour 1 1 6.73 5.00 24.03 Disc t r a c t o r eOhp rented 12ft d i s c 2 0 . 2 0 0.24 6.10 Seed f r a i l t r a c t o r 40hp rented seeder 1 0.2S 0.30 13.58 F e r t . a p p l i c a t i o n t r a c t o r SOhp f e r t . spreader t r a c t o r 60hp f e r t . spreader 2 1 0 . 4 3 0 . 2 5 0.52 0.30 1 7 . : ; 25.62 N u t r i e n t a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 3 0.80 0.96 J « . 5 i H e r b i c i d e a p p l i c a t i o n t r a c t o r SOhp weed sprayer t r a c t o r eOhp need sprayer 3 2 3 .60 0.66 4 . 3 2 0.80 28.21 17.25 Aphid c o n t r o l t r a c t o r SOhp o r c h . sprayer custoa a e r i a l 1 1 0.26 0.32 2.52 20.30 Mowing t r a c t o r SOhp eomer W i n t r a c t o r 60hp toner 108in 4 3 3 .20 1.50 3 . 8 4 1.B0 I r r i g a t i o n \ n i t e r fee (e) s o l i d s e t s o l i d s e t 14 14 168.00 168.00 1.50 3.00 70.00 34.99 Rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 16.37 Gopher c o n t r o l t r a c t o r 60hp gopher eachine 1 o.te d.Jo 5.61 Transp. use of pickup pickup 1/2 ten pickup 1/2 tan 8 . 6 0 9 . 0 0 10.32 10.80 SOURCES: (a) B . C . M . A . F . * E s t i M t e d C o s t s and R e t t r n s : Apple Orchard Establishment and P r o d u c t i o n . ' Study Mo. 266, May 1984. (b) Compiled from Hinmtn, H . R . i Hunter, R. E . i and Tukey, R. 8 . '1985 Cost of E s t a b l i s h i n g An Apple Orchard Columbia B a s i n , Washington. ' C o l l e g e of A g r i c u l t u r e , Washington S t a t e U n i v e r s i t y , Pullman, Washington Extension B u l l e t i n 0960, January, 1985. (c) Labour hours per acre * machine hours per acre » 1.2 (d) The eichange r a t e , 1984 monthly noon average, i s 1.22 Can* per USt. (e) An estimate provided by Ted W.*Vin der G u l i k , A g r i c u l t u r a l Engineer, B . C . M . A . F , 5 1 TABLE 11 MANAGEMENT SCHEDULE FOR TREES IN YEAR 3 ESTABLISHMENT STAGE, B.C. AND WASHINGTON S T A T E OPERATION(a,b) MACHINE USED B . C . ( a ) HASH.(b) TIMES USED PER ACRE B . C . ( a ) WASH.(bl MACHINE HOURS FER ACRE B.C. (a) MASH.(b) LABOUR HOURS PER ACRE B.C. <a,c)WASH. <b> S E R V I C E / MATERIAL COST PER ACRE B . C . ( a ) NASH.(a! C a n t C a n t i d ! 1984 198* P r u n i n g 1 t r a i n i n g p r u n i n g t o o l s p r u n i n g t o o l s 1 1 8.42 15.50 15.91 80.52 c ? r t i l i z e r a p p l i c a t i o n t r a c t o r 50hp f e r t . s p r e a d e r t r a c t o r i O h p f e r t . s p r e a d e r 2 1 0.43 0.25 0.52 0. TO 22.90 te in D o r i a n t o i l 2 g a l t r a c t o r 50hp o r c h . s p r a y e r 1.20 1.44 7.90 F r u i t r e a o v a l hand l a b o u r 1 1.00 N u t r i e n t a p p l i c a t i o n (e) t r a c t o r 50hp o r c h . s p r a y e r * 2.00 2.40 53.94 H e r b i c i d e a p p l i c a t i o n t r a c t o r 50hp n e e d s p r a y e r t r a c t o r 60hp tteed s p r a y e r 3 3 3.60 0.99 4.32 1.20 28.21 28.51 A p h i d c o n t r o l t r a c t o r 50hp o r c h . s p r a y e r c u s t o m a e r i a l 1 1 0.26 0.32 5.05 22.74 P l i c t r a n 4 oz t r a c t o r 50hp o r c h . s p r a y e r 1 1.20 1.44 6.05 Hot t i n g t r a c t o r 50hp • o t t e r 8 0 i n t r a c t o r 60hp t o t t e r l O B i n 4 3 3.20 1.50 3.84 1.B0 I r r i g a t i o n 4 * a t e r f e e ( 0 s o l i d s e t s o l i d s e t 14 14 168.00 168.00 1.50 3.00 70.00 3 4 . 9 9 R o d e n t c o n t r o l h a n d l a b o u r c u s t o a a e r i a l 1 1 0,40 2.29 20.37 Gopher c o n t r o l t r a c t o r 60hp g o p h e r e a c h i n e 1 0.25 0.30 5.61 I r a n s p . u s e o f p i c k u p p i c k u p 1/2 t o n p i c k u p 1/2 t o n 8.40 10.00 10.32 12.00 SOURCES: (a) B.C.H.A.F. " E s t i a a t e d C o s t s and R e t u r n s : A p p l e O r c h a r d E s t a b l i s h s e n t and P r o d u c t i o n . " S t u d y No. 266, May 1984. (b) C o m p i l e d f r o i H i n a a n , H . R .i H u n t e r , R. E . i and M e y , R. B. '1985 C o s t o f E s t a b l i s h i n g An A p p l e O r c h a r d C o l u m b i a B a s i n , N a s h i n g t o n . " C o l l e g e o f A g r i c u l t u r e , W a s h i n g t o n S t a t e U n i v e r s i t y , P u l l a a n , N a s h i n g t o n E x t e n s i o n B u l l e t i n 0960, J a n u a r y , 1985. ( c ) L a b o u r h o u r s p e r a c r e = a a c h i n e h o u r s p e r a c r e * 1.2 (d) The e x c h a n g e r a t e , 1984 a o n t h l y noon a v e r a g e , i s 1.22 C a n t p e r US*. (e) I n c l u d e s an a p p l i c a t i o n o f z i n c s u l p h a t e . I f ) An e s t i a a t e p r o v i d e d by Ted W. Van d e r G u l i k , A g r i c u l t u r a l E n g i n e e r , B.C.H.A.F. TABLE 12 MANAGEMENT SCHEDULE FOR TREES IN YEAR 4 ESTABLISHMENT AND FIRST FARTIAL CROP STAGE, B.C. AND WASHINGTON STATE OPERATION!*,!)) MACHINE USES B . C . ( a ) NASH.(b) TIMES USED PER ACRE B . C . ( a ) HASH.(b) MACHINE HOURS PER ACRE B . C . ( a ) MASH.(b) LABOUR HOURS PER ACRE B.C.(a,c>HASH.!b) • SERVICE/ MATERIAL COST PER ACRE B . C . ( a ) NASH.(b) Cant C a n i Id) 1984 1984 Pruning t t r a i n i n g •and labour hand labour 1 1 10.10 26.50 80.52 F e r t i l i z e r a p p l i c a t i o n t r a c t o r SOhp f e r t . spreader t r a c t o r 35hp f e r t . spreader 2 1 0 . 4 3 0 . 2 S 0 . 5 2 0.30 28.57 25.62 Cover i p r a y t r a c t o r 60hp b l a s t sprayer 2 0 . B 0 0.96 29.77 Prepink spray t r a c t o r Mhp b l a s t sprayer 6.4T •• TOT : r u i t t h i n n i n g hand labour hand labour 1 1 3.37 8.33 N u t r i e n t a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 3 3 . 6 0 4.32 37.98 h e r b i c i d e a p p l i c a t i o n t r a c t o r SOhp • t e d sprayer t r a c t o r 35hp teed sprayer 3 2 3 . M 0 . 6 6 4.32 O.B0 28.21 15.81 I n s e c t i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer t r a c t o r Mhp b l a s t sprayer 7 1 8.40 0 . 4 0 10.06 0.48 137.40 14.25 f u n g i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 2 2.40 2.B8 Boron 25 l b s t r a c t o r SOhp f e r t . spreader 1 0 . 2 2 0 . 2 6 12.07 towing t r a c t o r SOhp •oner BOin t r a c t o r 60hp tower lOflin 4 3 3.20 1.50 3.B4 1.80 I r r i g a t i o n t water fee (e s o l i d s e t s o l i d set 14 14 166.00 168.00 1.50 3.00 70.00 34.99 H a r v e s t i n g / p i c k i n g p i c k i n g sacks p i c k i n g sacks 1 1 33.00 6 i . « 9 Bin h a u l i n g / h a n d l i n g * t r a c t o r SOhp r e a r f r k s f r n t H r I f r k s t r a c t o r Mhp backfork 1 1 0.24 0 . 5 0 0 . 2 9 0 . 6 0 Bin h a u l i n g t r a c t o r 35hp backfork 1 0 . 5 0 0.60 Custoa haulihq 2 b i n s 5 b i n s I 1 7.00 15.25 rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 2.29 20.37 6opher c o n t r o l t r a c t o r Mhp aopher e a c h i n * 1 0 . 2 5 0.30 5.61 Transp. use of pickup pickup 1/2 ton * pickup 1/2 ton 8 . 6 0 10.00 10.32 12.00 M i s c . use of t r a i l e r t r a c t o r Mhp t r a i l e r 1.00 1.20 SOURCES: (a) B . C . M . A . F . ' E s t i m a t e d Costs and Returns: Apple Orchard Establishment and P r o d u c t i o n . ' Study No. 266, May 1984. (b) Coepiled f r o i H i n t a n , H . R . ; Hunter, R. E.< and Tukey, R. B. '1985 Cost of E s t a b l i s h i n g An Apple Orchard C o l u i b i a B a s i n , Washington." C o l l e g e of A g r i c u l t u r e , Washington State U n i v e r s i t y , P u l l e a n , Washington Extension B u l l e t i n 0960, January, 1985. (c) Labour hours per acre 1 l a c h i n e hours per acre * 1.2 (d) The exchange r a t e , 1984 eonthly noon average, i s 1.22 Can! per US*. (e! An e s t i i a t e provided by Ted W. Van der G u l i k , A g r i c u l t u r a l Engineer, B . C . M . A . F . TABLE 13 MANAGEMENT SCHEDULE FOR TREES IN YEAR S ESTABLISHMENT AND SECOND PARTIAL CROP STAGE, B.C. AND NASHINGTON STATE OPERATION(j,bI MACHINE USED B . C . ( a ) NASH.(b) TIMES USED PER ACRE B . C . ( a ! HASH.(bl MACHINE HOURS PER ACRE B . C . ( a ) HASH.(b) LABOUR HOURS PER ACRE B.C.(a,c)NASH.(b> SERVICE/ MATERIAL COST PEP ACRE B . C . ( a ) HASH.(b) Cans Cant (d) 1984 1984 Pruning I t r a i n i n g pruning t o o l s pruning t o o l s 1 1 19.37 36.50 7 .32 F e r t i l i z e r a p p l i c a t i o n t r a c t o r 50hp f e r t . spreader t r a c t o r 35hp f e r t . spreader 2 1 0 . 4 3 0 . 2 5 0.52 0.30 28.62 42.70 Cover spray t r a c t o r 60hp b l a s t sprayer 2 0 . 8 0 0.96 29.77 Prepink spray t r a c t o r 60hp b l a s t sprayer 1 0.40 0.48 i l • 0/ P o l l i n a t i o n 1 1 36.00 49.41 F r u i t t h i n n i n g hand labour t r a c t o r 60hp b l a s t sprayer 1 2 0 . 8 0 10.10 0.96 15.81 N u t r i e n t a p p l i c a t i o n t r a c t o r 50hp o r c h . sprayer 3 3.40 4 . 3 2 37.98 H e r b i c i d e a p p l i c a t i o n t r a c t o r 50hp w e d sprayer t r a c t o r 3Shp w e d sprayer 3 2 3.60 0.66 4 . 3 2 0.80 28.21 15.81 I n s e c t i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer t r a c t o r 60hp b l a s t sprayer 7 1 8.40 0.40 10.08 0.48 137.40 17.76 Fungicide a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 2 2.40 2.8B 19.04 Honing t r a c t o r SOhp •oner 8 0 i n t r a c t o r 60hp • o w r lOBin 4 3 3.20 1.50 3 . 8 4 1.80 I r r i g a t i o n t water fee (e) s o l i d s e t s o l i d s e t 14 14 168.00 168.00 1.50 3.00 70.00 34.99 H a r v e s t i n g / p i c k i n g p i c k i n g sacks p i c k i n g sacks 110.00 183.00 Bin d i s t r i b u t i o n / handling t r a c t o r SOhp r e a r f r k s f r n t l d r & f r k s t r a c t o r 35hp backfork 1 1 1.67 3 . 0 0 2.00 3.60 Load t r a c t o r 60hp h i g h l i f t f o r k 1 3 . 0 0 3.60 Saaap t r a c t o r 35hp backfork 1 3 . 0 0 3.60 Custoa h a u l i n g 10 b i n s IS b i n s 1 1 35.00 45.75 Rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 2.29 20.37 Gopher c o n t r o l t r a c t o r oOhp gopher eachine 1 0 . 2 5 0.30 5.61 Cleanup i t r a c t o r 35hp t r a i l e r 1 0 . 5 0 0.60 Transp. use of pickup pickup 1/2 ton pickup 1/2 ton 8.60 10.00 10.32 12.00 M i s c . use of t r a i l e r t r a c t o r 60hp t r a i l e r 0 . 5 0 0.60 SOURCES: (a) B . C . H . A . F . ' E s t i m a t e d Costs and Returns: Apple Orchard Establishment and P r o d u c t i o n . ' Study No. 266, May 1984. (b) Coopiled f r o * Hinean, H . R . ; Hunter, R. E . j and Tukey, R. B. "1985 Cost of E s t a b l i s h i n g An Apple Orchard Coluabia B a s i n , N a s h i n g t o n . " C o l l e g e of A g r i c u l t u r e , Nashington S t a t e U n i v e r s i t y , Pullman, Nashington Extension B u l l e t i n 0960, January, 1985. (c) Labour hours per acre - machine hours per acre * 1.2 (d) The exchange r a t e , 1984 monthly noon average, i s 1.22 Can* per U S i . (e) An estimate provided by Ted N. Van der 6 u l i k , A g r i c u l t u r a l Engineer, B . C . H . A . F . 5 4 TABLE 14 MANAGEMENT SCHEDULE FOR TREES IN YEAR A ESTABLISHMENT AND THIRD PARTIAL CROP STAGE, B.C. AND WASHINGTON STATE Q P E R A T I O N ( a , b l MACHINE USED B . C . ( a ) HASH.tb) TIMES USED PER ACRE B . C . ( a ) NASH.(b) MACHINE HOURS PER ACRE B . C . ( a ) HASH.(b) LABOUR HOURS PER ACRE B . C . ( a , c ) H A S H . ( b ) S E R V I C E / MATERIAL COST PER ACRE B . C . ( a ) HASH.(b) C a n i Can$ !d) 1984 1934 P r u n i n q 4 t r a i n i n q p r u n i n g t o o l s p r u n i n g t o o l s 1 1 26.93 53.17 7.32 F e r t i l i z s r a p p l i c a t i o n t r a c t o r SOhp f e r t . s p r e a d e r t r a c t o r 35hp f e r t . s p r e a d e r 2 1 0.43 0.25 0.52 0.30 34.35 42.70 C o v e r s p r a y t r a c t o r AOhp b l a s t s p r a y e r 2 0.80 0.94 29.77 P r e p i n k s p r a y t r a c t o r AOhp b l a s t s p r a y e r 1 0.40 0.4B 21.37 P o l l i n a t i o n 1 1 36.00 49.41 F r u i t t h i n n i n g h a n d l a b o u r t r a c t o r AOhp b l a s t s p r a y e r 1 2 0.60 13.47 0.94 15.81 N u t r i e n t a p p l i c a t i o n t r a c t o r 50hp o r c h . s p r a y e r 3 3. AO 4.32 37.98 H e r b i c i d e a p p l i c a t i o n t r a c t o r 50hp tteed s p r a y e r t r a c t o r 35hp Heed s p r a y e r 3 2 3. AO O.AA 4.32 0.B0 29.21 15.81 I n s e c t i c i d e a p p l i c a t i o n t r a c t o r 50hp o r c h . s p r a y e r t r a c t o r AOhp b l a s t s p r a y e r 7 1 8.40. 0.40 10.08 0.48 137.40 17.76 f u n g i c i d e a p p l i c a t i o n t r a c t o r 50hp o r c h . s p r a y e r 2 2.40 2.88 19.04 Mowing t r a c t o r 50hp s o w e r 8 0 i n t r a c t o r AOhp • o n e r 1 0 8 i n 4 „3 3.20 1.50 3.84 1.80 I r r i g a t i o n k w a t e r f e e ( e l s o l i d s e t s o l i d s e t 14 14 1AB.O0 1AB.00 1.50 3.00 70.00 34.99 H a r v e s t i n g / p i c k i n g p i c k i n g s a c k s p i c k i n g s a c k s 1 1 165.00 320.66 B i n d i s t r i b u t i o n / h a n d l i n g t r a c t o r 50hp r e a r f r k s f r n t l d r s * f r k s t r a c t o r 35hp b a c k f o r k 1 1 3.33 4.40 4.00 5.28 L o a d t r a c t o r AOhp h i g h l i f t f o r k 1 4.40 5.28 Swai p t r a c t o r 35hp b a c k f o r k 1 4.40 5.28 C u s t o a h a u l i n g 20 b i n s 26.3 b i n s 1 1 70.00 80.22 R o d e n t c o n t r o l h a n d l a b o u r c u s t o a a e r i a l 1 1 0.40 2.90 20.37 Gopher c o n t r o l t r a c t o r AOhp g o p h e r e a c h i n e 1 0.25 0.30 5.6! C l e a n u p t r a c t o r 35hp t r a i l e r 1 0.50 O.AO T r a n s p . u s e o f p i c k u p p i c k u p 1/2 t o n p i c k u p 1/2 t o n 8. AO 10.00 10.32 12.00 M i s c . u s e o f t r a i l e r t r a c t o r AOhp t r a i l e r 0.50 0.60 SOURCES: (a) B.C.M.A.F. " E s t i a a t e d C o s t s and R e t u r n s : A p p l e O r c h a r d E s t a b l i s h e e n t and P r o d u c t i o n . " S t u d y No. 2AA, May 1984. ! b l C o m p i l e d f r o a H i n t a n , H.R.i H u n t e r , R. E . ; and T u k e y , R. B. "1985 C o s t o f E s t a b l i s h i n g An A p p l e O r c h a r d C o l u i b i a B a s i n , H a s h i n g t o n . " C o l l e g e o f A g r i c u l t u r e , W a s h i n g t o n S t a t e U n i v e r s i t y , P u l l n a n , H a s h i n g t o n E x t e n s i o n B u l l e t i n 09AO, J a n u a r y , 1985. ( c ) L a b o u r h o u r s p e r a c r e = s a c h i n e h o u r s p e r a c r e » 1.2 (d) The e x c h a n g e r a t e , 1984 a o n t h l y n o o n a v e r a g e , i s 1.22 C a n t p e r U S i . (e) An e s t i i a t e p r o v i d e d b y T e d H. Van d e r G u l i k , A g r i c u l t u r a l E n g i n e e r , B.C.M.A.F. sS TABLE 15 MANAGEMENT SCHEDULE FOR TREES IN YEAR 7 ESTABLISHMENT AND FOURTH PARTIAL CROP STAGE, B.C. AND NASHINGTON STATE OPERATION (a ,b ) MACHINE USED B . C . ( a ) NASH.(b) TIMES USED PER ACRE B . C . ( a ) HASH.(b) MACHINE HOURS PER ACRE B . C . ( a ) HASH.(b) LABOUR HOURS PER ACRE B . C . l a . d l A S H . I b l SERVICE/ MATERIAL COST PES ACRE B . C . (a) HASH.(b) Cant Cart (d) 1984 1984 Pruning t t r a i n i n g • e c h a n i c a l l a d d e r , pover pruner pruning t o o l s 1 1 16.00 30.30 6 9 . B4 7.32 F e r t i l i z e r a p p l i c a t i o n t r a c t o r 50hp f e r t . spreader t r a c t o r 35hp f e r t . spreader 2 1 0.43 0 . 2 5 0.52 0.30 34.35 42.70 Cover spray t r a c t o r 60hp b l a s t sprayer 2 O.BO 0.96 29.77 Prepink spray t r a c t o r 60hp b l a s t sprayer 1 0 . 4 0 0.48 21.37 P o l l i n a t i o n 1 1 36.00 * 9 . 4 1 F r u i t t h i n n i n g hand labour t r a c t o r 60hp b l a s t sprayer 1 2 O.BO 13.46 0.94 15.81 Nutrient a p p l i c a t i o n t r a c t o r 50hp o r c h . sprayer 3 3.60 4.32 37.98 Herbicide a p p l i c a t i o n t r a c t o r SOhp need soraver t r a c t o r 35hp med soraver 1 2 3.60 0 . 6 6 4.32 0 . 8 0 28.21 15.81 I n s e c t i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer t r a c t o r 60hp b l a s t soraver 7 1 6.40 0 . 4 0 10.0B 0 . 4 8 137.40 17.76 Fungicide a p p l i c a t i o n t r a c t o r SOhp o r c h . soraver 2 2.40 2. SB 19.04 E l g e t o l .74 g a l t r a c t o r SOhp o r c h . sprayer 1 1.20 1.44 27.70 Boron 11 kg t r a c t o r SOhp f e r t . spreader 1 0 . 2 2 0.26 12.10 (lotting t r a c t o r SOhp •oner BOin t r a c t o r 60hp •oner lOBin 4 3 3.20 1.50 3.84 1.B0 I r r i g a t i o n t w t e r f e e (e) s o l i d set s o l i d set 14 14 16B.O0 16B.00 1.50 3.00 70.00 34.99 H a r v e s t i n g / p i c k i n g • e c h a n i c a l ladder p i c k i n g sacks 1 1 6.40 3 5 1 5 6 457.50 B i n d i s t r i b u t i o n / handling t r a c t o r SOhp r e a r f r k s f m t i d r & f r k s t r a c t o r 3Shp back fork 1 1 5.00 5 . 0 3 6.00 6.14 Load t r a c t o r 60hp h i o h l i f t f o r k 1 5 . 0 3 6.14 Sttaap t r a c t o r 35hp backfork 1 5 . 0 3 6.14 Custoa haulinq 3 2 . 5 bins } 37.5 b i n s 1 1 113.75 114.38 Rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 2.90 20.37 Gopher c o n t r o l t r a c t o r 60hp gopher eachine 1 • 0 . 2 5 0.30 5.61 Cleanup t r a c t o r 35hp t r a i l e r 1 0 . 5 0 0 . 6 0 Transp. use of pickup pickup 1/2 ton pickup 1/2 tan B.60 10.00 10.32 12.00 M i s c . use of t r a i l e r t r a c t o r 60hp t r a i l e r 0 . 5 0 0 . 6 0 SOURCES: (a) B . C . H . A . F . ' E s t i m a t e d Costs and Returns: Apple Orchard Establishment and P r o d u c t i o n . * Study No. 266, May 1984. (b) Compiled from Hinaan, H . R . i Hunter, R. E.J and Tukey, R. B. "1985 Cost of E s t a b l i s h i n g An Apple Orchard Columbia B a s i n , N a s h i n g t o n . * College of A g r i c u l t u r e , Nashington State U n i v e r s i t y , Pullman, Kashington Extension B u l l e t i n 0 7 6 0 , January, 1985. (c) Labour hours per acre - machine hours per acre » 1.2 Id) The exchange r a t e , 1934 monthly noon average, i s 1.22 Cant per US(. (el An estimate provided by Ted H. Van der 6 u l i k , A g r i c u l t u r a l Engineer, S . C . M . A . F . TABLE 14 MANAGEMENT SCHEDULE FOR TREES IN YEAR 6 ESTABLISHMENT AND FIFTH PARTIAL CROP STAGE, B.C. AND HASHINGTON STATE OPERATIONS, b l MACHINE USED B . C . ( a ) HASH.(b) TINES USED PER ACRE B . C . ( a ) HASH.(b) MACHINE HOURS PER ACRE B.C(a) H A S H .(bl LABOUR HOURS PER ACRE B . C . ( a , c ) H A S H .(b) SERVICE/ MATERIAL COST PER ACRE B . C . ( a ) MASK.(b) Cant Cant 'd> 1984 1984 Pruning & t r a i n i n g a e c h a n i c a l l a d d e r , power pruner hand labour pruning t o o l s 1 1 17.78 33.67 86.50 7 .32 F e r t i l i z e r a p p l i c a t i o n t r a c t o r SOhp f e r t . spreader t r a c t o r 35hp f e r t . spreader 2 1 0 . 4 3 0.25 0.52 0.30 34.35 42.70 Cover spray t r a c t o r 60hp b l a s t sprayer 2 0.80 0.96 29.77 Prepink spray t r a c t o r 60hp b l a s t soraver a 1 0.40 0.48 21.37 p o l l i n a t i o n 1 1 36.00 4 9 . * ! Thin spray (growth reg) t r a c t o r SOhp o r c h . sprayer t r a c t o r M h p b l a s t sprayer 1 2 1.20 0.80 1.44 0.94 44.82 15. SI Hand t h i n n i n g hand labour hand labour ladders 1 1 34.00 4 6 . 2 « Nutrient a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 3 3 . 6 0 4.32 37.98 Herbicide a p p l i c a t i o n t r a c t o r SOhp weed sprayer t r a c t o r 35hp weed sprayer 3 2 3 . 6 0 0.66 4.32 0.B0 28.21 15.81 I n s e c t i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer t r a c t o r M h p b l a s t sprayer 7 1 6.46 6.4*6 16.66 " 0.46 137.40 17.7A Fungicide a p p l i c a t i o n t r a c t o r 50hp o r c h . sprayer 2 2 .40 2.8B 19.04 Honing t r a c t o r SOhp •ower 80in t r a c t o r M h p •ower lOSin 4 3 3.20 1.50 3.84 1.80 I r r i g a t i o n & water fee (e) s o l i d set s o l i d s e t 14 14 168.00 168.00 1.50 3.00 70.00 3 * . 99 Bin d i s t r i b u t i o n t r a c t o r 35hp backfork 1 5.60 6.72 H a r v e s t i n g / p i c k i n g t e c h a n i c a l l a d d e r , bags ladders p i c k i n g sacks 1 1 6.00 440.00 595.3A Swaip t r a c t o r J5hp back f o r k 1 5.60 4.75 B i n l o a d i n g / h a n d l i n g t r a c t o r SOhp r e a r f r k s f r n t l d r I f r k s t r a c t o r M h p h i g h l i f t f o r k 1 1 5.34 5.60 6.40 6.72 Custoa h a u l i n q 40 b i n s ^ 8 . 7 5 b i n s 1 140.00 148.8t Cleanup t r a c t o r 3Shp t r a i l e r 1 0.50 0.60 Rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 2.90 20.37 Gopher c o n t r o l t r a c t o r AOhp gopher eachine 1 0.25 0.30 5.A1 Transp. use of pickup pickup 1/2 ton pickup 1/2 ton 8.60 10.00 10.32 12.00 Hi s c . use of t r a i l e r t r a c t o r Mhp t r a i l e r 6.50 6.40 SOURCES: ( a ) B.C.M.A.F. ' E s t i m a t e d C o s t s a n d R e t u r n s : A p p l e O r c h a r d E s t a b l i s h m e n t a n d P r o d u c t i o n . ' S t u d y Ho. 266, May 1984. l b ! C o a p i l e d f r o a H i n a a n , H . R . i H u n t e r , R. E . ; a n d T u k e y , R. B. "1985 C o s t o f E s t a b l i s h i n g An A p p l e O r c h a r d C o l u m b i a B a s i n , H a s h i n g t o n . ' C o l l e g e o f A g r i c u l t u r e , H a s h i n g t o n S t a t e U n i v e r s i t y , P u l l a a n , H a s h i n g t o n E x t e n s i o n B u l l e t i n 0960, J a n u a r y , 1985. ( c ) L a b o u r h o u r s p e r a c r e = e a c h i n e h o u r s p e r a c r e • 1.2 !d) T h e e x c h a n g e rate,- 1 9 8 4 a o n t h l y n o o n a v e r a g e , i s 1.22 C a n t p e r U S t . ( e l An e s t i t a t e p r o v i d e d b y T e d H . Van d e r B u l i k , A g r i c u l t u r a l E n g i n e e r , B.C.M.A.F. TABLE 17 MANAGEMENT SCHEDULE FOR MATURE TREES, B.C. AND NASHINGTON STATE OPEP-ATIONIa.bt MACHINE USED B . C . ( a ) NASH.(b) TIMES USED PER ACRE B . C . ( a ) NASH.(bl MACHINE HOURS PER ACRE B.C(a) NASH.(b) LABOUR HOURS PER ACRE B . C . ( a , c ) H A S H . ! b ! SERVICE/ MATR-AL :OST PER ACRE B . C . (a) MASH.f.bi Cant Cant (d) 1984 1994 Pruning & t r a i n i n g • e c h a n i c a l l a d d e r , power prunpr hand labour pruning t o o l s 1 1 17.78 33.67 86.50 F e r t i l i z e r a p p l i c a t i o n t r a c t o r SOhp f e r t . spreader t r a c t o r 35hp f e r t . spreader 2 1 0.43 0 . 2 5 0.52 0.30 34.35 42.70 Cover spray t r a c t o r oOhp b l a s t sprayer 2 O.BO 0.96 29.77 Prepink spray t r a c t o r 60hp b l a s t sprayer 1 0 . 4 0 0.48 21.37 p o l l i n a t i o n 1 1 36.00 49.41 Thin spray (growth reg) t r a c t o r SOhp o r c h . sprayer t r a c t o r Mhp b l a s t sprayer 1 2 1.20 0 . 8 0 1.44 0.94 44.82 15.81 Hand t h i n n i n g hand labour hand labour l a d d e r s 1 1 34.00 46.29 Nutrient a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 3 3 . 6 0 4.32 37.98 H e r b i c i d e a p p l i c a t i o n t r a c t o r SOhp M t d sprayer t r a c t o r 35hp need sprayer 3 n L 3.60 0 . 6 6 4.32 O.BO 2B.21 15. B l I n s e c t i c i d e a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer t r a c t o r 60hp b l a s t sprayer 7 1 8.40 0 . 4 0 10.08 0.48 137.40 17.76 Fungicide a p p l i c a t i o n t r a c t o r SOhp o r c h . sprayer 2 2.40 2.88 19.04 Boron 25 l b s every 3rd yr t r a c t o r SOhp f e r t . spreader 1 0.08 0.10 4 . 0 3 Mowing t r a c t o r SOhp •oner 80in t r a c t o r 60hp •oner 108in 4 3 3.20 1.50 3.84 1.B0 I r r i g a t i o n ( water f e e (e) s o l i d set s o l i d s e t 14 14 168.00 168.00 1.50 3.00 70.00 34.99 Bin d i s t r i b u t i o n t r a c t o r 35hp backfork 1 6 . 0 0 7.20 H a r v e s t i n g / p i c k i n g • e c h a n i c a l l a d d e r , bags p i c k i n g sacks 1 1 9.30 522.50 732.00 Swaap t r a c t o r 33hp back f o r k 1 4.M - o n Bin l o a d i n g / h a n d l i n g t r a c t o r 50hp r e a r f r k s f m t l d r & f r k s t r a c t o r 60hp t h i g h l i f t f o r k 1 1 5.34 6 . 0 0 6.40 7.20 Custom h a u l i n g 4 7 . 5 b i n s 60 b i n s 1 1 166.25 183.00 Cleanup t r a c t o r 35hp t r a i l e r 1 0 . 5 0 0.60 Rodent c o n t r o l hand labour custoa a e r i a l 1 1 0.40 2.90 20.37 Gonher c o n t r o l t r a c t o r 60hp gopher eachine I 0 . 2 5 0.30 5.61 Transp. use of pickup pickup 1/2 ton pickup 1/2 ton 8.60 10.00 10.32 12.00 M i s c . use of t r a i l e r t r a c t o r 60hp t r a i l e r 0.56 0.60 SOURCES: (a) B . C . H . A . F . "Estimated Costs and Returns: Apple Orchard Establishment and P r o d u c t i o n . ' Study No. 266, May 19B4. (b) Compiled from Hinaan, H.R.J Hunter, R. E . : and Tukey, R. B. M985 Cost of E s t a b l i s h i n g An Apple Orchard Columbia B a s i n , N a s h i n g t o n . ' College of A g r i c u l t u r e , Nashington State U n i v e r s i t y , Pullman, Nashington Extension B u l l e t i n 0960, January, 1985. (c) Labour hours per acre = machine hours per acre * 1.2 (d) The exchange r a t e , 1984 monthly noon average, i s 1.22 Cant per US*. (el An estimate provided by Ted N. Van der 6 u l i k , A g r i c u l t u r a l Engineer, B . C . H . A . F . 58 machine hours s p e c i f i e d i n the B.C.M.A.F. s t u d y . With the new e s t i m a t e d machine h o u r s , l a b o u r hours a r e d e r i v e d by m u l t i p l y i n g the machine hours by 1.2 t o r e f l e c t time r e q u i r e d t o a d j u s t implements. T h i s i s a method employed i n the Washington S t a t e s t u d i e s . For hand o p e r a t i o n s , l a b o u r hours a r e the same as those i n the B.C. s t u d y . In the case of Washington S t a t e , the o p e r a t i o n s / p r a c t i c e s , machine used, machine hours and s e r v i c e / m a t e r i a l c o s t a re c o m p i l e d from v a r i o u s e x i s t i n g a p p l e o r c h a r d s t u d i e s (Hinman, Hunter, and Tukey, 1981, 1982, 1985) f o r t r e e s age 1 t o 5 and mature. A c c o r d i n g t o th e s e s t u d i e s , the i n f o r m a t i o n was o b t a i n e d from meetings w i t h e x p e r i e n c e d f r u i t g rowers, e x t e n s i o n agents and h o r t i c u l t u r a l i s t s . Management p r a c t i c e s f o r t r e e s age 6 th r o u g h 8 are d e r i v e d from management p r a c t i c e s s et out f o r year 5 and mature t r e e s . The machine hours and m a t e r i a l / s e r v i c e c o s t f o r f e r t i l i z e r a p p l i c a t i o n , c o v e r s p r a y , p r e p i n k s p r a y , h e r b i c i d e a p p l i c a t i o n , i n s e c t i c i d e a p p l i c a t i o n , mowing, i r r i g a t i o n , c h e m i c a l t h i n n i n g , and rodent and gopher c o n t r o l a r e assumed t o be the same as f o r year 5 and mature t r e e s . A d j u s t m e n t s a r e made t o l a b o u r and machine hours r e q u i r e d t o prune and t r a i n t r e e s , t h i n t r e e s , and h a r v e s t f r u i t by a p p l y i n g a c o n s t a n t l i n e a r growth r a t e c a l c u l a t e d by t a k i n g the d i f f e r e n c e between year 5 and mature hour r e q u i r e m e n t s and d i v i d i n g by the number of y e a r s between 5 and mature. P r u n i n g time i s assumed t o peak i n year 8; hence, the hours r e q u i r e d t o prune and t r a i n w i l l be 59 the same f o r mature and year 8 t r e e s . 1 5 B i n h a n d l i n g hours and h a r v e s t i n g c o s t s a re a d j u s t e d a c c o r d i n g t o the i n c r e a s e i n the number of b i n s h a r v e s t e d . A g a i n , l a b o u r hours are e s t i m a t e d by m u l t i p l y i n g the machine hours by a f a c t o r of 1.2. 3.2.2.1 E s t i m a t i n g Ownership and O p e r a t i n g C o s t s A s i d e from l a n d and t r e e s , an o r c h a r d i s t must i n v e s t a l a r g e amount on c a p i t a l a s s e t s t h a t are r e q u i r e d t o m a i n t a i n an o r c h a r d . These c a p i t a l i n v e s t m e n t s w i l l i n c l u d e t r a c t o r ( s ) , implements, b u i l d i n g s , v e h i c l e s and v a r i o u s o t h e r equipment. C o n s e q u e n t l y , every o r c h a r d i s t i n c u r s some c o s t s a s s o c i a t e d w i t h these c a p i t a l i n v e s t m e n t s . Two common c a t e g o r i e s of a s s e t c o s t s a r e ownership and o p e r a t i n g c o s t s . Ownership c o s t s a r e c o s t s a s s o c i a t e d w i t h owning the a s s e t s . These i n c l u d e d e p r e c i a t i o n c o s t ; o p p o r t u n i t y / i n t e r e s t c o s t on i n v e s t m e n t , i n s u r a n c e c o s t , p r o p e r t y t a x e s , s a l e s t a x e s and h o u s i n g c o s t . O p e r a t i n g c o s t s a r e c o s t s a s s o c i a t e d w i t h u t i l i z a t i o n of a machine. These i n c l u d e r e p a i r and ma i n t e n a n c e , f u e l 1 5 C o n v e r s a t i o n w i t h Brooke P e t e r s o n , Yakima County E x t e n s i o n Agent, i n d i c a t e d t h a t p r u n i n g peaks b e f o r e f u l l p r o d u c t i o n o c c u r s . 60 c o s t , l u b r i c a n t c o s t and l a b o u r c o s t a s s o c i a t e d w i t h o p e r a t i n g the machine. An a c c u r a t e economic e s t i m a t e of p r o d u c t i o n c o s t s r e q u i r e s the i n c l u s i o n of both c a t e g o r i e s of c o s t . Having d e f i n e d a s e t of c a p i t a l a s s e t s f o r each o r c h a r d p r e v i o u s l y , i t i s i m p o r t a n t t o choose a s t a n d a r d method t o c a l c u l a t e ownership and o p e r a t i n g c o s t s . As i n d i c a t e d i n the l i t e r a t u r e r e v i e w s e c t i o n , the c a p i t a l b u d g e t i n g approach appears t o be the most a p p r o p r i a t e . The most i m p o r t a n t c a t e g o r i e s of ownership c o s t a r e d e p r e c i a t i o n and o p p o r t u n i t y c o s t . To c a l c u l a t e t h e s e c o s t s , an e s t i m a t e of a machine's s a l v a g e / r e m a i n i n g v a l u e has t o be o b t a i n e d f i r s t . For machinery and implements, t h i s i s d e r i v e d u s i n g e q u a t i o n ( 5 ) . A complete s e t of v a r i a b l e d e f i n i t i o n s i s d e f i n e d i n Appendix B. (5) SV i ( t ) = RFVK * (RFV2 i ) t * RV i The a n n u a l s a l v a g e v a l u e of a machine or implement i n year t (SV^ ( t ) ) i s e s t i m a t e d as a p r o d u c t of i t s replacement v a l u e (RV ^ )and an i n i t i a l s a l v a g e f a c t o r (RFV1^ ) m u l t i p l i e d by a second s a l v a g e f a c t o r taken t o the power of the year i n which the s a l v a g e v a l u e i s c a l c u l a t e d , (RFV2^ ) f c . One minus th e s a l v a g e f a c t o r s , RFV1 and RFV2, a r e the r a t e s a t which a machine or p i e c e of equipment i s d e p r e c i a t e d i n y e a r 1 and t h e r e a f t e r , 61 r e s p e c t i v e l y . With the e x c e p t i o n of t r a c t o r s , the same f a c t o r s a r e used f o r s i m i l a r machines i n the two r e p r e s e n t a t i v e o r c h a r d s . These f a c t o r s a r e averages p u b l i s h e d i n the A g r i c u l t u r a l E n g i n e e r i n g Yearbook. They ar e a l s o used i n Washington S t a t e ' s c o s t of p r o d u c t i o n s t u d i e s (Hinman, Hunter, and Tukey, 1981, 1982, 1985). For the B.C. o r c h a r d , the t r a c t o r i s d e p r e c i a t e d at an i n i t i a l r a t e of 14.2 p e r c e n t ( M c N e i l l ) and a l i n e a r d e p r e c i a t i o n r a t e of 20 p e r c e n t t h e r e a f t e r . In c o n t r a s t , the t r a c t o r s i n Washington S t a t e a r e d e p r e c i a t e d a t the r a t e s of 32 and 8 p e r c e n t , r e s p e c t i v e l y . The lower d e p r e c i a t i o n r a t e s a p p l i e d t o the B.C. t r a c t o r r e f l e c t lower t o t a l hours used over the machine's l i f e . S i n c e no common e s t i m a t e d s a l v a g e f a c t o r s e x i s t f o r d e p r e c i a t i n g s m a l l equipment and b u i l d i n g s , a s t r a i g h t l i n e method, e q u a t i o n ( 6 ) , has been employed. In most c a s e s , a 10 p e r c e n t s a l v a g e v a l u e i s assumed at year T, the replacement year ( i . e . SV^ (T) = .1 * R\T ). (6) SV i ( t ) = {RV i - SV i (T)} / T To e l i m i n a t e i n f l a t i o n a r y f a c t o r s , c u r r e n t machinery p r i c e s a r e used as replacement v a l u e s (RV ^ ). Annual d e p r e c i a t i o n c o s t of machine i (D^ ) i s o b t a i n e d by m u l t i p l y i n g the net p r e s e n t v a l u e of the s a l v a g e v a l u e s over the machine's l i f e , L£=] (SV. ( t - 1 ) - S V i ( t ) / ( 1 + r ) f c 62 , by an a m o r t i z a t i o n f a c t o r ( a ( r , T ) ) which i s a f u n c t i o n of the d i s c o u n t r a t e ( r ) and the replacement year ( T ) . T (7) D. = {I (SV. ( t - 1 ) - SV. ( t ) ) / ( l + r ) f c } * t=1 a ( r , T ) O p p o r t u n i t y c o s t (OC^ ) i s d e r i v e d i n a s i m i l a r manner T (8) OC. = {I r * SV. ( t - 1 ) / ( 1 + r ) t } * a ( r , T ) 1 t=1 1 A r e a l d i s c o u n t r a t e of 6 p e r c e n t i s used f o r B.C. ( J e n k i n s ) and 5 p e r c e n t f o r Washington S t a t e . The one p e r c e n t d i f f e r e n c e comes from ob s e r v e d d i f f e r e n c e s i n market i n t e r e s t r a t e s and i n f l a t i o n a r y r a t e s . A n nual i n s u r a n c e (I ^ ), h o u s i n g (0^ ), p r o p e r t y t a x e s and s a l e s t a x e s (P^ + S^ ) are c a l c u l a t e d u s i n g s i m i l a r e q u a t i o n s . In each c a s e , the c o s t i s assumed t o be a c e r t a i n p e r c e n t of the replacement v a l u e (RV^ ). To c a l c u l a t e the i n d i v i d u a l c o s t s , a n n u a l c o s t s a r e d i s c o u n t e d and summed over the l i f e of the machine and m u l t i p l i e d by an a m o r t i z a t i o n f a c t o r ( a ( r , T ) ) , as i n e q u a t i o n s (9) t o ( 1 1 ) . 63 (9) Ii = [ l f = 1 {(RV i * 0.0025) / (\+r)t }] * a ( r , T ) T (10) 0. = [Z {(RV. * 0.0075) / O + r ) * }] * a ( r , T ) 1 t=1 1 T (11) P. + S. = [ I {(RV. * 0.01) / O + r ) * }] * 1 1 t=1 1 a ( r , T ) The assumed p e r c e n t a g e s (0.0025, 0.0075, and 0.01 f o r i n s u r a n c e , h o u s i n g , and p r o p e r t y and s a l e s t a x e s ) a r e t h o s e s u g g e s t e d i n the A g r i c u l t u r a l E n g i n e e r i n g Yearbook. However, s i n c e a l l farm machines a r e exempted from s a l e s t a x i n B.C., t h i s c o s t has not been i n c l u d e d . Hence, f o r B.C., e q u a t i o n (11) reduces t o The p e r c e n t a p p l i e d (0.005) i s an e s t i m a t e d v a l u e . In k e e p i n g w i t h the measurement of time r e q u i r e d t o c o m p l e t e an o p e r a t i o n , a l l the c a t e g o r i e s of ownership c o s t a r e c a l c u l a t e d on a per hour b a s i s . The per hour c o s t of a machine or implement i s o b t a i n e d by d i v i d i n g (12) P i = [ Z t = i * ( R v i * 0-005) / (1+r) f c }] * a ( r , T ) 64 each annua l c o s t by the hours used per y e a r , h. For s m a l l equipment and b u i l d i n g s , the c o s t s a re e s t i m a t e d as a n n u a l c o s t s . The main sou r c e of o p e r a t i n g c o s t comes from annu a l r e p a i r and maintenance (R&M) of machines and implements. These c o s t s a r e o b t a i n e d from the f o l l o w i n g e q u a t i o n . H (13) R&M. ( t ) = { I (CRC- (H) - CRC (H-1)) / 1 h=1 1 1 ( l + r ) f c } * a ( r , T ) where RF3. (14) CRC i (H) = RV i *RF1. * RF2. * (KL /1000) 1 Annual R&M i s e s t i m a t e d by m u l t i p l y i n g the net p r e s e n t v a l u e of the c u m u l a t i v e r e p a i r c o s t s over l i f e of machine or implement, L^=] (CRC i (H)-CRC i ( H - 1 ) ) / ( 1 + r ) t , by an a m o r t i z a t i o n f a c t o r ( a ( r , T ) ) . Annual c u m u l a t i v e r e p a i r and maintenance (CRC ^ (H)) i s a f u n c t i o n of replacement v a l u e (RV^ ), the assumed r e p a i r r a t e s (RF1, RF2, and RF3) and the c u m u l a t i v e hours of use (H) d i v i d e d by 1000. A g a i n , the RF1, RF2 and RF3 v a l u e s a r e assumed t o be t h e same f o r s i m i l a r machines i n both r e g i o n s ( i . e . same r e p a i r c u r v e ) . The v a l u e s used a r e averag e s l i s t e d i n the A g r i c u l t u r a l E n g i n e e r i n g 65 Yearbook. F or t r a c t o r s , as shown i n e q u a t i o n ( 1 5 ) , annual f u e l c o s t s (F1. ) a r e o b t a i n e d by m u l t i p l y i n g the number of horsepower of a machine (hp) by a f u e l consumption f a c t o r (m) and a per u n i t f u e l c o s t ( f ) . (15) F 1 i = h p * m * f For p i c k u p s , e q u a t i o n (16) i s employed t o c a l c u l a t e f u e l c o s t s . (16) F 2 i = (RV i / 1000) * m * f Except f o r machines w i t h power, l u b r i c a n t c o s t s a r e i n c l u d e d i n R&M. O t h e r w i s e , a n n u a l l u b r i c a n t c o s t s (L^ ) ar e e s t i m a t e d as 15 p e r c e n t of f u e l c o s t (F1• ). (17) L i = 0.15 * F U A l t e r n a t i v e l y , (18) L i = 0.15 * F 2 i 15 p e r c e n t i s the v a l u e suggested by the A g r i c u l t u r a l E n g i n e e r i n g Yearbook. The sum of e q u a t i o n s (9) through (13) p r o v i d e s t o t a l a n n u a l o p e r a t i n g c o s t s f o r i n d i v i d u a l machines or implements. No annual o p e r a t i n g 66 c o s t s a r e e s t i m a t e d f o r s m a l l equipment and b u i l d i n g s . As i n the 1985 o r c h a r d study (Hinman, Hunter, and Tukey), a" l a b o u r c o s t of §7.06. Canadian per hour i s a p p l i e d t o Washington S t a t e f o r o p e r a t i o n s r e q u i r i n g a l a b o u r e r . A l a b o u r c o s t of $8 per hour i s a p p l i e d t o a l l l a b o u r i n B.C. A g a i n , the per hour c o s t s a r e o b t a i n e d by d i v i d i n g the annua l c o s t s by hours used a n n u a l l y , h. 3.2.3 PRODUCTION COST SCHEDULES A set of management s c h e d u l e s i n d i c a t i n g machine and l a b o u r hours r e q u i r e d per o p e r a t i o n per a c r e has been e s t a b l i s h e d above. In a d d i t i o n , the c a t e g o r i e s of ownership and o p e r a t i n g c o s t f o r each c a p i t a l a s s e t , on a per hour b a s i s , have been c a l c u l a t e d . By combining th e s e two s e t s of e s t a b l i s h e d i n f o r m a t i o n , a new s e t of s c h e d u l e s , p r o d u c t i o n c o s t s c h e d u l e s , i s d e r i v e d . The p r o d u c t i o n c o s t s c h e d u l e s a r e p r e s e n t e d i n T a b l e s 18 t o 26. Each p r o d u c t i o n c o s t s c h e d u l e i n d i c a t e s the o p p o r t u n i t y c o s t , d e p r e c i a t i o n c o s t , i n s u r a n c e c o s t , h o u s i n g c o s t , p r o p e r t y and s a l e s t a x e s , r e p a i r and maintenance c o s t , f u e l and l u b r i c a n t c o s t , l a b o u r c o s t and s e r v i c e / m a t e r i a l c o s t per o p e r a t i o n per a c r e and by age of t r e e s . Except f o r l a b o u r and s e r v i c e / m a t e r i a l TABLE 18 PRQDUCTIGN COST SCHEDULE OF TREES IN F I R S T YEAR ESTABLISHMENT STAGE, B.C. AND NASHINGTON STATE,- PER ACRE OPERATION 1 E P R E C I A T I O N 3PP0RTUNITY NS, PROP, S A L E S R I H COST FUEL I LUB LABOUR COST MATERIAL/ TOTAL COST COST COST \ HOUSING COST COST S E R V I C E COST B.C. NASH. B.C. NASH. B.C NASH. B.C. NASH. B.C NASH. B.C. NASH. B.C HASH. B.C. HASH. Can » C a n % Can $ Can t Can t C a n % Can % Can » Can $ Can t Can % Can % Can S C a n * Can $ Can » • 1984 19B4 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 19B4 19B4 1984 T r e e & R o o t R e a o v a l 3 8 4 . 0 0 33B.B8 250.00 2 5 0 . 0 0 6 3 4 . 0 0 588.88 G r o u n d P r e p a r a t i o n 292.21 146.72 121.52 1.51 0.50 26.88 5.93 20.74 589.34 26.67 L a y o u t / s t a k i n g 4 s t a k e s 6 4.00 10.59 0.12 64.00 10.71 P l a n t t r e e s 2 5 5 . 6 9 122.36 88.45 2.53 0.97 238.08 43.77 1131.00 1476.81 1839.09 1520.58 fouling p l a n t s 6.08 2.64 2.75 0.14 0.13 7.06 IB.BO F e r t i l i z e r A p p l i c a t i o n 2.16 7.06 5.73 114.44 7.89 121.50 H a n d s s e d S . 4 k q f e s c u e s i x 4.00 3 0 . 0 0 34.00 H e e d i n g hand h o e i n g 80.64 80.64 B u a c e r t r a i n i n g tt p r u n i n q 2 6 . 8 8 7.87 34.75 s o w i n g 25.6B 46.58 10.13 24.27 7.42 25.88 0.94 1.56 0.29 0.10 15.36 10.59 59.82 10B.97 N u t r i e n t A p p l i c a t i o n 11.57 4.40 3.08 0.38 0.14 7.68 24.51 51.76 T h i o d a n 6 oz 3.82 1.45 1.02 0.13 0.05 2.53 2.52 11.51 b c r o n 25 l b s 4.00 1.64 1.17 0.09 0.04 2.07 12.10 21.12 H e r b i c i d e A p p l i c a t i o n 14.23 7.96 7.79 0.47 0.04 4.66 17.25 52.41 I r r i g a t i o n \ w a t e r l e e 137.76 3 3 0 . 9 6 131.04 199.92 26.88 94.08 35.28 69.55 0.00 0.26 12.00 21.18 70.00 3 4 . 9 ? 4 1 2 . 9 6 750.94 h o u s e g u a r d 3.20 110.40 113.60 R o d e n t c o n t r o l 3.20 2.29 20.37 5.49 20.37 G o o h e r c o n t r o l 8.03 4.16 4.66 0.18 0.02 1.77 5.61 24.42 Use o f p i c k u p 5 9 . 7 7 5 4 . 7 2 31.13 23.76 22.70 24.75 0.74 1.24 9.12 1.20 82.56 63.54 2 0 6 . 0 2 169.21 s t a l l t o o l s \ e q u i p a e n t 2 3 . 5 2 26 . 9 9 10.16 5.08 4.90 3.56 38.58 35.63 P r u n i n g t o o l s 0.56 0.07 0.06 0.69 P i c k i n g s a c k s I l a d d e r s 18.28 0.31 1.37 0.05 0.72 0.05 20.37 0.41 l a c h i n e s h e d 5 7 . 4 8 23.18 5 0 . 7 9 40.31 10.06 8.87 118,33 72,36 P i c k e r s ' c a b i n 9 5 . 7 9 8 4 . 6 5 16.77 197.21 S u b t o t a l 9 8 5 . 5 6 5 1 1 . 6 3 5 9 5 . 8 5 308.22 304.69 172.45 41.60 73.14 11.11 1.75 9 5 5 . 2 5 5 1 5 . 0 3 1646.42 1940.34 4540.48 3522.56 Tax on l a n d . 3 0.00 26.84 tent on l a n d 154.88 311.13 O v e r h e a d c o s t 132.72 126.51 I n t e r e s t on o p e r a t i n g c a p i t a 1 159.26 139.16 TOTAL COST PER ACRE 5017.34 4126.21 TABLE 19 PRODUCTION COST SCHEDULE FDR TREES IN YEAR 2 ESTABLISHMENT STABC, B . C . AND WASHINGTON STATE, PER ACRE OPERATION lEPRECIATION OPPORTUNITY INS, PROP, SALES R 1 M COST FUEL 1 LUB LABOUR COST MATERIAL/ TOTAL COST COST COST 1 HOUSING COST COST SERVICE COST B.C. NASH. B . C . NASH. e.c HASH. B.C. NASH. 8.C HASH. B . C . NASH. B.C NASH. B.C. HASH. Can t Can t Can 1 Can 1 Can 1 Can « Can % Can 0 Can 1 Can 1 Can f Can 1 Can 1 Can » Can 1 Can t 19B4 1984 1984 1984 19B4 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 R e p l a n t i n g 8 51 I plant 21.37 11.97 12.29 0.72 0.07 6 . 0 0 22.59 56.56 175.68 62.56 244.69 p o l l e n i z e r s Haul I water p l a n t s 6.08 ft 2.44 M S 6.14 6.13 8.47 20.21 Pruning t t r a i n i n g 53.B4 35.30 24.03 77.87 Disc 2.82 1.76 1.60 0.14 0.01 1.69 6.10 14.14 Seed grass 3.53 2.21 2.01 0.18 0 . 0 2 2.12 13.58 23.63 F e r t . a p p l i c a t i o n e.oo 14.61 3.29 7.02 2.33 7 . 6 5 0 . 2 3 0.18 0.54 0 . 0 2 4 . 1 5 2.12 17.23 25.62 35,-75 57.21 N u t r i e n t a p p l i c a t i o n 11.57 4.40 3.08 0 . 3 8 0.14 7 .68 24.51 51.76 H e r b i c i d e a p p l i c a t i o n 44.0& 14.23 15.62 7.96 10.80 7.79 1.58 0.47 6.65 0.04 34.56 5 . 6 5 2B.2I 17.25 135.48 53.40 Aphid c o n t r o l 3 . 8 2 1.45 1.02 6.13 0 . 0 3 2.53 LSL 20.30 11.51 20.30 Hoeing 51.36 46.58 20.26 51.78 14.85 25.8B l . B B 1.56 0.5B 0.10 30.72 14.40 119.64 140.28 I r r i g a t i o n & water l e e 157.76 330.96 131.04 199.92 26.88 94.08 35.28 69.55 0.00 0.26 12.00 21.18 70.00 34.99 412.96 750.94 Rodent c o n t r o l 3.20 2.29 20.37 5.49 20.37 Gopher c o n t r o l 8.03 4.16 4 . 6 6 0.18 0.02 2.12 5.61 24.77 Transp. use o l pickup 59.77 54.72 31.13 23.76 22.70 24.75 0.74 1.24 9.12 ( , 2 0 82.56 86.40 206.02 192.07 s t a l l t o o l s & eguipeent 23.52 26.99 10.16 5.08 4.90 3 . 5 6 3B.5B 35.63 Pruninq t o o l s 0.56 0.07 0 . 0 6 0.69 P i c k i n q sacks 1 ladders 3 . 8 3 0.31 1.37 0.05 0.72 0 . 0 5 5.92 0.41 Machine shed 57.48 23.18 50.79 40.31 10.06 8.87 118.33 72.36 P i c k e r s ' c a b i n 95.79 84.65 16.77 197.21 Subtotal 496.96 553.96 354.16 358.69 114.11 195.99 40.20 74.36 11.07 1.87 237.24 202.04 225.35 319.51 1479.09 1671,j? Tax on land 30.00 46.36 Rent on land 154.88 311.13 Overhead cost 25.69 29.89 I n t e r e s t on operating c a p i t a 30.83 32.88 TOTAL COST PER ACRE 1720.49 2091.37 T A B L E 20 PRODUCTION COST SCHEDULE FOR TREES IH YEAR 3 ESTABLISHMENT STAGE, B . C . AND NASHIN6TDN STATE, PER ACRE OPERATION DEPRECIATION OPPORTUNITY INS, PROP, SALES R I N COST FUEL 6 LUB LABOUR COST WTERIAL/ TOTAL COST COST COST t HOUSING COST COST SERVICE COST B . C . NASH. B.C. IASH. B.C NASH. B . C . NASH. B.C HASH. B.C. NASH. B.C NASH. B . C . NASH. Can * Can t Can 1 Can 1 Can 1 Can $ Can i Can t Can 1 Can t Can % C m t Can t Can t Can t Can 0 1984 1984 1984 1984 1984 1984 1984 1984 1704 I9B4 1984 1984 1984 1984 1984 1984 Pruning 1 t r a i n i n g 47.36 10f,43. 13.91 80.32 ' 83.27 189.93 F e r t i l i z e r a p p l i c a t i o n B.00 14.61 3.29 7.02 2.33 7 .65 0.19 0.18 0.08 0.02 4.15 2 , t ? 22.90 25.62 40.93 57.21 Dorsant o i l 2 gal 17.35 6 ; * ) 4.62 0.57 0.22 11.52 7 .80 48.68 F r u i t r e t o v a l 7.06 Nutrient a p p l i c a t i o n 28.92 11.00 7.70 0 . 9 5 0.36 19.20 33.94 122.07 H e r b i c i d e a p p l i c a t i o n 44.06 21.34 15.62 11.94 10.80 11.69 1.58 0.71 0 . 6 5 0.07 34.56 8,47 28.21 28.31 135.48 8 2 . t t Aphid c o n t r o l 3.23 1.15 0.79 0.13 0 . 0 3 2.53 5 . 0 3 22.74 12.93 22.74 P l i c t m 4 oz 17.35 6.60 4.62 0.57 0 . 2 2 11.32 6 . 0 3 46.93 Hotting 51.36 46.58 20.26 24.27 14.B5 25.88 1.88 1.56 0.58 0.10 30.72 12.71 119.44 111.08 I r r i g a t i o n 4 water fee 137.76 330.96 131.04 199.92 26.B8 94.08 35.28 69.55 0 . 0 0 0,74 12.00 21.11 70.00 3 4 . 9 * 412.94 750.94 Rodsnt c o n t r o l 3.20 2.29 20.37 3.49 20.37 Gopher c o n t r o l 8.03 4.16 4.66 0.18 0.02 2.12 5.61 2 4 . ) / Transp. use at pickup 59.77 60.80 31.13 26.40 22.70 27.50 0.74 1.38 9.12 1.33 82.36 84,72 206.02 202.13 s t a l l t o o l s i eTOIDtent 23.52 26.99 10,16 5 . 0 8 4.90 3.36 38.58 35.63 Pruning t o o l s 0.56 0.07 0.06 0.00 0.69 P i c k i n q sacks 1 ladders 3.83 0.31 1.37 0 . 0 5 0.72 0.05 5.92 0.41 Machine shed 57.48 23.18 30.79 40.31 10.06 8.87 118.33 72.36 P i c k e r s ' cabin 95.79 84.65 16.77 197.21 Subtotal 548.43 533.35 373.66 319.22 127.75 183.99 41.88 73.36 11.26 1.79 279.32 247.Bl 212.13 218.37 1594.43 1371.03 Tax an land 30.00 46.36 Rent on land 154.88 311.13 Overhead cost 27.23 27.08 Interest on operating c a p i t a 32.68 29.78 TOTAL COST PER ACRE 1839.22 1985.38 TABLE 21 PRODUCTION COST SCHEDULE FOR TREES III YEAR 4 ESTABLISHMENT AND FIRST PARTIAL CMP STAGE, I . C . AW NASHIN6T0N STATE, PER ACRE OPERATION DEPRECIATION OPPORTUNITY IRS, PROP, SALES R t N COST m V LOB L M O M COST MATERIAL/ TOTAL COST COST COST t HOUSING COST COST SERVICE COST I . C . HASH. I . C . NASH* I . C NASH. B . C . IM6H* I . C NASH. B . C . NASH. B.C HASH. B . C . HASH. Can ( Can f Can 1 Can t Can 1 Can f Can « Can « Can % Can t Can 1 Can 1 Can 1 Can $ Can t Can 1 1984 1984 1984 1984 1984 1984 1984 1984 1*84 1984 1984 1984 1984 1984 1984 1984 Pruning t t r a i n i n g 80.10 187,0? 8 0 . 5 2 8 0 . 8 0 247.41 F e r t i l i z e r a p p l i c a t i o n 8 . 0 0 12.76 3.29 5.87 2 . 3 3 4 . 4 0 0.19 0.12 0.08 0.01 4 . 1 5 2.12 28.57 25.42 44.40 5 3 . 0 8 Cover spray 26.51 13.47 14.14 0 . 5 9 0 . 0 5 4.78 29.77 9 1 . 5 3 Prepink spray 13.26 4.84 7 .08 0 . 2 9 0 . 0 3 ? . B 2 21.37 54.49 F r u i t t h i n n i n g 24.94 58.81 24.94 N u t r i e n t a p p l i c a t i o n 52.06 19.80 13.84 1.71 0 . 4 5 34.54 37.98 140.42 H e r b i c i d e a o o l i c a t i o n 44.06 9.35 15.42 «•'! 10.80 5 . 0 2 1.58 0.47 0 . 4 5 0.04 34.54 5 . 4 5 28.21 15.81 135.48 41.24 I n s e c t i c i d e a p p l i c a t i o n 121.46 13.26 46.20 4.B4 32.34 7.0B 4.00 0 . 2 9 1.51 0 . 0 3 80.44 3 . 3 9 137.40 14.29 423.55 45.17 Fungicide a p p l i c a t i o n 34.70 13.20 9.24 1.14 0 . 4 3 23.04 19.04 100.80 Boron 25 l b s 4 . 0 0 1.64 1.17 0 . 0 9 8.04 2.07 12.07 21.09 Honing 51.36 46.58 20.26 24.27 14.85 25.88 1.88 1.54 8 . 5 8 8.10 30.72 12.71 119.44 111.08 I r r i g a t i o n 1 water fee 137.76 330.96 131.84 199.12 26. BB 94.08 35.21 4 9 . 5 5 8 . 0 0 0 . 2 4 12.00 21.11 70.00 3 4 . 9 9 412.94 730.94 H a r v e s t i n g / p i c k i n g 33.00 41.49 3 3 . 0 0 41.49 Bin h a u l i n g / h a n d l i n g 3.73 7 .09 1.46 2.12 1.11 4 . 0 3 0.11 0 . 3 4 0.04 0 . 0 3 2 . 3 0 4 . 2 4 8.75 17.87 Bin h a u l i n g 3.39 2.12 1.93 0 . 2 3 0 . 0 2 4.24 11.92 Custoa h a u l i n o 7.00 15.25 7 . 0 0 15.25 rodent c o n t r o l 3 . 2 0 2.29 20.37 5 . 4 9 20.37 Gopher c o n t r o l 8 . 0 3 4.14 4.44 0.18 0.02 2.12 5.41 24.77 Transp. use of pickup 59.77 60.80 31.13 24.40 22.71 27.50 0.74 1.38 9.12 1.33 82.54 84.72 204.02 202.13 M i s c . use of t r a i l e r 19.86 11.55 11.34 0.74 0.07 B.47 5 2 . 0 3 s t a l l t o o l s t equipment 23.52 26.99 10.16 5 . 0 8 4 . 9 0 3.54 38.58 3 5 . 4 3 Pruning t o o l s 0.56 8.07 0.04 0 . 4 9 P i c k i n g sacks 1 l a d d e r s 3 . 8 3 0.31 1.37 8 . 0 5 0.72 0 . 0 5 5 . 9 2 0.41 Machine shed 37.48 23. IB 50.79 <0,31 10.06 8.87 • 118.33 72.34 P i c k e r s ' c a b i n 95.79 8 4 . 6 3 14.77 197.21 Subtotal 697.53 602.87 430.41 354.17 147.73 221.90 44.71 75.77 13.09 1.99 417.54 404.33 375.54 325.09 2148.79 1927.30 Tan on land 30.00 44.34 Rent on land 154.BB 311.13 Overhead cost 42.45 40.34 I n t e r e s t on operating c a p i t a 51.18 44.39 TOTAL COST PER ACRE 2427.50 2369.54 TABLE 22 PRODUCTION C05T SCHEDULE FOR TREES IN YEAR 5 ESTABLISHMENT AND SECOND PARTIAL CROP STAGE, B . C . AND HASHINGTON STATE, PER ACRE OPERATION 9EPRECIATI0N OPPORTUNITY INS, PROP, SALES R I M COST FUEL 6 LUB LABOUR COST MATERIAL/ TOTAL COST COST COST 6 HOUSING COST COST SERVICE COST B.C. HASH. B.C. NASH. B.C NASH. B.C. . HASH. B.C NASH. B . C . NASH. B.C HASH. B.C. HASH. Can t Can % Can t Can 1 Can t Can t Can 1 Can 1 Can 1 Can t Can 1 Can t Can $ Can * Can t Can • 1984 1984 1984 1984 1984 19B4 19B4 1984 1984 1984 1984 1984 19B4 1984 I9B4 19B4 Pruning t t r i i n i n q 154.96 257.69 7.32 154.96 265.01 F e r t i l i z e r a p p l i c a t i o n 8 . 0 0 12.76 3.29 5.87 2.33 6 . 6 0 0.19 0.12 0.08 0.01 4.15 2.12 28.62 42.70 46.65 70.16 Cover spray 26.51 13.67 14.16 0.59 0.05 6.78 29.77 91.53 Prepink spray 13.26 6.B4 7.08 0.29 0 . 0 3 3.39 21.37 52.23 P o l l i n a t i o n 36.00 49.41 36.00 49.41 F r u i t t h i n n i n g 26.51 13.67 14.16 0.59 0.05 BO. 80 6.78 15.B1 80.80 77.57 N u t r i e n t a p p l i c a t i o n 52.06 .i k 19.80 13.86 1.71 0.63 34.56 37.98 160.62 H e r b i c i d e a p p l i c a t i o n 44.06 9.33 15.62 4.91 10. BO 5.02 1.58 0.47 0.63 0.04 34.56 5.65 2B.21 15.81 135.4B 41.26 I n s e c t i c i d e a p p l i c a t i o n 121.46 13.26 46.20 6.B4 32.34 7 .08 3.6B 0.29 1.51 0.03 80.64 3.39 137.40 17.76 423.24 48.64 F u n g i c i d e a p p l i c a t i o n 34.70 13.20 9.24 1.05 0.43 23.04 19.04 100.71 Honing 171.33 46.58 70.53 24.27 7B.14 25.88 30.02 1.56 8.86 0.10 30.72 12.71 389.60 111.08 I r r i q a t i o n & Mater fee 137.76 330.96 131.04 199.92 26. B8 94.08 35.28 69.55 0.00 0.26 12.00 21.IB 70.00 34.99 412.96 750.94 H e r v e s t i nq/pickina 110.00 183.00 110.00 183.00 B i n d i s t r i b u t i o n / 25.99 20.34 10.14 12.69 7.72 11.55 0.75 1.40 0.30 0.10 16.03 25.42 60.92 71,49 h a n d l i n g Load 54.84 31.89 30.39 2.20 0.20 25.42 144.93 Swaip 20.34 12.69 11.55 1.40 0.10 25.42 71.49 Custoa l i a u l i n q 35.00 45.75 35.00 45.75 Rodent c o n t r o l 3.20 2.29 20.37 5.49 20.37 Gopher c o n t r o l 8.03 4.16 4 . 6 6 0.18 0.02 2.12 5.61 24.77 Cleanup 6.23 3.47 3.58 0 . 2 5 0.02 4.24 17.77 Transp. use of pickup 59.77 3.04 31.13 1.32 22.70 1.38 0.74 1.3B 9.12 1.33 82.56 84,72 206.02 d i s c , use of t r a i l e r 9.93 3.78 1 6 8 0.37 0.03 4.24 26.03 s t a l l t o o l s t eouipient 23.52 26.99 10.16 3.08 4.90 3 . 5 6 39.58 35.63 Pruning t o o l s 0.56 0.07 0.06 0 . 6 9 P i c k i n g sacks t ladders 3.83 0.31 1.37 0.03 0.72 0.03 5.92 0.41 Machine shed 57.4B 23.18 50.79 40.31 10.06 8.87 IIB.33 72.36 P i c k e r s ' cabin 95.79 84.65 16.77 197.21 S u b t o t a l B35.75 65?,96 487.92 393.48 236.47 255.38 74.99 80.63 21.60 2.36 557.22 491.23 504.54 4B9.6B 27IB.4B 2365.73 Tax on land 30.00 46.36 Rent on laod 154.88 311.13 Overhead cost 57.92 53.20 I n t e r e s t on operating c a p i t a 69.50 5B.52 TOTAL COST PER ACRE 3030.76 2834.93 TABLE 23 PRODUCTION COST SCHEDULE FOR TREES IN YEAR 4 ESTABLISHMENT AND THIRI PARTIAL CROP STAGE, I . C . AMI NASHINGTON STATE, PER ACRE OPERATION DEPRECIATION OPPORTUNITY INS, PROP, SALES R t II COST FUEL I LUB LABOUR COST MATERIAL/ TOTAL COST COST COST 4 HOUSING COST COST SERVICE COST I . C . NASH. I . C . NASH. I . C HASH. I . C . HASH. I . C HASH. I . C . HASH. B.C HASH. B . C . HASH. Can l Can t Can 1 Can 1 Can t Can % CM t Can 1 Can t Can 1 Can t Can 1 Can % Can t Can 1 Can t 19B4 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 Pruning I t r a i n i n g ; 215.44 375.38 7.32 215.44 382.70 F e r t i l i z e r a p p l i c a t i o n 8 . 0 0 12.76 3.29 5.87 2 . 3 3 4 . 4 0 0 . 1 9 0.12 0.08 0.81 4.15 2.12 34.35 42.70 52.38 70.14 Cover i p r a y 26.51 13.47 14.14 0 . 5 9 0 . 0 5 4.78 29.77 9 1 . 5 3 Prepink spray 13.26 4 . 8 4 7 .08 0.29 0 . 0 3 3.39 21.37 5 2 . 2 5 P o l l i n a t i o n 36.00 49.41 36.00 49.41 F r u i t t h i n n i n o 2 M » 13.47 14.14 0 . 5 9 0 . 0 5 107.74 4.44 15.B1 107.76 77.43 N u t r i e n t a p p l i c a t i o n 52.06 19.80 13.84 1.71 0 . 6 5 34.56 37.98 160.62 H e r b i c i d e a p p l i c a t i o n 44.04 9.35 15.62 4.91 10.80 5 . 0 2 1.58 0.31 0.45 0 . 0 2 34.54 5 . 4 5 28.21 15.81 135.48 41.07 I n s e c t i c i d e a p p l i c a t i o n 102.82 13.26 36.46 4 . 8 4 25.20 7 . 0 8 4 . 0 0 0.29 1.51 0 . 0 3 80.64 3.39 137.40 17.76 388.02 48.44 Fungicide a p p l i c a t i o n 34.76 13.20 9.24 1.14 0 . 4 3 23.04 19.04 100.80 Honing 51.36 46.58 20.26 24.27 14.85 25.88 1.88 1.08 0.58 0 . 1 0 30.72 12.71 119.64 110.40 I r r i g a t i o n I water fee 137.76 330.96 131.04 199.92 24.88 94.08 35.28 6 9 . 5 5 , 0 . 0 0 0.24 12.00 21.18 70.00 34.99 412.96 750.94 H a r v e s t i n g / p i c k i n g 145.66 320.86 165.00 320.84 Bin d i s t r i b u t i o n / 51.81 47.87 20.21 24.44 15.38 26.09 1.49 2 . 0 5 0.40 0.14 31.97 37.28^ 121.47 139.88 handling Load 8 0 . 4 3 44.77 44.57 2 . 0 5 0.14 37.28 211.25 Swatp 29.83 18.41 16.94 3.22 0 . 2 9 37.28 104.17 Custoa h a u l i n g 70.00 BO. 22 70.00 8 0 . 2 2 Rodent c o n t r o l 3.20 2.90 20.37 6.10 2 0 . 3 7 Gopher c o n t r o l 8 . 0 3 4.14 4.44 0.18 0 . 0 2 7,1? 5.61 24.77 Cleanop 6.23 3.47 3 . 5 8 0 . 2 5 0 , 0 2 4 . J 4 17.77 Transp. use of pickup 59.77 60.80 31.13 24.40 22.70 27.50 0.74 1.38 9.12 1 .33 82.54 84.72 206.02 202.13 P i s e , use of t r a i l e r 9.93 5.78 5.48 0.37 0 . 0 3 4.24 2 4 . 0 3 s e a l l t o o l s 1 equipment 23.52 26.99 10.16 5 . 0 8 4 . 9 0 3 . 5 4 38.58 3 5 . 4 3 Pruning t o o l s 0.56 0 . 0 7 0 . 0 4 0 . 4 9 P i c V i n g sacks I ladders 18.28 0.31 7.61 0 . 0 3 3.72 0 . 0 5 29.61 0.41 Machine shed 57,18 23,10 M.71 40.31 10.04 8.87 118.33 7 2 . 3 4 P i c k e r s ' cabin 95.79 84.45 14.77 197.21 Subtotal 737.41 773.34 444.22 453.12 174.70 315.61 48.00 8 2 . 3 2 13.41 2.52 440.40 644.37 600.88 662.01 2681.41 2933.29 Tax on land 30.00 4 4 . 3 4 Rent on land 154.88 311.13 Overhead cost 66.15 4 9 . 5 4 I n t e r e s t on operating c a p i t a 79.38 7 4 . 5 2 TOTAL COST PER ACRE 3011.83 3434.84 —J TABLE 24 PRODUCTION COST SCHEDULE FOR TREES IN YEAR 7 ESTABIISHNENT AND FOURTH PARTIAL CROP STAB!, I . C . AND NASHINBTON STATE, PER ACRE OPERATION EPRECIATION fc PP0RTUNITT NS, PROP, SALES R V II COST FUEL 6 LUB LABOUR COST MATERIAL/ TOTAL COST COST :OST k HOUSING COST COST SERVICE COST B . C . NASH. B.C. NASH. B.C HASH. B.C. NASH. B.C NASH. B . C . NASH. B.C NASH. B . C . HASH. Can « Can 1 Can % Can 1 Can 1 Can f Can t Can t Can « Can • Can t Can t C m f Can 1 Can 1 Can % 1984 1984 19B4 1984 1984 1984 1984 1984 1984 1984 19B4 1984 1984 1984 1984 1984 Pruning t t r a i n i n g . 44.44 23.34 19.04 15.02 1.12 242.40 493.07 7.32 345.38 500.39 F e r t i l i z e r a p p l i c a t i o n 8.00 12.76 3.29 5.87 2.33 6.60 8.00 0.12 3.29 0.01 4.13 2.12 34.35 42.70 63.40 70.16 Cover spray 26.51 13.67 14.16 0 . 5 9 0 . 0 5 6.78 29.77 91.53 Prepink spray 13.26 6.84 7.08 0 . 2 9 0 . 0 3 3 . 3 9 21.37 52.25 P o l l i n a t i o n 36.00 49.41 36.00 49.41 F r u i t thinning 26.51 13.67 14.16 0 . 5 9 0 . 0 5 107.68 6.64 I5.BI 107.68 77.43 Nutrient a p p l i c a t i o n 52.04 • 19.80 13.84 1.71 0.65 34.36 37.98 160.62 Herbicide a p p l i c a t i o n 44.04 9.35 15.42 4.91 10.80 5.02 1.58 0.47 0 . 6 5 0.04 34.56 5 . 6 5 28.21 15.81 135.48 41.26 I n s e c t i c i d e a p p l i c a t i o n 121.46 13.26 46.20 6.84 32.34 7.08 4.00 0.29 1.51 0 . 0 3 80.64 3.39 137.40 17.76 423.55 4B.64 Fungicide a p p l i c a t i o n 34.70 13.20 9.24 1.14 0.43 ??,o« 19.04 1(9.80 Elgetol .74 gal 17.35 6.60 4.62 0.57 0.22 11.52 27.70 68.5B Boron It kt 4.00 1.64 1.17 0.07 0,04 2.07 12.10 21.1? Hoeing 51.36 46.58 20.26 24.27 14.85 25.88 1.88 1.56 0.58 0.10 30.72 12.71 I 1 9 . M 111.08 I r r i g a t i o n t water fee HhU 330.96 131.04 199.92 24.88 94.08 35.28 69.55 0.00 0.26 12.00 21.18 70.00 34.99 «».!•" 750.94 Harvesting/picking 15.17 7.94 6.59 5.68 0.45 357.30 457.50 393.32 457.50 Bin d i s t r i b u t i o n / 77.80 34.10 30.35 21.28 23.10 19.37 2.24 2 . 3 5 0.90 0.16 48.00 43.32 182.39 120.58 handling Load 91.95 53.47 50.99 3.61 0.34 43.32 243.64 Suae? 34.10 21.28 19.37 2.42 0.16 43.32 120.63 Custoa haulioQ 113.75 114.38 113.75 114.38 Rodent c o n t r o l 3.20 2.90 20.37 6.10 20.37 Gopher c o n t r o l 8.03 4.16 4.66 0.18 0 . 0 ? 2.12 3.61 24.77 Cleanse 6.23 3.47 3.SB 3.37 2.10 4.24 22.98 Transp. use of t i c k e t 59.77 60.80 31.13 26.40 22.70 27,50 0.74 I . J ? 9.12 1,33 82.56 84.72 206.02 202.13 N i s c . ese of t r a i l e r 9.93 5.78 5.68 0.37 0 . 0 3 4.24 26.03 s t a l l t o o l s I equipeent 23.52 26.99 10.16 5.08 4.90 3.56 38.58 35.63 Pruning t o o l s 0.56 0.07 0.06 0.69 P i c k i n g sacks 1 ladders 18.28 0.31 7.61 0.05 3.72 0.05 29.61 0.41 Itachine shed 57.46 23.18 50.79- 40.31 10.06 8.B7 118.33 72.36 P i c k e r s ' cabin 95.79 84.65 16.77 197.21 Subtotal 863.20 775.35 503.64 457.32 222.97 317.70 77.91 87.14 18.94 4.71 717.10 780.20 876.93 832.BI 3280.70 3255.23 Tat on land 30.00 46.36 Rent on land 154.88 311.13 Overhead cost B4.54 85.24 Interest on operating c a p i t a 101.45 93.77 TOTAL COST PER ACRE 3651.58 3791.73 PRODUCTION: COST SCHEDULE FOR TREES IN YEAR B ESTABLISHHENT AND FIFTH PARTIAL CROP STAGE, I . C . AND NASHINGTON STATE, PER ACRE OPERATION DEPRECIATION OPPORTUNITY INS, PROP, SALES R t N COST UEL t LOT LABOUR COST MATERIAL/ TOTAL COST COST COST 1 HOUSING COST COST SERVICE COST I . C . NASH. I . C . HASH. I . C HASH. I . C . HASH. I . C HASH. I . C . NASH. I . C NASH. I . C . HASH. Can t Can » Can t Can 1 Can 1 Can t Can 1 Can 1 Can I Can 1 Can I Can t Can t Can i Can 1 Can I 1984 I9B4 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 1984 Pruning I t r a i n i n g 49.60 25.95 21.15 14.48 1.24 249.34 410.49 7.32 383.99 616.01 F e r t i l i z e r a p p l i c a t i o n 8.00 12.76 3.29 5.B7 2.33 6.60 0.19 0.12 0.08 0.01 4.15 2,1? 34.35 42.70 52.36 70.14 Cover spray 26.51 13.47 14.16 0 . 5 9 0 , 0 5 6.78 29.77 91.53 Prepink spray 13.26 6.84 7.08 0 . 2 9 0 . 0 3 3.39 21.37 52.25 p o l l i n a t i o n 36.00 49.41 34.00 49.41 Thin spray (growth reg) 17.35 26.51 6.60 13.47 4.42 14.16 0.57 0 . 5 9 0.22 0 . 0 5 11.52 6.44 44.82 15.81 85.70 77.43 Hand t h i n n i n o 272.00 326.81 272.00 326.81 N u t r i e n t a o o l i c a t i o n 52.06 19.80 13.84 1.71 0.45 34.54 37.98 140.62 H e r b i c i d e a p p l i c a t i o n 44.06 8.45 15.62 4.51 10.80 4.34 1.58 0.31 0.45 0.02 34.56 5.45 28.21 15.81 135.48 39.09 I n s e c t i c i d e a p p l i c a t i o n 121.46 13.26 46.20 6.84 32.34 7.08 4.00 0.29 1.51 0.03 80.44 3.39 137.40 17.76 423.55 48.64 F u n g i c i d e a p p l i c a t i o n 34.70 13.20 9.24 1.14 0.43 23.04 19.04 100.80 Hoeing 51.36 46.5B 20.26 24.27 14.85 25.B8 1.88 1.54 0.58 0.10 30.72 W\ 119.64 111.08 I r r i g a t i o n t water l e e 137.76 330.96 131.04 199.92 26.88 94.0B 35.28 49.55 0.00 0.24 12.00 21.18 70.00 34.99 412.96 750.94 B i n d i s t r i b u t i o n 37.97 23.69 21.56 2.47 0.18 47.44 133.51 H a r v e s t i n g / p i c k i n g 18.96 9.92 8.24 7.10 0.54 440.00 595.36 4B4.7B 595.36 Swaap 37.97 il.tt 21.54 1.62 0.18 47.44 133.45 B i n loading/handling 8 3 . 0 3 102.37 32.39 59.53 24.65 56.73 2.39 4.10 0.94 0.37 51.23 47.44 194.64 270.54 Custoa hauling - 140.00 146.84 140.00 148.84 Cleanup 6.23 3.47 3.58 0.37 0.03 4.24 17.91 Rodent c o n t r o l ? . W 2 . 9 0 20.37 6.10 20.37 Sopher c o n t r o l 1 .03 4.14 4.64 0.12 0.01 2.12 5.61 24.70 Transp. use of pickup 59.77 60.80 31.13 24.40 22.70 27.50 0.74 7.18 9.12 0.47 82.54 84.72 206.02 207.27 H i s c . use of t r a i l e r 9.93 5.71 $.48 0.37 0.03 26.03 s a a l l t o o l s a equipment 23.52 26.99 10.16 5.08 4.90 3.54 38.5B 35.63 Pruning t o o l s 0.56 0.07 0.04 0.69 P i c k i n g sacks t ladders 18.28 0.31 7.61 0.05 3.72 0.05 29.61 0.41 Machine shed 57.4B 23.18 50.79 40.31 10.06 B.B7 U B . 3 3 72.36 P i c k e r s ' cabin 95.79 84.65 16.77 197.21 Subtotal 873.IB 792.61 508.61 447.80 227.12 327.17 73.25 90.72 15.99 2.02 909.53 1234.98 990.70 1005.13 3598.38 3922.43 Tax on land 30.00 46.36 Rent on land 154.86 311.13 Overhead cost 99.47 116.74 I n t e r e s t on operating c a p i t a 119.37 128.42 TOTAL COST PER ACRE 4002.10 4525.08 TABLE 2 « PRODUCTION COST SCHEDULE FDR NATURE TREES, I . C . AND HASHINGTON STATE, PER ACRE OPERATION )EPRECIATIM OPPORTUNITY INS, PROP, SALES R I H COST FUEL 1 LUB LABOUR COST MATERIAL/ TOTAL COST COST COST 6 HOUSING COST COST SERVICE COST B . C . NASH. B.C. NASH. B.C HASH. B . C . NASH. B.C NASH. B . C . NASH. B.C HASH. B . C . HASH. Can i Can 1 Can % Can I Can t Can % Can l Can 1 Can f Can % Can t Can 1 Can » Can 1 Can % Can t I9B4 1984 19B4 1984 1984 I9B4 1984 I9B4 1984 1984 I9B4 1984 1984 1984 1984 1984 Pruning I t r a i n i n g 49.60 25.95 21.15 16.68 1.24 269.36 610.69 7 .32 3B3.99 618.01 F e r t i l i z e r a p p l i c a t i o n 8.00 12.76 3.29 5.87 2.33 6.60 0.19 0.12 0.08 0.01 4.15 2.12 34.35 42.70 52.38 70.16 Cover spray 26.51 13.67 14.16 0.59 0.05 4.78 29.77 91.53 P r e p i n t spray 13.26 6.84 7.08 0.29 0 . 0 3 3.39 21.37 52.25 p o l l i n a t i o n 36.66 49.41 36.66 49.41 Thin spray (growth reg) 17.35 26.51 6.60 13.67 4.62 14.16 0.57 0.59 0.22 0.05 11.52 6.64 44.82 15.81 BS.70 77.43 Hand t h i n n i n g 272.00 326.81 272.00 326.81 N u t r i e n t a p p l i c a t i o n 52.06 19.60 13.86 1.71 0 . 6 5 34.56 37.98 160.62 H e r b i c i d e a p p l i c a t i o n 44.06 8.45 15.62 4.51 10.80 4.34 1.58 0.31 0 . 6 5 0 . 0 2 34.56 5.65 28.21 15.81 135.48 39.09 I n s e c t i c i d e a p p l i c a t i o n 121.46 13.26 46.20 6.B4 32.34 M B 4.o6 6.29 1.S1 0.03 60.64 3.39 137.40 17.76 423.55 48.44 Fungicide a p p l i c a t i o n 34.70 13.20 9.24 1.14 0 . 4 3 23.04 19.04 100.80 Boron 25 l b s every 3rd yr 1.4S 0.61 0.43 0 . 0 3 0.01 0.77 4 . 0 3 7.37 l o v i n g 51,36 46.58 20.26 24.27 14.85 25.88 1.8B 1.56 0.58 0.10 30.72 12.71 119.64 111.08 I r r i g a t i o n t water fee 137.76 330.96 131.04 199.92 26.88 94.0B 35.28 69.55 0 . 0 0 0.26 12.00 21.18 70.00 34.99 412.96 750.94 B i n d i s t r i b u t i o n 40.68 25.38 23.10 2.87 0.19 50.83 143.05 H a r v e s t i n g / n i c k i n a 22.04 11.53 9.58 8 . 2 5 0 . 6 5 522.50 732.00 574.55 732.00 Swaap 40.68 25.38 23.10 2.80 0.19 50.83 142.99 B i n loadinq/handlinq 83.03 109.68 32.39 63.78 24.65 60.78 2 . 3 9 4.39 0 . 9 4 0.40 51.23 50.83 194.64 289.84 Custoa h a u l i n g 166.25 163.00 166.25 183.00 Cleanup 6.23 3.47 3.58 0.37 0.03 4.24 17.91 Rodent c o n t r o l 3.20 2.90 20.37 6.10 20.37 Gopher c o n t r o l 8.03 4.16 4.66 0.12 0.01 2.12 5.61 24.70 Transp. use of o i c k u i 59.77 60.80 31.13 26.40 22.70 27.50 0.74 7.18 9.12 0.67 B2.56 84.72 206.02 207.27 Hi s c . use of t r a i l e r 9.93 5.78 5.68 0.37 0 . 0 3 4.24 24.03 s t a l l t o o l s 1 equipment 23.52 26.99 10.16 5 . 0 8 4.90 3.56 38.58 35.63 Pruning t o o l s 0.56 • 0.07 0.06 0.49 P i c k i n g sacks I ladders 18.28 0.31 7.61 0 . 0 5 3.72 0.05 29.61 0.41 Machine shed 57.4B 23.18 50.79 40.31 10.06 8.B7 118.33 72.36 P i c k e r s ' c a b i n 95.79 84.65 16.77 197.21 Subtotal 877.74 805.34 510.83 475.44 228.B9 334.30 74.44 91.39 16.10 2.07 910.30 1247.15 1103.48 1175.93 3721.78 4131.63 Tat on land 30.00 46.36 Rent on land 154.88 311.13 Overhead cost 105.22 125.83 Interest on operating c a p i t a 126.26 138.41 TOTAL COST PER ACRE 4138.13 4733.36 I n 76 c o s t , each s e p a r a t e c a t e g o r y of c o s t i s d e r i v e d by m u l t i p l y i n g the machine hours r e q u i r e d t o complete an o p e r a t i o n (from the management s c h e d u l e s ) by the r e s p e c t i v e c o s t s a s s o c i a t e d w i t h the machine used. I f more than one machine i s used, the t o t a l c o s t of any one c a t e g o r y of c o s t i s e q u a l t o the sum of the c o s t s a s s o c i a t e d w i t h a l l machines used. For example, the t o t a l d e p r e c i a t i o n c o s t a s s o c i a t e d w i t h the o p e r a t i o n f e r t i l i z e r a p p l i c a t i o n i s e q u a l t o t h e d e p r e c i a t i o n c o s t per hour of the t r a c t o r used p l u s the d e p r e c i a t i o n c o s t of the f e r t i l i z e r s p r e a d e r per hour m u l t i p l i e d by the number of machine hours r e q u i r e d t o complete the o p e r a t i o n . I t s h o u l d be noted t h a t the f u e l and l u b r i c a n t c o s t s a re z e r o f o r B.C.'s i r r i g a t i o n system. T h i s r e s u l t s from the assumption t h a t water i s s u p p l i e d t h r o u g h a p r e s s u r i z e d system t h a t does not r e q u i r e a pump. Labour hours r e q u i r e d m u l t i p l i e d by wage r a t e p r o v i d e s a l a b o u r c o s t per o p e r a t i o n . S e r v i c e / m a t e r i a l c o s t s a r e those d e f i n e d i n the management s c h e d u l e s . Other c o s t s i n c l u d e d a r e annual d e p r e c i a t i o n c o s t , o p p o r t u n i t y c o s t , i n s u r a n c e c o s t , h o u s i n g c o s t , p r o p e r t y and s a l e s t a x e s on s m a l l equipment and b u i l d i n g s . I n a d d i t i o n , a t a x on l a n d , o p p o r t u n i t y c o s t or r e n t on l a n d , c r o p i n s u r a n c e c o s t , an overhead charge (5 p e r c e n t of t o t a l o p e r a t i n g c o s t ) and an i n t e r e s t c h a r ge on o p e r a t i n g c a p i t a l have been i n c l u d e d . I n t e r e s t c h a r g e s on o p e r a t i n g c a p i t a l (IC) a r e o b t a i n e d by m u l t i p l y i n g t o t a l o p e r a t i n g c o s t (a) by the p r o d u c t of o n e - h a l f a year (6 months/12 months) and the market d i s c o u n t 77 r a t e ( d ) . One h a l f a year i s used t o r e f l e c t the assumption t h a t an o p e r a t i n g l o a n w i l l average 6 months i n d u r a t i o n . (19) IC = o * (6/12 * d) The market i n t e r e s t r a t e s used aire 12 and 11.5 p e r c e n t f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . These i n t e r e s t r a t e s r e p r e s e n t the 1984 average prime r a t e s p l u s one i n the r e s p e c t i v e r e g i o n s . The f i v e p e r c e n t of t o t a l o p e r a t i n g c o s t i s a s t a n d a r d approach taken by c o s t of p r o d u c t i o n r e s e a r c h e r s i n c a l c u l a t i n g an overhead charge (B.C.M.A.F., Hinman, Hunter, and Tukey). Two c o s t s a s s o c i a t e d w i t h l a n d , i . e . p r o p e r t y tax and r e n t a l c o s t , have been i n c l u d e d . The r e n t a l c o s t r e p r e s e n t s an o p p o r t u n i t y c o s t of f a r m i n g the l a n d . P r o p e r t y t a x e s a r e assumed t o be $30 per a c r e f o r the o r c h a r d i n B.C. T h i s i s the average v a l u e used i n the B.C.M.A.F. model. The p r o p e r t y t a x e s e s t i m a t e d f o r Washington S t a t e are $26.84 Canadian f o r one year o l d t r e e s and $46.36 Canadian f o r a l l o t h e r t r e e s . The lower t a x on new t r e e s i s a r e s u l t of the method employed i n c a l c u l a t i n g p r o p e r t y t a x e s . The v a l u e of an o r c h a r d i s e s t i m a t e d by summing the v a l u e of the bare l a n d , the t r e e s and the i r r i g a t i o n s y s t e m . 1 6 A c c u r a t e e s t i m a t e s of a r e n t a l v a l u e f o r o r c h a r d l a n d a r e v e r y d i f f i c u l t t o o b t a i n , s i n c e the r e n t a l markets a r e v e r y s m a l l i n both a r e a s . Annual per a c r e r e n t s on o r c h a r d 1 6 I n f o r m a t i o n o b t a i n e d from County Tax o f f i c e s i n Washington S t a t e . 78 l a n d v a r y w i d e l y . The most common type of r e n t a l arrangement, i n B.C. and Washington S t a t e , i s c r o p - s h a r i n g . In B.C., the average c r o p - s h a r i n g arrangement i s based on a 20 t o 80 s p l i t on g r o s s market r e t u r n s ( i e 20 p e r c e n t of g r o s s market r e t u r n s go t o the o r c h a r d owner as r e n t and 80 p e r c e n t of g r o s s market r e t u r n s go to the o p e r a t o r ) The arrangements v a r y , depending l a r g e l y on who pays the p r o p e r t y t a x e s , the q u a l i t y of the l a n d and the t r e e s , and o t h e r f a c t o r s . In B.C., most o r c h a r d s a r e r e n t e d t h rough p r i v a t e owners or f i n a n c i a l i n s t i t u t i o n s . In c o n t r a s t , the r e n t a l market i n Washington S t a t e i s dominated l a r g e l y by l e a s e s from the S t a t e . Orchard l e a s e s are w r i t t e n f o r 25 y e a r s and a r e based on c r o p - s h a r i n g a l s o . R e n t e r s a r e r e q u i r e d t o b i d f o r t h e i r c r o p - s h a r i n g arrangements at p u b l i c a u c t i o n s . The average b i d a c c e p t e d f o r bare l a n d ( l a n d w i t h o u t t r e e s and l i t t l e or no i r r i g a t i o n ) i s about 7 p e r c e n t . 1 7 T h i s i m p l i e s t h a t , on a v e r a g e , 7 p e r c e n t of the r e n t e r ' s g r o s s market r e t u r n goes t o pay f o r the r e n t a l of the o r c h a r d . A g a i n , the a c c e p t e d b i d s w i l l v a r y a c c o r d i n g t o the a v a i l a b i l i t y of w a t e r , q u a l i t y of l a n d and o t h e r f a c t o r s . For t h i s s t u d y , the r e n t a l v a l u e of l a n d i s e s t i m a t e d as 7 p e r c e n t of g r o s s market r e t u r n s f o r Washington S t a t e . The 7 p e r c e n t i s employed f o r Washington S t a t e because the p r o d u c e r i s assumed t o be r e s p o n s i b l e f o r a l l o t h e r c o s t s , 1 7 H a r o l d Veeman, A s s i s t a n t Area Manager South-East A r e a , Department of N a t u r a l R e s o u r c e s , E l l e n s b u r g , Washington S t a t e . 79 such as i r r i g a t i o n systems, a s s o c i a t e d w i t h e s t a b l i s h i n g the o r c h a r d i n i t i a l l y . U s i n g an average p r i c e (1976-83) of 12 1 8 Canadian c e n t s per pound and an average y i e l d of 36961 pounds per a c r e f o r Washington S t a t e , a r e n t a l v a l u e of $311.13 per a c r e i s thus e s t i m a t e d f o r t h i s s t u d y . The 20 t o 80 s p l i t of g r o s s market r e t u r n s i n B.C. i n c l u d e s the r e n t a l of l a n d , i r r i g a t i o n system, and t r e e s . By assuming t r e e replacement i s on an on-going p r o c e s s , the t e n a n t pays f o r the t r e e s i n the on-going annual o p e r a t i o n s . C o n s e q u e n t l y , the r e n t a l v a l u e o b t a i n e d by t a k i n g 20 p e r c e n t of g r o s s market r e t u r n s i n c l u d e s a r e n t a l fee f o r the i r r i g a t i o n system and l a n d . S i n c e the i r r i g a t i o n system i s assumed t o be among the a s s e t s owned by the o p e r a t o r , the r e n t a l v a l u e of t h i s equipment has t o be s u b t r a c t e d from the c a l c u l a t e d r e n t a l v a l u e on l a n d . Hence, the r e n t a l v a l u e f o r bare o r c h a r d l a n d i s e s t i m a t e d as 20 p e r c e n t of g r o s s market r e t u r n s l e s s the d e p r e c i a t i o n , o p p o r t u n i t y , and i n s u r a n c e and p r o p e r t y c o s t s of the i r r i g a t i o n system. U s i n g an average market p r i c e (1976-83) of 8 c e n t s 1 9 per pound and an average y i e l d of 27920 pounds per a c r e , the e s t i m a t e d r e n t on o r c h a r d l a n d i s $154.88 per a c r e f o r B.C. 2 0 The 1 8 D e r i v e d from the average pr o d u c e r r e t u r n s shown i n T a b l e 3. 1 9 C a l c u l a t e d from the average p r o d u c e r r e t u r n s shown i n T a b l e 3. 2 0 E m p l o y i n g the same approach, a second r e n t a l v a l u e i s e s t i m a t e d f o r Washington S t a t e ( i . e . t o t a l r e n t on o r c h a r d l a n d - .2 * g r o s s market r e t u r n s - ( d e p r e c i a t i o n , o p p o r t u n i t y , and i n s u r a n c e and p r o p o e r t y c o s t s of i r r i g a t i o n s y s t e m ) ) . In t h i s i n s t a n c e , the e s t i m a t e d r e n t on o r c h a r d l a n d is.$358 per a c r e . T h i s e s t i m a t e i s not used i n the s t u d y because the 20 p e r c e n t of g r o s s market r e t u r n i s c o n s i d e r e d t o be h i g h e r than what may a c t u a l l y e x i s t i n 80 payment of p r o p e r t y t a x and water f e e s i s assumed t o be the r e s p o n s i b i l i t y of the o p e r a t o r . The sum of t o t a l c o s t per o p e r a t i o n p l u s a l l o t h e r a n n u a l c o s t s p r o v i d e a t o t a l p r o d u c t i o n c o s t per a c r e by age of t r e e s . These s c h e d u l e s p r o v i d e per a c r e , by age of t r e e s , p r o d u c t i o n c o s t c o m p a r i s o n s between the two r e g i o n s . I f d i f f e r e n c e s e x i s t , the t a b l e s a l l o w f o r comparisons on a per o p e r a t i o n b a s i s . An average per a c r e p r o d u c t i o n c o s t (AC) i s d e r i v e d by summing the p r o d u c t of t o t a l c o s t per a c r e (C(g)) and the number of a c r e s of t r e e s of the same a g e ( b ( g ) ) . T h i s sum i s then d i v i d e d by t o t a l acreage of the o r c h a r d b l o c k (B) . (21) AC = { I ^ = 1 (C(g) * b ( g ) ) } / B T h i s p r o v i d e s an average p r o d u c t i o n c o s t per a c r e comparison between B.C. and Washington S t a t e . F u r t h e r m o r e , a c o s t per pound can be d e r i v e d by d i v i d i n g the average c o s t per a c r e (AC) by the average y i e l d per a c r e (AY). (22) AC ( $ / a c r e ) / AY ( l b / a c r e ) = c o s t per l b of a p p l e s The average (average of i n d i v i d u a l o r c h a r d b l o c k s ) y i e l d e s t i m a t e d f o r B.C and Washington S t a t e a r e 27920 and 37039 pounds per a c r e , r e s p e c t i v e l y . The average y i e l d (AY) i s 2 0 ( c o n t ' d ) Washington S t a t e . The v a l u e o b t a i n e d i n t h i s c a l c u l a t i o n p r o v i d e s an upper bound on Washington S t a t e ' s l a n d r e n t . 81 e s t i m a t e d by summing the p r o d u c t of the y i e l d s per a c r e ( y ( g ) ) and the number of a c r e s of t r e e s of the same age ( b ( g ) ) , e q u a t i o n ( 2 3 ) . T h i s sum i s then d i v i d e d by t o t a l a c r e s d e f i n e d f o r the i n d i v i d u a l o r c h a r d b l o c k s . (23) AY = { [ I < j = 1 ( y ( g ) * b ( g ) ) ] / B} The y i e l d s per a c r e by age of t r e e s ( y ( g ) ) , as shown i n Ta b l e 27, are s t i m a t e d t h rough i n p u t o b t a i n e d from h o r t i c u l t u r i s t s and f i e l d r e p r e s e n t a t i v e s i n both B.C. and Washington S t a t e . The average per a c r e y i e l d s of the f o u r , f i v e and s i x ye a r o l d t r e e s f o r the 20 (202 t r e e s ) and 40 (269 t r e e s ) a c r e o r c h a r d b l o c k s i n B.C. are those used i n the B.C.M.A.F. model. For the re m a i n i n g t r e e s , the average per a c r e y i e l d s a r e a d j u s t e d from i n f o r m a t i o n p r o v i d e d by Tim Watson, D i s t r i c t H o r t i c u l t u r i s t , B.C.M.A.F., O l i v e r and Mike Sanders, Tree F r u i t S p e c i a l i s t , B.C.M.A.F., Kelowna. The average per a c r e y i e l d s of the f o u r and f i v e year o l d t r e e s i n Washington S t a t e a r e c o m p i l e d from the most r e c e n t a p p l e p r o d u c t i o n study (Hinman, H.R.; Hunter, R.B.; and Tukey, R.B., 1985). The average per a c r e y i e l d of the mature t r e e s i s based on an e x i s t i n g a p p l e p r o d u c t i o n study (Hinman, H u n t e r , and Tukey, 1982) and i n f o r m a t i o n o b t a i n e d from c o u n t y e x t e n s i o n agents i n Washington S t a t e . For the s i x t o 82 TABLE 27 AVERAGE PER ACRE YIELDS: B.C. VS WASHINGTON STATE (POUNDS) AGE OF TREES B.C.a 20 ACRE BLOCK (202 TREES) WASH.b 46 ACRE BLOCK (269 TREES) B.C.3 40 ACRE BLOCK (202 TREES) WASH.b 40 ACRE BLOCK (269 TREES) 1 2 3 4 5 6 7 8 mature 1600 4000 10000 26000 32000 38000 4125 12375 21698 30938 40260 49500 1600 4000 10000 26000 32000 38000 4125 12375 21698 30938 40260 49500 AVERAGE PER ACRE 27920 37039 27920 36961 a B.C.M.A.F. "Estimated Costs And Returns: Apple Orchard Establishment And Production." May 1984. Mike Sanders, Tree F r u i t S p e c i a l i s t , B.C.M.A.F., Kelowna. Tim Watson, U i s t r i c H o r t i c u l t u r i s t , B.C.M.A.F., Oliver. b Hinman, H. R.; Hunter, R.; and Tukey, R. B. "1985 Cost Of Establishing An Apple Orchard Columbia Basin, Washington." College of Agriculture, Washington State University, January 1985. Hinman, H. R.; Tukey, R. B.; and Hunter, R. E. "Estimated Cost Of Production For A Red Delicious Apple Orchard In Central Washington." College of Agriculture, Washington State University, June 1982. Ray Hunter, Douglas County Extension Agent, Washington State. Brooke Peterson, Yakima County Extension Agent, Washington State. 83 e i g h t year o l d t r e e s , a l i n e a r growth r a t e 2 1 has been assumed s i n c e no o t h e r d a t a a r e a v a i l a b l e . The l i n e a r growth r a t e i s e s t i m a t e d by t a k i n g the d i f f e r e n c e between the per a c r e y i e l d s of the mature and f i v e y e a r o l d t r e e s and d i v i d i n g by the d i f f e r e n c e of the t r e e ages. 2 1 I n f o r m a t i o n p r o v i d e d by Ray H u n t e r , Douglas County E x t e n s i o n Agent, and Brooke P e t e r s o n , Yakima County E x t e n s i o n Agent, i n Washington S t a t e . 4. CHAPTER IV 4.1 RESULTS The r e s u l t s o b t a i n e d a r e p r e s e n t e d i n t h r e e s e c t i o n s . S e c t i o n one a n a l y s e s the r e s u l t s o b t a i n e d from the p r o d u c t i o n s c h e d u l e s . I t compares the per a c r e p r o d u c t i o n c o s t by age of t r e e s i n B.C. w i t h t h a t of Washington S t a t e . S e c t i o n two p r e s e n t s and examines the average per pound and average per a c r e p r o d u c t i o n c o s t e s t i m a t e d f o r i n d i v i d u a l o r c h a r d b l o c k s i n B.C. and Washington S t a t e . The f i n a l s e c t i o n examines r e s u l t s o b t a i n e d from v a r i o u s s e n s i t i v i t y a n a l y s e s . 4.2 RESULTS FROM PRODUCTION SCHEDULES The t o t a l c o s t s per a c r e by age of t r e e s a r e summarized i n T a b l e 28 f o r B.C. and Washington S t a t e . The per a c r e c o s t d i f f e r e n t i a l s a r e a l s o shown i n t h i s T a b l e . In B.C., the h i g h e s t per a c r e c o s t , $5017, i s o b t a i n e d from the one year o l d t r e e s . T h i s i s f o l l o w e d by t h e mature t r e e s w i t h a t o t a l per a c r e c o s t of $4138. These r e s u l t s show t h a t on a per 84 85 TABLE 28 TOTAL COST PER ACRE BY AGE OF TREES: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS AGE OF TREES TOTAL COST PER ACRE B.C.- WASH. B. C. WASH. 1 5017 4126 891 2 1720 2091 (371) 3 1839 1985 (146) 4 2427 2370 57 5 3031 2835 196 6 3012 3437 (425) 7 3652 3792 (140) 8 4002 4525 (523) mature 4138 4753 (615) 86 a c r e b a s i s , the c o s t s a s s o c i a t e d w i t h r e p l a n t i n g a r e h i g h e r t h a n the c o s t s a s s o c i a t e d w i t h k e e p i n g mature t r e e s i n p r o d u c t i o n by $879. The d i f f e r e n t i a l r e p r e s e n t s a p p r o x i m a t e l y 18 p e r c e n t of the per a c r e c o s t of the one y e a r o l d t r e e s . The c o s t s a s s o c i a t e d w i t h r e p l a n t e d a r e a s a r e even g r e a t e r i f the per a c r e income foregone i s added t o the c u r r e n t per a c r e c o s t . These r e s u l t s may p a r t l y e x p l a i n why e x p a n s i o n and/or r e n o v a t i o n have been r e t a r d e d i n B.C., i n t h e s h o r t - r u n . In the l o n g - r u n , the d e c i s i o n t o expand and/or r e n o v a t e w i l l be d e t e r m i n e d p r i m a r i l y by the net p r e s e n t v a l u e e s t i m a t i o n ( i . e . sum of d i s c o u n t e d net r e t u r n s o v e r the l i f e span of the i n v e s t m e n t ) of the p r o j e c t . In c o n t r a s t , t h e mature t r e e s show the h i g h e s t t o t a l per a c r e c o s t , $4753, i n Washington S t a t e . The t o t a l per a c r e c o s t of the one year o l d t r e e s rank the t h i r d h i g h e s t , b e h i n d the e i g h t year o l d t r e e s . The c o s t s a s s o c i a t e d w i t h r e p l a n t i n g one a c r e of t r e e s a r e l e s s than the c o s t s a s s o c i a t e d w i t h k e e p i n g one a c r e of t r e e s i n p r o d u c t i o n by $627. W i t h the e x c e p t i o n of the two and t h r e e year o l d t r e e s , the per a c r e c o s t s of the r e m a i n i n g t r e e s i n c r e a s e w i t h t r e e age. Gi v e n t h e management p r a c t i c e s s e t out i n the p r o d u c t i o n s c h e d u l e s , t h e s e r e s u l t s appear r e a s o n a b l e . For example, the c o s t s a s s o c i a t e d w i t h h a r v e s t i n g and p r u n i n g i n c r e a s e w i t h the age of t r e e s ; hence, the t o t a l per a c r e c o s t s h o u l d i n c r e a s e w i t h t r e e age. W i t h the e x c e p t i o n of one, f o u r and f i v e year o l d t r e e s , the per a c r e c o s t s by age of t r e e s a r e lower i n B.C. 87 than i n Washington S t a t e . The lower per a c r e c o s t s range from a h i g h of $615 (mature t r e e s ) t o a low of $140 (seven year o l d t r e e s ) . The p r o d u c t i o n s c h e d u l e , Table 26, i n d i c a t e s t h a t lower t o t a l per a c r e l a b o u r c o s t , m a t e r i a l / s e r v i c e c o s t , and r e n t on l a n d i n B.C. a r e l a r g e l y r e s p o n s i b l e f o r the c o s t d i f f e r e n t i a l shown by the mature t r e e s . These v a l u e s a re shown i n the s u b t o t a l row and i n the r e s p e c t i v e columns of the p r o d u c t i o n s c h e d u l e . The sum of thes e c o s t s r e p r e s e n t s $ 5 6 6 2 2 or 92 p e r c e n t of the c o s t d i f f e r e n t i a l . Out of $566, $377 i s a t t r i b u t e d t o l a b o u r c o s t s . T h i s i s a r e s u l t of lower p r u n i n g and t r a i n i n g c o s t i n B.C. The c o s t d i f f e r e n t i a l of the e i g h t year o l d t r e e s i s a l s o l a r g e l y a t t r i b u t e d t o lower t o t a l per a c r e l a b o u r c o s t , m a t e r i a l / s e r v i c e c o s t , and r e n t on l a n d . Lower per a c r e r e n t on l a n d i n B.C. i s r e s p o n s i b l e f o r the c o s t d i f f e r e n t i a l shown by the seven and t h r e e year o l d t r e e s . For the s i x year o l d t r e e s , the lower per a c r e c o s t i n B.C. i s m a i n l y a r e s u l t of lower t o t a l per a c r e r e n t s on l a n d , m a t e r i a l / s e r v i c e c o s t , r e p a i r and maintenance c o s t , and i n s u r a n c e , p r o p e r t y , s a l e s and h o u s i n g c o s t . The lower per a c r e c o s t shown by the two year o l d t r e e s i n B.C. i s p r i m a r i l y caused by the lower t o t a l per a c r e r e n t on l a n d , m a t e r i a l / s e r v i c e , d e p r e c i a t i o n , and i n s u r a n c e , p r o p e r t y , s a l e s and h o u s i n g c o s t . 2 2 T h i s v a l u e i s o b t a i n e d as f o l l o w s : (1247-910)+(1176-1103)+(311-155)=566 88 The t o t a l per a c r e c o s t of the one, f o u r and f i v e year o l d t r e e s a r e h i g h e r i n B.C. than i n Washington S t a t e . The h i g h e s t c o s t d i f f e r e n t i a l , $891, i s shown by the one year o l d t r e e s . E x a m i n a t i o n of the p r o d u c t i o n s c h e d u l e f o r the one year o l d t r e e s ( T a b l e 18) i n d i c a t e s t h a t the major c o n t r i b u t o r s t o the l a r g e c o s t d i f f e r e n t i a l a r e the t o t a l per a c r e d e p r e c i a t i o n and o p p o r t u n i t y c o s t of machines used. The t o t a l d e p r e c i a t i o n and o p p o r t u n i t y c o s t per a c r e f o r these t r e e s a r e $986 and $596 f o r B.C. The same r e s p e c t i v e v a l u e s f o r Washington S t a t e a r e $512 and $308. When summed t o g e t h e r , the t o t a l c o s t of d e p r e c i a t i o n and o p p o r t u n i t y c o s t i s shown t o be $762 h i g h e r i n B.C. than i n Washington S t a t e . T h i s a c c o u n t s f o r 85 p e r c e n t of the t o t a l c o s t d i f f e r e n t i a l . The t o t a l l a b o u r c o s t i n B.C. f o r the one year o l d t r e e s i s $440 g r e a t e r than Washington S t a t e . However, t h i s h i g h e r c o s t i s l a r g e l y b a l a n c e d by a lower t o t a l per a c r e r e n t on l a n d and m a t e r i a l / s e r v i c e c o s t . A h i g h p r o p o r t i o n of the o p p o r t u n i t y and d e p r e c i a t i o n c o s t i n B.C. comes from the ownership of a t r e e auger and r o t o v a t o r . In Washington S t a t e , i t i s assumed t h a t o r c h a r d i s t s would r e n t a p l a n t e r t o p l a n t t r e e s ; t h u s , n e i t h e r the auger or r o t o v a t o r i s among the l i s t of a s s e t s owned. By r e n t i n g a p l a n t e r , o r c h a r d i s t s i n Washington S t a t e a r e a b l e t o e l i m i n a t e the c o s t of owning and m a i n t a i n i n g t h e s e two i m p l e m e n t s . 2 3 In a d d i t i o n , the p l a n t e r reduces the 2 3 F r o m c o n s u l t a t i o n s w i t h f i e l d r e p r e s e n t a t i v e s and h o r t i c u l t u r i s t s , t h i s appears t o be a b e h a v i o u r d i f f e r e n c e between B.C. and Washington S t a t e o r c h a r d i s t s . 89 l a b o u r r e q u i r e m e n t ; hence, a lower l a b o u r c o s t r e s u l t s . In c o n t r a s t , the c o s t of owning and o p e r a t i n g the auger and r o t o v a t o r add a t o t a l of $609 t o the per a c r e c o s t of one year o l d t r e e s . To reduce c o s t s , i t may be b e n e f i c i a l f o r o r c h a r d i s t s i n B.C. t o r e n t these two implements when needed r a t h e r than p u r c h a s i n g them. For example, i f an o r c h a r d i s t had r e n t e d the t r e e auger, he would have had a t o t a l r e n t a l f e e of $52 (5.4 hours x $ l 0 / h o u r ) 2" per a c r e as opposed t o $261 f o r the c o s t of owning and m a i n t a i n i n g the auger. By r e n t i n g the auger, an o r c h a r d i s t i n B.C. can p o t e n t i a l l y reduce the c o s t d i f f e r e n t i a l by 23 p e r c e n t . 4.3 ESTIMATED PER ACRE AND PER POUND COST OF PRODUCING APPLES The t o t a l average c o s t (average of i n d i v i d u a l r e p r e s e n t a t i v e o r c h a r d b l o c k s ) per a c r e and per pound a r e summarized i n T a b l e 29. The t o t a l average c o s t per a c r e and per pound a r e e s t i m a t e d u s i n g e q u a t i o n s (21) and ( 2 2 ) , r e s p e c t i v e l y . The c o s t of the i n d i v i d u a l c a t e g o r i e s t h a t make up the t o t a l c o s t and t h e i r s h a r e s , i n terms of p e r c e n t a g e s , of t o t a l per a c r e c o s t a re a l s o p r o v i d e d i n 2 t t The r a t e assumed i s $10 per hour as s t a t e d by the packinghouse i n O l i v e r . 90 TABLE 29 COMPARING PRODUCTION COSTS: B.C. YS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS AVERAGE COST PER ACRE AVERAGE COST PER POUND B.C. WASH. B.C. WASH. ($) (%) ($) (%) ($) ($) DEPRECIATION 835 22.1 751 17.9 0.030 0.020 OPPORTUNITY 494 13.1 445 10.6 0.018 0.012 INS, PROP, SALES 218 5.8 305 7.3 0.008 0.008 REPAIR & MAINTENANCE 68 1.8 87 2.1 0.002 0.002 FUEL & LUBRICANT 16 0.5 2 0.1 0.001 0.000 LABOUR 799 21.2 1010 24.1 0.029 0.027 MATERIAL/SERVICE 956 25.3 1019 24.3 0.034 0.028 TAX & RENT ON LAND 185 4.9 357 8.5 0.007 0.010 OVERHEAD & INT. ON 202 5.4 222 5.3 0.007 0.006 OPERATING COST TOTAL COST PER ACRE 3773 100.0 4198 100.0 0.136 0.113 91 t h i s T a b l e . From the r e p r e s e n t a t i v e o r c h a r d s , the e s t i m a t e d t o t a l average per a c r e c o s t i s $3773 f o r B.C. and $4198 f o r Washington S t a t e . B.C.'s per a c r e c o s t i s $425 lower than Washington S t a t e . In B.C., the f o u r h i g h e s t c a t e g o r i e s of c o s t , i n d e c r e a s i n g i m p o r t a n c e , a r e m a t e r i a l / s e r v i c e , d e p r e c i a t i o n , l a b o u r and o p p o r t u n i t y c o s t s . S i n c e the c a t e g o r y m a t e r i a l / s e r v i c e c o s t i n c l u d e s i n p u t c o s t s such as f e r t i l i z e r s , h e r b i c i d e s , f u n g i c i d e s , n u t r i e n t s , p e s t i c i d e s , water f e e s , r o d e n t i c i d e s and •• custom s e r v i c e s , i t i s not s u r p r i s i n g t h a t t h e s e c o s t s c o n s t i t u t e the h i g h e s t c o s t , 25 p e r c e n t of t o t a l c o s t s . A l t h o u g h B.C. p r o d u c e r s b e l i e v e l a b o u r c o s t s dominate t h e i r c o s t e x p e n d i t u r e s , r e s u l t s i n d i c a t e l a b o u r c o s t s t o be much l e s s , 21 p e r c e n t of t o t a l c o s t , than e x p e c t e d . The f i x e d c o s t s , o p p o r t u n i t y and d e p r e c i a t i o n , make up $1329 or 35 p e r c e n t of t o t a l c o s t s . T h i s s u g g e s t s t h a t more than o n e - t h i r d of t o t a l per a c r e c o s t i s a r e s u l t of c a p i t a l i n v e s t m e n t s . In Washington S t a t e , the f o u r h i g h e s t c a t e g o r i e s of c o s t , i n d e c r e a s i n g i m p o r t a n c e , a re m a t e r i a l / s e r v i c e , l a b o u r , d e p r e c i a t i o n and o p p o r t u n i t y c o s t . The c o s t s a s s o c i a t e d w i t h i n p u t s and custom s e r v i c e s a r e $1019 which r e p r e s e n t s 24 p e r c e n t of t o t a l per a c r e c o s t . Labour c o s t i s $1010 or 24 p e r c e n t of t o t a l per a c r e c o s t . T o gether, the two c o s t s c o n t r i b u t e a sum of 48 p e r c e n t t o t o t a l per a c r e c o s t . T h i s i s a 2 p e r c e n t h i g h e r c o n t r i b u t i o n than the same c a t e g o r i e s i n B.C. In t h i s c a s e , 28 p e r c e n t of t o t a l per 92 a c r e c o s t i s a t t r i b u t e d t o d e p r e c i a t i o n and o p p o r t u n i t y c o s t which i s 7 p e r c e n t lower than i n B.C. T h i s i s s i g n i f i c a n t when 7 p e r c e n t of $3773 i s $264. For the B.C. o r c h a r d , the per a c r e c o s t of t a x and r e n t on l a n d r e p r e s e n t o n l y 5 p e r c e n t of t o t a l per a c r e c o s t w h i l e the same c o s t i n Washington S t a t e i s about 9 p e r c e n t of t o t a l c o s t . T h i s i s l a r g e l y due t o h i g h e r r e n t s on l a n d i n Washington S t a t e . The average per pound c o s t i s 13.6 and 11.3 c e n t s f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . B.C.'s per pound c o s t i s 2.3 c e n t s (20 p e r c e n t ) h i g h e r than Washington S t a t e ' s . W i t h an average market p r i c e of e i g h t c e n t s per pound, t h i s i m p l i e s t h a t B.C. p r o d u c e r s a r e l o s i n g 5.6 c e n t s per pound of a p p l e s produced. I f the r e s u l t i s t r u e , then why a r e a p p l e p r o d u c e r s i n B.C. c o n t i n u i n g t o produce? Economic t h e o r y of a c o m p e t i t i v e i n d u s t r y s u g g e s t s t h a t p r o d u c e r s w i l l c o n t i n u e t o m a i n t a i n p r o d u c t i o n i n the s h o r t - r u n as l o n g as the market r e t u r n s a r e e q u a l or g r e a t e r than the v a r i a b l e c o s t s . From the r e s u l t s e s t i m a t e d , the sum of the v a r i a b l e c o s t s ( r e p a i r and maintenance, f u e l and l u b r i c a n t , l a b o u r , m a t e r i a l / s e r v i c e , and overhead and i n t e r e s t on o p e r a t i n g c o s t s ) c o n s t i t u t e 7.3 c e n t s of the t o t a l 13.6 c e n t s per pound. At an average market p r i c e of 8 c e n t s per pound of a p p l e s , t h i s i s 0.7 c e n t s above the c a l c u l a t e d v a r i a b l e c o s t s . The p r i m a r y e x p l a n a t i o n f o r the 2.3 c e n t s per pound d i f f e r e n t i a l between B.C. and Washington S t a t e r e v o l v e s around the average per a c r e y i e l d e s t i m a t e d f o r the 93 r e s p e c t i v e r e g i o n s . Washington S t a t e ' s average (average of the o r c h a r d b l o c k ) per a c r e y i e l d i s 9119 pounds g r e a t e r than B.C.'s. D e s p i t e a lower average (average of o r c h a r d b l o c k ) per a c r e c o s t , the l o w e r average per a c r e y i e l d caused the average t o t a l per pound c o s t t o be h i g h e r i n B.C. than i n Washington S t a t e . To examine the i s s u e of e f f i c i e n c y , a r a t i o based on t o t a l o u t p u t v a l u e s / t o t a l i n p u t v a l u e s per a c r e i s c a l c u l a t e d f o r B.C. and Washington S t a t e . The r a t i o i s 0.59 (based on a market p r i c e of 8 c e n t s per pound) and 1.06 (based on 12 c e n t s per pound) f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . These r a t i o s s u ggest t h a t a p p l e p r o d u c e r s i n Washington S t a t e a r e e x t r a c t i n g more r e t u r n s from t h e i r e x p e n d i t u r e s than the B.C. p r o d u c e r s . The p r o d u c e r s i n Washington S t a t e are o b t a i n i n g r e t u r n s almost t w i c e as much as the B.C. p r o d u c e r s . 4.4 RESULTS FROM SCENARIOS The r e s u l t s p r e s e n t e d i n t h e above s e c t i o n s a r e based on r e p r e s e n t a t i v e o r c h a r d b l o c k s t h a t d i f f e r i n t o t a l a c r e s and p l a n t i n g d e n s i t y . To o b t a i n a b e t t e r u n d e r s t a n d i n g of p r o d u c t i o n c o s t s , s e v e r a l s c e n a r i o s are examined. Each 94 s c e n a r i o i s d e s i g n e d t o answer a s p e c i f i c q u e s t i o n . The o b j e c t i v e of these a n a l y s e s i s t o determine how p r o d u c t i o n c o s t s change under d i f f e r e n t a s s u m p t i o n s . Three s c e n a r i o s -i n p u t p r i c e , acreage and d e n s i t y - a r e setup f o r t h i s p urpose. The r e s u l t s a r e examined below. 4.4.1 INPUT PRICE SCENARIO D i f f e r e n c e s i n i n p u t p r i c e s have been r e c o g n i z e d as a major c o n t r i b u t o r t o o v e r a l l p r o d u c t i o n c o s t s . The d e t e r m i n a t i o n of how i m p o r t a n t a r o l e i n p u t p r i c e s p l a y i n c o s t d i f f e r e n c e s i s the o b j e c t i v e of t h i s s c e n a r i o . In t h i s s c e n a r i o , the s i z e of o r c h a r d b l o c k s and i t s l a n d c o m p o s i t i o n , management s c h e d u l e s , machinery, and b u i l d i n g replacement c o s t s a re t h o s e d e f i n e d f o r the o r i g i n a l or base c a s e . However, p r i c e s of t r e e s , f u e l , l a b o u r , water, l a n d t a x and r e n t , and h a r v e s t i n g c o s t s have been exchanged f o r the two r e g i o n s . For example, the per u n i t c o s t of f u e l i n B.C. i s used t o c a l c u l a t e the f u e l and l u b r i c a n t c o s t of machines i n Washington S t a t e . With the e x c e p t i o n of r e n t on o r c h a r d l a n d , the p r i c e s of a l l o t h e r i n p u t s exchanged a r e h i g h e r i n B.C. I t i s s u s p e c t e d t h a t B.C.'s p r o d u c t i o n c o s t s w i l l d e c l i n e from t h o s e o b t a i n e d i n the base case w h i l e 95 Washington S t a t e ' s c o s t s w i l l i n c r e a s e . The average t o t a l per a c r e c o s t s and per pound c o s t s f o r a l l s c e n a r i o s a r e summarized i n T a b l e s 30 and 31, r e s p e c t i v e l y . W i t h exchanged i n p u t p r i c e s , the t o t a l c o s t per a c r e i s $3823 f o r B.C. and $4181 f o r Washington S t a t e . Compared t o the base c a s e , t h i s r e p r e s e n t s an i n c r e a s e of $50 or 1.3 p e r c e n t per a c r e f o r B.C. The i n c r e a s e i n the average t o t a l per a c r e c o s t c o n t r a d i c t s what i s e x p e c t e d . An e x a m i n a t i o n of the c o s t s by c a t e g o r i e s show t h a t t o t a l l a b o u r , f u e l and l u b r i c a n t , m a t e r i a l / s e r v i c e c o s t s d i d d e c r e a s e , but the i n c r e a s e i n the l a n d c o s t s outweiged the d e c r e a s e i n the o t h e r c a t e g o r i e s . S i m i l a r l y , a d e c l i n e i n l a n d c o s t s i s a l s o r e s p o n s i b l e f o r the o v e r a l l d e c l i n e i n the per a c r e c o s t i n Washington S t a t e . In t h i s c a s e , the t o t a l per a c r e c o s t d e c l i n e d by $17. On a per pound b a s i s , B.C.'s c o s t has i n c r e a s e d by 0.1 c e n t w h i l e Washington S t a t e ' s has d e c r e a s e d by an e q u a l amount. The e f f i c i e n c y r a t i o i n B.C. d e c l i n e s from 0.59 t o 0.58. The i n c r e a s e i n the e f f i c i e n c y r a t i o i s too s m a l l t o be s i g n i f i c a n t f o r Washington S t a t e . I f the r e n t a l v a l u e s of the o r c h a r d l a n d s are not exchanged, then the average t o t a l per a c r e c o s t d e c r e a s e s by $105 i n B.C. The average t o t a l per a c r e c o s t , i n Washington S t a t e , i n c r e a s e s by $138. The average c o s t of p r o d u c i n g one pound of a p p l e s f o r B.C. and Washington S t a t e would be 13.1 and 11.7 c e n t s , r e s p e c t i v e l y . TABLE 30 PRODUCTION COSTS PER ACRE: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS BASE CASE SCENARIOS INPUT PRICE3 ACREAGEb DENSITYC (CASE 1) (CASE 2) (CASE 3) B.C. WASH. B.C. WASH. B.C. WASH. B.C. WASH. DEPRECIATION COST 835 751 835 751 501 806 881 751 22.1 17.9 21.8 18.0 15.5 18.7 20.6 17.9 OPPORTUNITY COST 494 445 494 445 329 478 513 445 13.1 10.6 12.9 10.6 10.2 11.1 12.0 10.6 INS, PROP, SALES & 218 305 218 305 188 332 233 305 HOUSING 5.8 7.3 5.7 7.3 5.8 7.7 5.5 7.3 REPAIR & MAINTENANCE 68 87 68 87 72 78 73 87 1.8 2.1 1.8 2.1 2.2 1.8 1.7 2.1 FUEL A LUBRICANT 16 2 7 3 8 3 16 2 0.5 0.1 0.2 0.1 0.2 0.1 0.4 0.1 LABOUR COST 799 1010 705 1144 . 799. 1008 904 1010 21.2 24.1 18.4 27.4 24.7 23.4 21.2 24.1 MATERIAL/SERVICE 956 1019 949 1024 957 1018 1151 1019 25.3 24.3 24.8 24.5 29.5 23.7 27.0 24.3 TAX 4 RENT ON LAND 185 357 357 185 185 356 256 357 4.9 8.5 9.3 4.4 5.7 8.3 6.0 8.5 OVERHEAD 4 INT. ON 202 222 190 237 202 221 236 222 OPERATING COST 5.4 5.3 5.0 5.7 6.2 5.1 5.5 5.3 SSSSSSSSESSSSSCSSSSSSS =========== SSSSSS3S SSSC5S3SES = = = = = = = = = == ===== ---------- --------TOTAL AVERAGE COST 3773 4198 3823 4181 3241 4300 4263 4198 TOTAL PERCENT 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 a Land tax and rent, labour, water fee, fuel, and tree prices In B.C. are equated to Washington State. The same orocedure 1s applied to the orchard In Washington State, b o r a n d Washington's orchard blocks have been Increased/decreased to 40 acres, c Density of B.C." orchard has been Increased from 202 trees per acre to 269 trees per acre. 97 TABLE 31 PRODUCTION COSTS PER POUND: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS BASE CASE SCENARIOS INPUT PRICE8 ACREAGEb DENSITYC (CASE 1) (CASE 2) (CASE 3) B.C. HASH. B.C. WASH. B.C. WASH. B.C. WASH. DEPRECIATION COST 0.030 0.020 0.030 0.020 0.018 0.022 0.029 0.020 22.1 17.9 21.8 18.0 15.5 18.7 20.6 17.9 OPPORTUNITY COST 0.018 0.012 0.018 0.012 0.012 0.013 0.017 0.012 13.1 10.6 12.9 10.6 10.2 11.1 12.0 10.6 INS, PROP, SALES A 0.008 0.008 0.008 0.008 0.007 0.009 0.008 0.008 HOUSING 5.8 7.3 5.7 7.3 5.8 7.7 5.5 7.3 REPAIR & MAINTENANCE 0.002 0.002 0.002 0.002 0.003 0.002 0.002 0.002 1.8 2.1 1.8 2.1 2.2 1.8 1.7 2.1 FUEL & LUBRICANT 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.5 0.1 0.2 0.1 0.2 0.1 0.4 0.1 LABOUR COST 0.029 0.027 0.025 0.031 0.029 0.027 0.029 0.027 21.2 24.1 18.4 27.4 24.7 23.4 21.2 24.1 MATERIAL/SERVICE 0.034 0.028 0.034 0.028 0.034 0.028 0.037 0.028 25.3 24.3 24.8 24.5 29.5 23.7 27.0 24.3 TAX A RENT ON LAND 0.007 0.010 0.013 0.005 0.007 0.010 0.008 0.010 4.9 8.5 9.3 4.4 5.7 8.3 6.0 8.5 OVERHEAD A INT. ON 0.007 0.006 0.007 . 0.006 0.007 0.006 0.008 0.006 OPERATING COST 5.4 5.3 5.0 5.7 6.2 5.1 5.5 5.3 ssBssssBsaasasssasaeBSBB BBSBCBSCC: IBBBSBSSS: S333BBB333! EBSSSBSSS; BEBBBSBBBa ses&Esao BSS3SSS3S3S ISBBCBBE TOTAL AVERAGE COST 0.136 0.113 0.137 0.112 0.117 0.117 0.138 0.113 TOTAL PERCENT 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 a Land tax and rent, labour, water fee, fuel, and tree prices In B.C. are equated to Washington State. The same procedure 1s applied to the orchard in Washington State. 0 B.C. and Washington State's orchard blocks have been Increased/decreased to 40 acres, c Density of B.C.'s orchard has been Increased from 202 trees per acre to 269 trees per acre. 98 4.4.2 ACREAGE SCENARIO I t has been suggested by peopl e w i t h i n the a p p l e i n d u s t r y t h a t economies of s i z e e x i s t i n o r c h a r d p r o d u c t i o n . To the e x t e n t t h a t economies of s i z e do e x i s t , the base s c e n a r i o w i l l be d e f i c i e n t g i v e n the d i f f e r e n c e i n the s i z e of the two o r c h a r d b l o c k s . A second s c e n a r i o , acreage s c e n a r i o , i s s t r u c t u r e d t o examine t h i s i s s u e . The o b j e c t i v e of the acreage s c e n a r i o i s t o e l i m i n a t e d i f f e r e n c e s r e s u l t i n g from economies of s i z e . For t h i s s c e n a r i o , the s i z e of B.C.'s o r c h a r d b l o c k i s i n c r e a s e d from 20 t o 40 a c r e s , w h i l e Washington S t a t e ' s o r c h a r d b l o c k i s d e c r e a s e d from 46 t o 40 a c r e s . Under t h e s e new a c r e a g e s , the s e t of c a p i t a l a s s e t s f o r each r e g i o n i s assumed t o remain unchanged. C o n s u l t a t i o n s w i t h o r c h a r d s p e c i a l i s t s i n B.C. a f f i r m e d t h a t the s e t of a s s e t s d e f i n e d f o r a 20 a c r e o r c h a r d b l o c k i n B.C. can be extended t o a 40 a c r e o r c h a r d b l o c k . I t i s f e l t t h a t the d e c l i n e i n acreage i s not enough t o w arrant a change i n c a p i t a l a s s e t s f o r Washington S t a t e . The assumption of no change i n c a p i t a l a s s e t s i s e x p e c t e d t o ge n e r a t e a d e c l i n e i n the per hour ownership c o s t of B.C.'s machinery. In t u r n , i t w i l l l e a d t o a lower t o t a l p r o d u c t i o n c o s t per a c r e . The o p p o s i t e i s t r u e f o r Washington S t a t e . I t s h o u l d be noted t h a t by i n c r e a s i n g / d e c r e a s i n g the o r c h a r d s i z e , o r c h a r d s a r e equated not o n l y i n s i z e but a l s o i n the p r o p o r t i o n of e s t a b l i s h m e n t / m a t u r e t r e e r a t i o i n t h i s 99 s c e n a r i o . In each c a s e , t r e e s age one through e i g h t c o n s t i t u t e s 1.75 a c r e s of the t o t a l 40 a c r e s . There a r e now 26 a c r e s of mature t r e e s . As a r e s u l t of the new l a n d c o m p o s i t i o n , the average per a c r e y i e l d of the Washington S t a t e ' s o r c h a r d b l o c k has been m o d i f i e d (see Ta b l e 2 7 ) . The average per a c r e y i e l d of the B.C.'s o r c h a r d b l o c k remains unchanged. In t h i s s c e n a r i o , the ty p e s of management o p e r a t i o n s d e f i n e d f o r each e s t a b l i s h m e n t and mature t r e e s w i l l not change. There i s some doubt t h a t the machine hours per o p e r a t i o n w i l l d e c l i n e because l a n d i n the Okanagan V a l l e y i s d i v i d e d i n t o p a r c e l s of 10 t o 11 a c r e s . 2 5 There i s a chance t h a t machine and l a b o u r hours may not decrease i f the b l o c k s ( i . e . two ten a c r e p a r c e l s ) b e i n g farmed are not l o c a t e d c l o s e t o each o t h e r . S i n c e the g e n e r a l o p i n i o n s e x p r e s s e d by h o r t i c u l t u r i s t s and f i e l d r e p r e s e n t a t i v e s i n d i c a t e t h a t machine l a b o u r hours do not change per a c r e i n g e n e r a l , no adjustment i s made t o any of the management sc h e d u l e s from the base ca s e . The e f f e c t on machine hours per o p e r a t i o n per a c r e i s assumed t o be too minimal t o warrant any adjustment f o r Washington S t a t e . S i n c e the s e t of a s s e t s has not changed, a d e c l i n e i n the average o p p o r t u n i t y and d e p r e c i a t i o n c o s t i s e x p e c t e d f o r the B.C. o r c h a r d ; f i x e d c o s t s a r e b e i n g s p r e a d over more a c r e s . In Washington S t a t e , the r e v e r s e , i . e . h i g h e r o p p o r t u n i t y and 2 5 I n c r e a s i n g an o r c h a r d s i z e u s u a l l y l e a d s t o a decrease i n machine and l a b o u r r e q u i r e m e n t s per a c r e s i n c e time r e q u i r e d t o a d j u s t and mount an implement can now be spread over more a c r e s . 100 d e p r e c i a t i o n c o s t , i s e x p e c ted s i n c e t o t a l acreage has d e c l i n e d . The average per a c r e c o s t i s $3241 and $4300 f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . For B.C., the r e s u l t s r e p r e s e n t s a $532 d e c l i n e over the base s c e n a r i o . The i n c r e a s e i s $102 per a c r e over the base s c e n a r i o f o r Washington S t a t e . As e x p e c t e d , these changes r e s u l t from changes i n d e p r e c i a t i o n and o p p o r t u n i t y c o s t . From a s h a r e of 35 p e r c e n t of t o t a l c o s t , these two c o s t s have d e c l i n e d t o 26 p e r c e n t i n B.C. In c o n t r a s t , the d e p r e c i a t i o n and o p p o r t u n i t y c o s t i n Washington S t a t e have i n c r e a s e d from 28 p e r c e n t t o 30 p e r c e n t . On a per pound b a s i s , the average c o s t has d e c l i n e d by 1.9 c e n t s t o 11.7 c e n t s i n B.C., but Washington S t a t e ' s c o s t changes by a v e r y s m a l l amount, 0.004 c e n t s . The r e d i s t r i b u t i o n of the share of t o t a l average c o s t i n B.C. suggest t h a t the a b i l i t y of a p r o d u c e r t o s p r e a d h i s f i x e d c o s t s does p l a y a r o l e i n d e t e r m i n i n g h i s t o t a l a verage c o s t on a per a c r e and pound b a s i s . The e f f i c i e n c y r a t i o f o r B.C. i s 0.69, an i n c r e a s e of 17 p e r c e n t over the base c a s e . From 1.06, the e f f i c i e n c y r a t i o i n Washington S t a t e d e c l i n e s by 0.03. The s m a l l e r change shown by Washington S t a t e i s a r e s u l t of a s m a l l d e c l i n e i n t o t a l a c r e s . 101 4.4.3 DENSITY SCENARIO The o r c h a r d s d e f i n e d i n the base case d i f f e r i n p l a n t i n g d e n s i t y . I t i s r e a s o n a b l e t o assume t h a t as d e n s i t y i n c r e a s e s , so w i l l l a b o u r c o s t on p r u n i n g , h a r v e s t i n g and o t h e r r e l a t e d c o s t s , per a c r e . C o n s e q u e n t l y , i t i s c o n s i d e r e d n e c e s s a r y t o examine a s c e n a r i o i n which the d e n s i t y of the o r c h a r d s are e q u a l . For t h i s s c e n a r i o , r o o t s t o c k s , c o m p o s i t i o n of l a n d , c a p i t a l a s s e t s and management p r a c t i c e s w i l l remain unchanged from the base c a s e . - A l l c o s t s a s s o c i a t e d w i t h c h e m i c a l a p p l i c a t i o n s , e x c e p t f e r t i l i z e r a p p l i e d by hand, a r e c o n s i d e r e d unchanged. 2 6 Machine and l a b o u r hours r e q u i r e d t o prune and t r a i n t r e e s , t h i n t r e e s , and the number of b i n s h a r v e s t e d and h a n d l e d a r e a d j u s t e d by assuming a c o n s t a n t c o s t per t r e e as s e t out i n the management s c h e d u l e s i n the base c a s e . T h i s s c e n a r i o p r o v i d e s an average p r o d u c t i o n c o s t comparison based on e q u a l d e n s i t y . R e s u l t s i n d i c a t e t o t a l average per a c r e c o s t i n c r e a s e s as t r e e d e n s i t y i n c r e a s e s . The average t o t a l c o s t , i n t h i s i n s t a n c e , i s $4263 f o r B.C., an i n c r e a s e of $409 (13 p e r c e n t ) per a c r e over the base c a s e . P r o d u c t i o n c o s t s f o r Washington S t a t e w i l l be i d e n t i c a l t o the base case s i n c e no change i n d e n s i t y has been made. M a t e r i a l / s e r v i c e c o s t , 2 6 D i s c u s s i o n s w i t h h o r t i c u l t u r i s t s i n d i c a t e t h a t c h e m i c a l a p p l i c a t i o n s a r e u s u a l l y recommended on a per a c r e b a s i s ; t h e r e f o r e , no adjustment i s r e q u i r e d . 1 02 l a b o u r c o s t and ren t on l a n d a r e a t t r i b u t e d t o B.C.'s i n c r e a s e i n p r o d u c t i o n c o s t . A h i g h e r r e n t on l a n d i s charged because the average y i e l d per a c r e has i n c r e a s e d 10 p e r c e n t 2 7 as a r e s u l t of more b e a r i n g t r e e s i n the o r c h a r d b l o c k . On t h e o t h e r hand, d e p r e c i a t i o n and o p p o r t u n i t y c o s t s ' s h a r e of t o t a l per a c r e average c o s t have d e c l i n e d from 35 t o 33 p e r c e n t . The average t o t a l per pound c o s t has i n c r e a s e d from 13.6 c e n t s t o 13.8 c e n t s . These r e s u l t s i n d i c a t e t h a t a 10 p e r c e n t i n c r e a s e i n the average per a c r e y i e l d i s not enough t o lower the per pound c o s t of p r o d u c i n g a p p l e s when the average per a c r e c o s t i n c r e a s e s by 13 p e r c e n t . T h i s suggests t h a t u n l e s s t h e average per a c r e y i e l d i s i n c r e a s e d a t a r a t e g r e a t e r than 10 p e r c e n t and/or the i n i t i a l average per a c r e y i e l d i s h i g h e r , i n c r e a s i n g the d e n s i t y of the t r e e s by 33 p e r c e n t w i l l not d e c r e a s e the per pound c o s t of p r o d u c i n g a p p l e s i n B.C. A l t e r n a t i v e l y , i t su g g e s t s t h a t i f the average per a c r e y i e l d i s the maximum a c h i e v a b l e , then the 202 d e n s i t y i s the most e f f i c i e n t system f o r B.C. The l a t e r i s d o u b t f u l s i n c e h o r t i c u l t u r i s t s and f i e l d r e p r e s e n t a t i v e s i n B.C. b e l i e v e t h a t the per a c r e average y i e l d employed can be improved. 2 7 Tim Watson, D i s t r i c t A g r i c u l t u r i s t , B.C.M.A.F., O l i v e r . 5. CHAPTER V 5.1 SUMMARY AND CONCLUSIONS The h i g h e s t t o t a l c o s t per a c r e by age of t r e e s i n B.C. i s $5017 (one year o l d t r e e s ) . T h i s i s f o l l w e d by the mature t r e e s w i t h a t o t a l per a c r e c o s t of $4138. With a d i f f e r e n t i a l of $879 per a c r e , (18 p e r c e n t of the per a c r e c o s t of the one year o l d t r e e s ) these r e s u l t s suggest t h a t the c o s t s a s s o c i a t e d w i t h k e e p i n g the t r e e s i n p r o d u c t i o n a r e l e s s than the c o s t s of r e p l a n t i n g the t r e e s . I f the income foregone by r e p l a n t i n g i s added t o the t o t a l per a c r e c o s t , i t w i l l i n c r e a s e s i g n i f i c a n t l y . T h i s may p a r t l y e x p l a i n why expansion and/or r e n o v a t i o n have been r e t a r d e d i n B.C., i n the s h o r t - r u n . The d e c i s i o n t o r e p l a n t and/or expand, i n the l o n g - r u n , w i l l depend on the e s t i m a t e d net p r e s e n t v a l u e of the i n v e s t m e n t s . For the s i x th r o u g h e i g h t year o l d t r e e s and mature t r e e s , the t o t a l per a c r e c o s t s a r e shown t o be c o n s i s t e n t l y h i g h e r i n Washington S t a t e than i n B.C. The t o t a l per a c r e c o s t s of the mature t r e e s a r e $4138 and $4753 f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . The lower t o t a l per a c r e c o s t of $615 i n B.C. i s a r e s u l t of lower t o t a l per a c r e l a b o u r c o s t , m a t e r i a l / s e r v i c e c o s t and r e n t on l a n d . The same c a t e g o r i e s of c o s t s a r e r e s p o n s i b l e f o r the lower t o t a l per a c r e c o s t , $523 ($4002 f o r B.C. and $4525 f o r Washington 103 1 04 S t a t e ) , f o r the e i g h t y e a r o l d t r e e s . . Lower r e n t on l a n d appears t o be the prime reason why B.C.'s t o t a l per a c r e c o s t of the seven y e a r o l d t r e e s i s lower than Washington S t a t e ' s . Lower r e n t on l a n d , a l o n g w i t h lower m a t e r i a l / s e r v i c e , r e p a i r and maintenance, i n s u r a n c e , p r o p e r t y and s a l e s t a x , and h o u s i n g c o s t s i n B.C., a r e r e s p o n s i b l e f o r the lower t o t a l per a c r e c o s t of the s i x year o l d t r e e s . The t o t a l per a c r e c o s t of the one, f o u r and f i v e year o l d t r e e s a r e h i g h e r i n B.C. than i n Washington S t a t e . With a r e s p e c t i v e t o t a l p e r a c r e c o s t of $501-7 and $4126 f o r the one year o l d t r e e s i n B.C. and Washington S t a t e , the h i g h e s t c o s t d i f f e r e n t i a l ($891) i s o b t a i n e d . E x a m i n i n a t i o n of the p r o d u c t i o n s c h e d u l e of the one year o l d t r e e s r e v e a l e d t h a t the h i g h e r per a c r e t o t a l d e p r e c i a t i o n and o p p o r t u n i t y c o s t s , a t o t a l of $762 (85 p e r c e n t of the t o t a l c o s t d i f f e r e n t i a l ) , are m a i n l y r e s p o n s i b l e f o r t h i s l a r g e c o s t d i f f e r e n t i a l . A p r i m a r y e x p l a n a t i o n f o r the h i g h e r d e p r e c i a t i o n and o p p o r t u n i t y c o s t s i n B.C. r e v o l v e s around the b e h a v i o u r a l a s s u m p t i o n t h a t a p p l e p r o d u c e r s , on the av e r a g e , w i l l own a r o t o v a t o r and t r e e auger i n B.C., but not i n Washington S t a t e . The e l i m i n a t i o n of the ownership of the t r e e auger a l o n e can reduce the t o t a l c o s t d i f f e r e n t i a l by 23 p e r c e n t . The e s t i m a t e d average (average of the i n d i v i d u a l o r c h a r d b l o c k s ) t o t a l a c r e c o s t s a r e $3773 f o r B.C. and $4198 f o r Washington S t a t e . In B.C., the f o u r h i g h e s t 1 05 c a t e g o r i e s of c o s t , i n d e c r e a s i n g importance, a r e m a t e r i a l / s e r v i c e , d e p r e c i a t i o n , l a b o u r and o p p o r t u n i t y c o s t s . M a t e r i a l / s e r v i c e c o s t s c o n s t i t u t e 25 p e r c e n t of t o t a l c o s t . T h i s i s not s u r p r i s i n g s i n c e t h i s c a t e g o r y i n c l u d e d i n p u t c o s t s such as f e r t i l i z e r s , h e r b i c i d e s , f u n g i c i d e s , n u t r i e n t s , p e s t i c i d e s , r o d e n t i c i d e s , water f e e s , and custom s e r v i c e s . Labour, a t 21 p e r c e n t , h o l d s the t h i r d h i g h e s t share of the average t o t a l per a c r e c o s t . D e p r e c i a t i o n and o p p o r t u n i t y c o s t s r e p r e s e n t 35 p e r c e n t of t o t a l c o s t s , a r e l a t i v e l y h i g h p o r p o r t i o n of t o t a l c o s t s . In Washington S t a t e , m a t e r i a l / s e r v i c e (24.3 p e r c e n t ) and l a b o u r c o s t (24.1 p e r c e n t ) h o l d the f i r s t and second h i g h e s t s hare of t o t a l average per a c r e c o s t . D e p r e c i a t i o n and o p p o r t u n i t y c o s t s f o l l o w w i t h a t o t a l of 28 p e r c e n t . A comparison between the c a t e g o r i e s i n B.C. and Washington S t a t e show t h a t a h i g h e r p r o p o r t i o n of B.C.'s t o t a l c o s t i s a r e s u l t of c a p i t a l i n v e s t m e n t s . An i n t e r e s t i n g r e s u l t t o note i s t h a t the p r o p o r t i o n of t o t a l c o s t r e s u l t i n g from t a x and r e n t on l a n d i s h i g h e r i n Washington S t a t e by 3.5 p e r c e n t . The average per pound c o s t i s 13.6 and 11.3 c e n t s f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . The 2.3 c e n t s d i f f e r e n t i a l t r a n s l a t e s i n t o a 20 p e r c e n t h i g h e r c o s t f o r B.C. p r o d u c e r s . T h i s appears i n c o n s i s t e n t w i t h the r e s u l t t h a t the average t o t a l per a c r e c o s t i s lower i n B.C. than i n Washington S t a t e . The e x p l a n a t i o n l i e s i n the average per a c r e y i e l d s e s t i m a t e d f o r the two o r c h a r d s . With a lower 1 06 y i e l d by 9119 pounds per a c r e , B.C.'s per pound c o s t becomes h i g h e r than t h a t of Washington S t a t e . The e f f i c i e n c y r a t i o s , based on t o t a l - o u t p u t v a l u e / t o t a l i n p u t v a l u e , a r e 0.59 f o r B.C. and 1.06 f o r Washington S t a t e . These r a t i o s suggest t h a t the Washington S t a t e p r o d u c e r s a re a b l e t o o b t a i n h i g h e r r e t u r n s from t h e i r e x p e n d i t u r e s than the B.C. p r o d u c e r s . Exchanging the i n p u t p r i c e s f o r the two a r e a s appears t o have l i t t l e e f f e c t on the average per a c r e and per pound c o s t . In t h i s s c e n a r i o , the average t o t a l per a c r e c o s t i n B.C. i n c r e a s e d from $3773 t o $3823, w h i l e Washington's per a c r e c o s t dropped from $4198 t o $4181. The s u r p r i s i n g i n c r e a s e i n B.C.'s t o t a l per a c r e c o s t i s l a r g e l y a r e s u l t of h i g h e r r e n t on o r c h a r d l a n d . A lower r e n t on l a n d i s a l s o r e s p o n s i b l e f o r the unexpected d e c l i n e i n Washington S t a t e ' s t o t a l per a c r e c o s t . The per pound c o s t of p r o d u c i n g a p p l e s a r e 13.7 and 11.2 c e n t s f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . I f the r e n t s on o r c h a r d l a n d are not exchanged, the average per a c r e c o s t i n B.C. d e c r e a s e s by $105 w h i l e Washington S t a t e ' s per a c r e c o s t i n c r e a s e s by $138. In t h i s c a s e , the per pound c o s t of p r o d u c i n g a p p l e s i n B.C. i s 13.1 c e n t s , a 0.5 c e n t s d e c r e a s e over the base c a s e . For Washington S t a t e , the per pound c o s t i s 11.7 c e n t s , a 0.4 c e n t s i n c r e a s e over the base c a s e . By i n c r e a s i n g B.C.'s o r c h a r d b l o c k from 20 t o 40 a c r e s and h o l d i n g a l l management p r a c t i c e s and c a p i t a l a s s e t s unchanged, the average t o t a l per a c r e c o s t i s e s t i m a t e d t o 1 07 d e c r e a s e from $3773 t o $3241, a 14 p e r c e n t d e c l i n e . Because the acreage has d e c l i n e d t o 40 from 46, the average t o t a l per a c r e c o s t i n Washington S t a t e i n c r e a s e s from $4198 to $4300, a 2 p e r c e n t i n c r e a s e . On a per pound b a s i s , both B.C. and Washington S t a t e ' s c o s t s a r e e s t i m a t e d t o be 11.7 c e n t s . For Washington S t a t e , the e f f i c i e n c y r a t i o d e c l i n e s by 0.03 t o 1.03. The e f f i c i e n c y r a t i o i n c r e a s e s from 0.59 t o 0.69 f o r B.C. These r e s u l t s i n d i c a t e t h a t the a b i l i t y of a p r o d u c e r t o spread f i x e d c o s t s does p l a y an i m p o r t a n t r o l e i n d e t e r m i n i n g c o s t s , e s p e c i a l l y on a per pound b a s i s . R e s u l t s o b t a i n e d from the d e n s i t y s c e n a r i o suggest t h a t an i n c r e a s e i n d e n s i t y does not n e c e s s a r i l y l e a d t o a d e c l i n e i n the per pound c o s t s of p r o d u c i n g a p p l e s . By i n c r e a s i n g B.C.'s d e n s i t y from 202 t o 269 t r e e s , the average per a c r e and per pound c o s t o b t a i n e d a r e $4263 and 13.8 c e n t s . The. h i g h e r per a c r e c o s t i s e x p e c t e d s i n c e c o s t s a s s o c i a t e d w i t h h a r v e s t i n g , p r u n i n g and t r a i n i n g , and v a r i o u s o t h e r c o s t s have been i n c r e a s e d . However, the h i g h e r per pound c o s t , $0,002 over the base c a s e , i s unexpected. An e x p l a n a t i o n l i e s i n the average per a c r e y i e l d employed t o e s t i m a t e the per pound c o s t . W i t h a 33 p e r c e n t i n c r e a s e i n d e n s i t y , the average per a c r e y i e l d i s assumed t o i n c r e a s e by 10 p e r c e n t . With a 13 p e r c e n t i n c r e a s e i n the t o t a l a verage per a c r e c o s t , a 10 p e r c e n t i n c r e a s e i n the average per a c r e y i e l d i s not h i g h enough t o reduce the average per pound c o s t of p r o d u c i n g a p p l e s . No change i s observed f o r Washington S t a t e i n t h i s i n s t a n c e because no adjustment was 108 made t o the base c a s e . 5.2 LIMITATIONS OF THE STUDY The use of a " r e p r e s e n t a t i v e " o r c h a r d i s one a l t e r n a t i v e method f o r d e t e r m i n i n g the c o s t s of p r o d u c t i o n . A l t h o u g h t h i s method i s c o n s i d e r e d t o be the most a p p r o p r i a t e g i v e n the a v a i l a b i l i t y of da t a and o t h e r f a c t o r s , c a u t i o n i s r e q u i r e d i n i n t e r p r e t i n g the r e s u l t s . The assumed p r i c e s , y i e l d s and management p r a c t i c e s do a f f e c t r e s u l t s i f changed. For example, the t o t a l per a c r e c o s t s o b t a i n e d by age of t r e e s , as shown i n the p r o d u c t i o n s c h e d u l e s , a re s p e c i f i c t o the management p r a c t i c e s d e f i n e d . The s u b t r a c t i o n or a d d i t i o n of an o p e r a t i o n w i l l change the t o t a l per a c r e c o s t . F u r t h e r m o r e , the assumed machine hours r e q u i r e d per o p e r a t i o n and the machines used a r e b e h a v i o u r a l a s s u m p t i o n s t h a t can a l t e r the c o s t s i f changed. As an i l l u s t r a t i o n , i f the s i z e of the t r a c t o r i s i n c r e a s e d i n B.C., the per hour d e p r e c i a t i o n and o p p o r t u n i t y c o s t s w i l l i n c r e a s e . U l t i m a t e l y , t h e s e changes t r a n s l a t e i n t o h i g h e r per a c r e c o s t s . The average c o s t per pound i s i n f l u e n c e d by the average per a c r e y i e l d employed. For example, by assuming a 10 109 p e r c e n t i n c r e a s e i n B.C.'s average per a c r e y i e l d ( i . e . 30712 pounds i n s t e a d of 27920 pounds) the per pound c o s t d e c r e a s e s t o 12.5 c e n t s , as opposed t o 13.6 c e n t s . T h i s i s a d e c r e a s e of 1.1 c e n t s per pound; hence, the d i f f e r e n t i a l between B.C. and Washington S t a t e ' s c o s t s of p r o d u c t i o n d e c r e a s e s by the same amount. The e f f i c i e n c y r a t i o s a r e e s t i m a t e d by u s i n g an average market p r i c e of 8 and 12 c e n t s per pound f o r B.C. and Washington S t a t e , r e s p e c t i v e l y . These a r e average p r i c e s t h a t do not t a k e i n t o account the q u a l i t y and grades ( i . e . e x t r a f a n c y , f a n c y ) of the a p p l e s produced. A change i n the average market p r i c e s used w i l l change r e s u l t s . For example, i f the average market p r i c e i n B.C. i s assumed t o be 9 c e n t s per pound and the average per a c r e y i e l d remains a t 27290 pounds, the e f f i c i e n c y r a t i o w i l l i n c r e a s e t o 0.67 from the c u r r e n t r a t i o 0.59. The Canada-US exchange r a t e (average of 1984) used i n t h i s s tudy a l s o p l a y s a r o l e i n the o v e r a l l r e s u l t s . A change i n the exchange r a t e w i l l change a l l of Washington S t a t e ' s p r o d u c t i o n c o s t s . For example, an i n c r e a s e i n the v a l u e of the U.S. d o l l a r w i l l g e n e r a t e an i n c r e a s e i n the average t o t a l per a c r e and pound c o s t s o b t a i n e d f o r Washington S t a t e . No change w i l l o c c ur i n B.C.'s p r o d u c t i o n c o s t s , assuming the change i n the exchange r a t e does not g e n e r a t e a change i n the replacement v a l u e s of the machines. T h i s may not be a v a l i d assumption s i n c e many of the machines p u r c h a s e d i n B.C. o r i g i n a t e i n the U.S. 1 10 C o n s e q u e n t l y , i t i s s u s p e c t e d t h a t B.C.'s average per a c r e and pound c o s t s w i l l i n c r e a s e . D e s p i t e the l i m i t a t i o n s of the r e s u l t s o b t a i n e d , t h i s study does p r o v i d e some i n d i c a t i o n of what the average per a c r e and pound c o s t s of p r o d u c t i o n a r e f o r a p p l e p r o d u c e r s i n B.C. and Washington S t a t e . I t p r o v i d e s a comparison between the c o s t s of p r o d u c t i o n i n B.C. and Washington S t a t e a t the farm l e v e l . The r e s u l t s have p r o v i d e d some i n s i g h t as to the economic e f f i c i e n c y ( i n terms of the p r o d u c e r s ' a b i l i t y t o o b t a i n r e t u r n s from e x p e n d i t u r e s ) of B.C.'s a p p l e p r o d u c e r s r e l a t i v e t o t h e i r c o u n t e r p a r t s i n Washington S t a t e . F u r t h e r m o r e , by c a r r y i n g out t h i s e x e r c i s e , the l a c k of a c c u r a t e d a t a has become q u i t e e v i d e n t . An improvement on c u r r e n t p r o d u c t i o n d a t a would s t r e n g t h e n f u t u r e c o s t of p r o d u c t i o n s t u d i e s . 5.3 FURTHER RESEARCH A major l i m i t a t i o n of t h i s study i s t h a t i t c o n c e n t r a t e s on the p r o d u c t i o n ( i . e . farm) l e v e l . I t would be more u s e f u l i f the i n d u s t r y c o u l d be examined as a whole. The r e s u l t s would p r o v i d e a b e t t e r i n s i g h t i n t o the a r e a s w i t h i n the i n d u s t r y t h a t may d i f f e r . The c u r r e n t r e s u l t s 111 o b t a i n e d show t h a t the average (average of t h e i n d i v i d u a l o r c h a r d b l o c k s ) per a c r e c o s t i s lower i n B.C. than i n Washington S t a t e , but on a per pound b a s i s B.C.'s c o s t s are h i g h e r . The p r i m a r y reason l i e s i n the a v e r a g e per a c r e y i e l d . C o n s e q u e n t l y , an u n d e r s t a n d i n g of why B.C.'s average y i e l d i s so much lower than those i n Washington S t a t e may a i d p r o d u c e r s i n B.C. t o a c h i e v e lower per pound c o s t s . In a d d i t i o n , the r e s u l t s show t h a t the B.C. p r o d u c e r s a r e l e s s e f f i c i e n t than t h e i r c o u n t e r p a r t s i n Washington S t a t e , based on the t o t a l output v a l u e s / t o t a l i n p u t v a l u e s r a t i o . The main e x p l a n a t i o n e v o l v e s around the average market p r i c e s . On average , B.C.'s market p r i c e i s 4 c e n t s per pound l e s s than t h a t of Washington S t a t e . With an average market p r i c e of 8 c e n t s per pound i n B.C., the d i f f e r e n t i a l r e p r e s e n t s 50 p e r c e n t of i t s market p r i c e . Hence, the q u e s t i o n which needs t o be a s k e d i s why the d i f f e r e n c e i n market p r i c e s . Because the p r i c e s r e c e i v e d by B.C. p r o d u c e r s a re net of m a r k e t i n g and p r o c e s s i n g c o s t s , f u r t h e r r e s e a r c h i n t o the e f f i c i e n c y of p a c k i n g h o u s e s i s needed. 1 1 2 5.4 POLICY IMPLICATIONS Recent statements a p p e a r i n g i n Coun t r y L i f e and o t h e r news media i n d i c a t e t h a t a p p l e p r o d u c e r s have r e c o g n i z e d the e x i s t e n c e of c e r t a i n problems w i t h i n t h e i r i n d u s t r y . I f the i n d u s t r y i s t o s u r v i v e , c e r t a i n b e h a v i o u r a l and s t r u c t u r a l changes must be u n d e r t a k e n . Through t h i s r e c o g n i t i o n , c e r t a i n changes have been implemented or a r e i n the p r o c e s s of b e i n g implemented. For example, i n c e n t i v e s f o r i m p r o v i n g the q u a l i t y of the f r u i t b e i n g s h i p p e d t o the packinghouses have been implemented through a p r i c i n g mechanism. The p r e v i o u s c e n t r a l m a r k e t i n g system has been m o d i f i e d to a l l o w independent m a r k e t i n g by i n d i v i d u a l p a c k i n g h o u s e s . The p o s s i b l e a d o p t i o n of new a p p l e v a r i e t i e s i s b e i n g c o n s i d e r e d . High d e n s i t y systems a r e becoming i n c r e a s i n l y r e c o g n i z e d as a means t o f u t u r e s u r v i v a l f o r t h i s i n d u s t r y . What r o l e s h o u l d the government p l a y i n r e l a t i o n t o t h i s i n d u s t r y ? R e s u l t s i n d i c a t e t h a t low average per a c r e y i e l d s and producer p r i c e s are two main rea s o n s why B.C. a p p l e p r o d u c e r s a r e l e s s e f f i c i e n t i n o b t a i n i n g r e t u r n s from t h e i r e x p e n d i t u r e s than t h e i r c o u n t e r p a r t s i n Washington S t a t e . F o r p o l i c y p u r p o s e s , t h e s e a r e two a r e a s t h a t the government may want t o c o n s i d e r . A c c o r d i n g t o h o r t i c u l t u r i s t s and f i e l d r e p r e s e n t a t i v e s i n B.C., the per a c r e y i e l d s i n B.C. a r e d i s a d v a n t a g e d r e l a t i v e t o Washington S t a t e by c l i m a t e and s o i l . U n l i k e 1 1 3 c l i m a t e , an u n c o n t r o l l a b l e f a c t o r , s o i l c o n d i t i o n s can be improved i f managed p r o p e r l y . C o n s e q u e n t l y , more r e s e a r c h c o u l d be undertaken t o det e r m i n e methods t h a t a p p l e p r o d u c e r s c o u l d employ t o improve t h e i r s o i l . Improvement c o u l d come b o t h i n terms of s o i l f e r t i l i t y and a l l e v i a t i n g the e f f e c t s of a p p l e r e p l a n t d i s e a s e . In Europe, h i g h d e n s i t y systems have been adopted t o i n c r e a s e y i e l d s , e s p e c i a l l y d u r i n g the e s t a b l i s h m e n t y e a r s . C u r r e n t l y , r e s e a r c h has been undertaken t o determine the a p p r o p r i a t e h i g h d e n s i t y system ( i . e . v a r i e t y of r o o t s t o c k and s p a c i n g ) f o r B.C. However, the s k i l l s r e q u i r e d t o manage a h i g h d e n s i t y system d i f f e r from those of a low d e n s i t y system. U n l e s s the s k i l l s r e q u i r e d t o manage a h i g h d e n s i t y system a r e a c q u i r e d , h i g h e r y i e l d s may not be a c h i e v e d . To a i d t he a d o p t i o n of the h i g h d e n s i t y systems i n B.C., the government c o u l d o r g a n i z e workshops t o p r o v i d e i n f o r m a t i o n on the management of t h e s e systems. S i n c e market p r i c e s a re l a r g e l y d e t e r m i n e d e x o g e n o u s l y , the government c o u l d do l i t t l e t o i n f l u e n c e i t , except f o r d i r e c t p r i c e support programs. . However, o t h e r forms of a s s i s t a n c e may be p r e f e r a b l e t o . p r i c e s u p p o r t programs. An example i s the improvement of the s t o r a g e system i n B.C. By p r o v i d i n g a s s i s t a n c e t o improve the s t o r a g e system, i t w i l l a l l o w p r o d u c e r s t o s e l l more d u r i n g the o f f - s e a s o n when market p r i c e s a r e u s u a l l y h i g h e r . 8. BIBLIOGRAPHY A g r i c u l t u r e Canada. "Apple Market Review." M a r k e t i n g and Economics Branch, A g r i c u l t u r e Canada, 1984. A g r i c u l t u r e Canada. "Government A s s i s t a n c e To The Tree F r u i t I n d u s t r y For Land Development And I r r i g a t i o n P r o j e c t s i n B.C. and Washington S t a t e . " R e g i o n a l Development Branch, A g r i c u l t u r e Canada, March 1984a. A g r i c u l t u r e Canada. "Impact of T a x a t i o n P r o v i s i o n s on Orchard E s t a b l i s h m e n t , Expansion and R e n o v a t i o n i n B.C." R e g i o n a l Development Branch, A g r i c u l t u r e Canada, March 1984b. American S o c i e t y of A g r i c u l t u r a l E n g i n e e r s . A g r i c u l t u r a l E n g i n e e r s Yearbook. S t . Joseph, M i s s o u r i , 1983. A n d i s o n , A l l a n ; Kennedy, George; and Graham, John. " H i s t o r i c P r o d u c t i o n Data For S p e c i f i c Apply O r c h a r d Systems i n the Okanagan V a l l e y of B.C." Economics Branch, A g r i c u l t u r e Canada, September 1977. B.C. M i n i s t r y of A g r i c u l t u r e and Food. "1983 Farm and Food S t a t i s t i c s . " B.C. M i n i s t r y of A g r i c u l t u r e and Food, A p r i l 1984. B.C. M i n i s t r y of A g r i c u l t u r e and Food. " E s t i m a t e d C o s t s and R e t u r n s : Apple Orchard E s t a b l i s h m e n t and P r o d u c t i o n . " B.C.M.A.F., Economics Branch, May 1982. B.C. M i n i s t r y of A g r i c u l t u r e and Food. " E s t i m a t e d C o s t s and R e t u r n s : Apple Orchard E s t a b l i s h m e n t and P r o d u c t i o n . " B.C.M.A.F., Economics Branch, May 1984, 1982. C a h i l l , Sean. "Apple P r o d u c t i o n ,In The P a c i f i c Northwest: A Comparative Study." B. Sc. T h e s i s , Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of B r i t i s h Columbia, 1982. C a m p b e l l , E l i z a b e t h M. "A Study of Canada's Apply I n d u s t r y . " M a r k e t i n g and Economics Branch, A g r i c u l t u r e Canada, 1983. 114 1 15 D o l l , J . P. and Orazem, F. P r o d u c t i o n Economics Theory W i t h  A p p l i c a t i o n s . 2d ed. New York: John W i l e y and Sons, 1984. Dawson, Dau and A s s o c i a t e s L i m i t e d . "B.C. Tree F r u i t O r c h a r d C o n d i t i o n . " March 11, 1984. Graham, John D.; Kennedy, George; M a r s h a l l A l l a n A. "A M u l t i - P e r i o d O r c h a r d Management Model." Economics Branch, A g r i c u l t u r e Canada, November 1977 H a r r i n g t o n , D a v i d H. "Costs and R e t u r n s ; Economic and A c c o u n t i n g Concepts." A g r i c u l t u r a l Economics R e s e a r c h , 35:4 (October 1983): 1-8. Hinman, H.R.; Hunter, R.E.; and Tukey, R.B. " 1 9 8 5 c o s t of E s t a b l i s h i n g An Apple Orchard Columbia B a s i n , Washington." C o o p e r a t i v e E x t e n s i o n , C o l l e g e of A g r i c u l t u r e , Farm B u s i n e s s Management R e p o r t s , J a n u a r y 1985. Hinman, H. R.; Tukey, R.B.; and Hunter, R.E. " E s t i m a t e d Cost of P r o d u c t i o n f o r a Red D e l i c i o u s Apple Orchard i n C e n t r a l Washington." C o o p e r a t i v e E x t e n s i o n , C o l l e g e of A g r i c u l t u r e , Farm B u s i n e s s Management R e p o r t s , June 1982. Hinman, H.R.; Tukey, R.B.; Hunter, R.E.; and W i l l e t , G.S. "1981 Cost of E s t a b l i s h i n g An Apple O r c h a r d , Columbia B a s i n , C e n t r a l Washington." C o o p e r a t i v e E x t e n s i o n , C o l l e g e of A g r i c u l t u r e , Farm B u s i n e s s Management R e p o r t s , September 1981. Hoffman, George, and G u s t a f s o n , C o l e . "A New Approach To E s t i m a t i n g A g r i c u l t u r a l C o s t s of P r o d u c t i o n . " A g r i c u l t u r a l Economics Research, 35:4 (October 1983): 9-14. Hudson, S.C. "An Economic Study of the Tree F r u i t I n d u s t r y i n B r i t i s h Columbia." B.C.M.A.F., September 1973. J e n k i n s , Glenn P. " C a p i t a l i n Canada: I t s S o c i a l and P r i v a t e Performance 1965-1974." Economic C o u n c i l of Canada, October 1977. 116 Kennedy, George. "B.C. Tree F r u i t I n d u s t r y : Some Economic C o n s i d e r a t i o n s . " Paper p r e s e n t e d t o A g r i c u l t u r e Canada H o r t i c u l t u r a l Review, Kelowna B.C., 30 September 1980. M c N e i l l , Roger G. " P r o d u c t i o n F u n c t i o n s For A p p l e Orchard Systems In The Okanagan V a l l e y Of B r i t i s h C olumbia." M.Sc. T h e s i s , Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of B r i t i s h C olumbia, November 1977. Noonan, Ted. "Orchard I n d u s t r y B a s i s of Okanagan Economy." Count r y L i f e , , June 1983: Noonon, Ted. "Whelan Meets F r u i t g r o w e r s Has No Answer t o D i s t r e s s . " Country L i f e , November 1983: A1. O'Rourke, A. Desmond. "The F u t u r e S i z e of the Washington Apple Crop." P r o v i s i o n a l Impact C e n t r e Working Paper 1. C o l l e g e of A g r i c u l t u r e and Home Economics, Washington S t a t e U n i v e r s i t y , P u l l m a n , Washington, 1984. Sc h o t z k o , Tom. "What I s The F u t u r e of The Apple I n d u s t r y ? " Paper p r e s e n t e d a t the 47th Annual H o r t i c u l t u r a l and T r a f f i c A s s o c i a t i o n Okanogan m e e t i n g , 4 F e b r u a r y 1982. S h o r t , Cameron and M c N e i l , Roger. " T r a c t o r C o s t s and Canadian Tax P o l i c y . " U.B.C. D i s c u s s i o n Paper, 1985. Swales, Ted. "Swales Shares Ideas On F u t u r e f o r D e l i c i o u s . " C o u n t r y L i f e , March 1984: A9. Swales, Ted. "Swales Shares More Ideas On F u t u r e of Red D e l i c i o u s . " C ountry L i f e , A p r i l 1984: A l l . Watts, Myles J . "Machinery R e p a i r F u n c t i o n s and D e p r e c i a t i o n . " N o r t h C e n t r a l J o u r n a l of A g r i c u l t u r a l  Economics, 4(1982):69-72. Watts, M y l e s J . and Helmers, G l e n A. "Machinery C o s t s and I n f l a t i o n . " Western J o u r n a l of A g r i c u l t u r a l Economics, 6(1981):129-45. U n i t e d S t a t e s Department A g r i c u l t u r a l C o s t s of Economics, S t a t i s t i c s , of A g r i c u l t u r e . " E s t i m a t i n g P r o d u c t ion-Workshop P r o c e e d i n g s . " and C o o p e r a t i v e S e r v i c e s , June 1 17 Kennedy, George. "B.C. Tree F r u i t I n d u s t r y : Some Economic C o n s i d e r a t i o n s . " Paper p r e s e n t e d to A g r i c u l t u r e Canada H o r t i c u l t u r a l Review, Kelowna B.C., 30 September 1980. M c N e i l l , Roger G. " P r o d u c t i o n F u n c t i o n s For A p p l e O r c h a r d Systems In The Okanagan V a l l e y Of B r i t i s h C o l u m b i a . " M.Sc. T h e s i s , Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of B r i t i s h C o l u m b i a , November 1977. Noonan, Ted. "Orchard I n d u s t r y B a s i s of Okanagan Economy." C o u n t r y L i f e , , June 1983: Noonon, Ted. "Whelan Meets F r u i t g r o w e r s Has No Answer t o D i s t r e s s . " C ountry L i f e , November 1983: A1. O'Rourke, A. Desmond. "The F u t u r e S i z e of the Washington A p p l e Crop." P r o v i s i o n a l Impact C e n t r e Working Paper 1. C o l l e g e of A g r i c u l t u r e and Home Economics, Washington S t a t e U n i v e r s i t y , P u l l m a n , Washington, 1984. S c h o t z k o , Tom. "What I s The F u t u r e of The Ap p l e I n d u s t r y ? " Paper p r e s e n t e d a t the 47th Annual H o r t i c u l t u r a l and T r a f f i c A s s o c i a t i o n Okanogan m e e t i n g , 4 F e b r u a r y 1982. S h o r t , Cameron and M c N e i l , Roger. " T r a c t o r C o s t s and Can a d i a n Tax P o l i c y . " U.B.C. D i s c u s s i o n P a p e r , 1985. Swales, Ted. "Swales Shares Ideas On F u t u r e f o r D e l i c i o u s . " C o u n t r y L i f e , March 1984: A9. Swales, Ted. "Swales Shares More Ideas On F u t u r e of Red D e l i c i o u s . " C o u n t r y L i f e , A p r i l 1984: A11. Watts, Myles J . "Machinery R e p a i r F u n c t i o n s and D e c r e e i a t i o n . " N o r t h C e n t r a l J o u r n a l of A g r i c u l t u r a l  E c onomics, 4(1982):69~72. Watts, M y l e s J . and Helmers, G l e n A. "Machinery C o s t s and I n f l a t i o n . " Western J o u r n a l of A g r i c u l t u r a l E conomics, 6 ( 1 9 8 0 : 1 2 9 - 4 5 . U n i t e d S t a t e s Department of A g r i c u l t u r e . " E s t i m a t i n g A g r i c u l t u r a l C o s t s of Pr o d u c t i o n - W o r k s h o p P r o c e e d i n g s . " Economics, S t a t i s t i c s , and C o o p e r a t i v e S e r v i c e s , June 1979. 118 APPENDIX A TABLE Al COMPARING PRODUCTION COSTS: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS AVERAGE COST PER HECTARE AVERAGE COST PER KILOGRAM B.C. ($) (%) WASH. ($) (% ) B.C. ($) WASH. ($) DEPRECIATION 2063 22.1 1856 17 .9 0.066 0 .044 OPPORTUNITY 1221 13.1 1100 10 .6 0.040 0 .026 INS, PROP, SALES 539 5.8 754 7 .3 0.018 0 .018 REPAIR & MAINTENANCE 168 1.8 215 2 .1 0.004 0 .004 FUEL & LUBRICANT 40 0.5 5 0 .1 0.002 0 .000 LABOUR 1974 21.2 2496 24 .1 0.064 0 .060 MATERIAL/SERVICE 2362 25.3 2518 24 .3 0.075 0 .062 TAX & RENT ON LAND 457 4.9 882 8 .5 0.015 0 .022 OVERHEAD & INT. ON 499 5.4 549 5 .3 0.015 0 .013 OPERATING COST TOTAL COST PER ACRE 9323 100.0 10373 100.0 0.300 0.250 119 APPENDIX A TABLE A2 PRODUCTION COSTS PER HECTARE: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS BASE CASE SCENARIOS ACREAGE15 INPU1 PRICE3 DENSITY0 (CASE 1) (CASE 2) (CASE 3) B.C. WASH. B.C. WASH. B.C. WASH. B.C. WASH. DEPRECIATION COST 2063 1856 2063 1856 1238 1992 2177 1856 22.1 17.9 21.8 18.0 15.5 18.7 20.6 17.9 OPPORTUNITY COST 1221 1100 1221 1100 813 1181 1268 1100 13.1 10.6 12.9 10.6 10.2 11.1 12.0 10.6 INS, PROP, SALES & 539 754 539 754 465 820 576 754 HOUSING 5.8 7.3 5.7 7.3 5.8 7.7 5.5 7.3 REPAIR & MAINTENANCE 168 215 168 215 178 193 180 215 1.8 2.1 1.8 2.1 2.2 1.8 1.7 2.1 FUEL & LUBRICANT 40 5 17 7 20 7 40 5 0.5 0.1 0.2 0.1 0.2 0.1 0.4 0.1 LABOUR COST 1974 2496 1742 2827 1974 2491 2234 2496 21.2 24.1 18.4 27.4 24.7 23.4 21.2 24.1 MATERIAL/SERVICE 2362 2518 2345 2530 2365 2515 2844 2518 25.3 24.3 24.8 24.5 29.5 23.7 27.0 24.3 TAX & RENT ON LAND 457 882 882 457 457 880 633 882 4.9 8.5 9.3 4.4 5.7 8.3 6.0 8.5 OVERHEAD & INT. ON 499 549 469 586 499 546 583 549 OPERATING COST 5.4 5.3 5.0 5.7 6.2 5.1 5.5 5.3 TOTAL AVERAGE COST 9323 10373 9447 10331 8008 10625 10534 10373 TOTAL PERCENT 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 a Land tax and rent, labour, water fee, fuel , and tree prices In B.C. are equated to Washington State. The same procedure 1s applied to the orchard 1n Washington State. b B.C. and Washington's orchard blocks have been Increased/decreased to 40 acres. c Density of B.C.'s orchard has been Increased from 202 trees per acre to 269 trees per acre. 120 | APPENDIX A TABLE A3 PRODUCTION COSTS PER KILOGRAM: B.C. VS WASHINGTON STATE, IN 1984 CANADIAN DOLLARS BASE CASE SCENARIOS INPUT PRICE3 ACREAGEb DENSITY0 (CASE 1) (CASE 2) (CASE 3) B.C. WASH. B.C. WASH. B.C. WASH. B.C. WASH. DEPRECIATION COST 0.066 0.044 0.066 0.044 0.040 0.049 0.064 0.044 22.1 17.9 21.8 18.0 15.5 18.7 20.6 17.9 OPPORTUNITY COST 0.040 0.026 0.040 0.026 0.026 0.029 0.037 0.026 13.1 10.6 12.9 10.6 10.2 11.1 12.0 10.6 INS, PROP, SALES & 0.018 0.018 0.018 0.018 0.015 0.020 0.018 0.018 HOUSING 5.8 7.3 5.7 7.3 5.8 7.7 5.5 7.3 REPAIR & MAINTENANCE 0.004 0.004 0.004 0.004 0.007 0.004 0.004 0.004 1.8 2.1 1.8 2.1 2.2 1.8 1.7 2.1 FUEL A LUBRICANT 0.002 0.000 0.001 0.001 0.001 0.001 0.001 0.000 0.5 0.1 0.2 0.1 0.2 0.1 0.4 0.1 LABOUR COST 0.064 0.060 0.055 0.068 0.064 0.060 0.064 0.060 21.2 24.1 18.4 27.4 24.7 23.4 21.2 24.1 MATERIAL/SERVICE 0.075 0.062 0.075 0.062 0.075 0.062 0.082 0.062 25.3 24.3 24.8 24.5 29.5 23.7 27.0 24.3 TAX & RENT ON LAND 0.015 0.022 0.029 0.011 0.015 0.022 0.018 0.022 4.9 8.5 9.3 4.4 5.7 8.3 6.0 8.5 OVERHEAD & INT. ON 0.015 0.013 0.015 0.013 0.015 0.013 0.018 0.013 OPERATING COST 5.4 5.3 5.0 5.7 6.2 5.1 5.5 5.3 TOTAL AVERAGE COST 0.300 0.250 0.303 0.248 0.259 0.259 0.306 0.250 TOTAL PERCENT 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 a Land tax and rent, labour, water fee, fuel, and tree prices in B.C. are equated to Washington State. The same procedure is applied to the orchard in Washington State. b B.C. and Washington State's orchard blocks have been increased/decreased to 40 acres. c Density of B.C.'s orchard has been increased from 202 trees per acre to 269 trees per acre. 7. APPENDIX B LIST OF VARIABLES VARIABLE DEFINITION SVi ( t ) Annual s a l v a g e or r e m a i n i n g v a l u e of machine i a t time t R F V I i f i r s t s a l v a g e f a c t o r f o r machine i RFV2i second s a l v a g e f a c t o r f o r machine i RVj replacement v a l u e of machine i T l i f e of machine (replacement age) i n y e a r s Di a n n u a l d e p r e c i a t i o n c o s t of machine i r d i s c o u n t r a t e a ( r , T ) a n n u a l i z a t i o n f a c t o r as a f u n c t i o n of l i f e T and d i s c o u n t r a t e r OCi a n n u a l o p p o r t u n i t y c o s t of machine i l i a n n u a l i n s u r a n c e c o s t of machine i P i a n n u a l p r o p e r t y t a x e s of machine i S i a n n u a l s a l e s t a x of machine i Oi a n n u a l h o u s i n g c o s t of machine i 12 1 122 R&Mi ( t ) a n n u a l r e p a i r and maintenance c o s t of machine i CRCi (H) c u m u l a t i v e r e p a i r and maintenance c o s t as a f u n c t i o n of c u m u l a t i v e hours of use H H c u m u l a t i v e hours of use h j a n n u a l hours used of machine i RF1i accumulated r e p a i r c o n s t a n t RF2i , R F 3 i r e p a i r c o n s t a n t s t h a t combine to dete r m i n e the shape of the r e p a i r r a t e c u r v e F1 £ a n n u a l f u e l c o s t ( t r a c t o r ) F 2 i a n n u a l f u e l c o s t ( p i c k u p ) hp number of horsepower m f u e l consumption m u l t i p l i e r f per u n i t c o s t of f u e l L i a n n u a l l u b r i c a n t c o s t of machine i IC i n t e r e s t on o p e r a t i n g c a p i t a l o t o t a l per a c r e o p e r a t i n g c o s t d nominal i n t e r e s t r a t e AC per a c r e average t o t a l p r o d u c t i o n c o s t 123 t o t a l per a c r e c o s t as a f u n c t i o n of age g of t r e e s number of a c r e s p l a n t e d as a f u n c t i o n of age g of t r e e s t o t a l number of a c r e s i n o r c h a r d b l o c k average y i e l d per a c r e as a f u n c t i o n of age of t r e e s , g 

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