Economics Working Group –Challenges and

AccomplishmentsEric Belasco, Suzette Galinato, Tom Marsh,

and Srinivasa Ponnaluru

June 1st, 2011

Enterprise Budgets Tomatoes and lettuce under high tunnels for growers

in WA

Production and Risk Analysis of crop insurance and risk related issues. Strategies for wind damage mitigation.

Cost-Benefit Analysis of BDM Establishment of the monetary benefits (saving

costs) and costs of the CBA. CB Comparison of BDM film vs HDPE/LDPE film.

Overview

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Accomplishments:◦ Tomato

High tunnel Open field

◦ Lettuce High tunnel

To be accomplished:◦ Lettuce

Open field

◦ Strawberry High tunnel Open field

Enterprise Budgets

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High tunnel as an add on to the existing farm. Tunnel is 96 X 20 ft single poly, with 85%

usable space 2300 plants in 20 rows, at a 10 X 10’’ spacing 75% marketable yield Direct local sales, CSA, and local restaurants

as market 3 years of usable life on tunnel. Drip irrigation

Budget Benchmark

WA Enterprise Budget: High tunnel Lettuce

Summary

Gross returns 3450

Total Variable costs 1844.11

Total Fixed costs 947.45

Net Returns 658.44

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Gross returns

Description Price Qty Total

Lettuce heads 2 1725 3450

 Item Unit Quantity Price ($)

Total Costs

($)Soil Preparation

Spread compostMaterial yard 21.00 3.50 73.50Labor hour 15.00 2.00 30.00

Till cover crop and compost hour 165.00 0.09 14.85Chisel plow hour 165.00 0.09 14.85Till beds hour 165.00 0.09 14.85Fertilizer        Material        Labor hour 165.00 0.09 14.85

Irrigation        Drip tape linear feet 0.03 1150.00 34.50Labor hour 15.00 0.60 9.00

SeedsSeeds per 1,000 0.01 2300.00 23.00Transplants pot 0.07 2300.00 161.00Planting hour 15.00 5.00 75.00

Variable costs

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 Item Unit Quantity Price ($)

Total Costs

($)

Production Costs

Fungicide       0.00Herbicide       0.00Insecticide       0.00Irrigation water month 10.00 2.00 20.00Irrigation power       0.00Tunnel temperature management hour 15.00 15.00 225.00

Harvest and Post-harvest Costs        Picking hour 15.00 18.00 270.00Washing, grading (per pound) case 1.50 72.00 108.00Supplies   0.25 72.00 18.00Packaging case 3.20 72.00 230.40Hydro Cooling case 0.80 72.00 57.60

Marketing        Delivery box 0.5 72 36.00

Maintenance and Repairs        Irrigation System Maintenance and Repair       45.00Tunnel and Equipment Maintenance and Repairs

      166.00

Other Variable Costs        Overhead (5% of variable costs)       82.07Interest on Variable Costs (7%)       120.64

Total Variable Costs       1,844.11

Variable costs

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Item Cost ($)Years Used

Cost Per year ($)

Fixed Costs        

Depreciation        

High Tunnel Hoop house       227.20

Irrigation System       36.67Machinery and Equipment Annual Replacement Cost       100.00

Interest        

High Tunnel Hoophouse       43.74

Irrigation System       4.24

Machinery and Equipment       35.61

Other Fixed Costs        

Permit       0.00Hoophouse set up and removal[1] hour 25 11 275.00

Irrigation management hour 15 15 225.00

Total Fixed Costs       947.45

         

Total Cost      2,791.5

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Estimated Net Returns       658.44

Fixed costs

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Tasks accomplished:◦ Identification of different crop insurance options

available for specialty crops (in the open field & under high tunnel).

◦ Paper presentation at AAEA, Pittsburgh.

Tasks to be accomplished:◦ Evaluate profitability with and without crop

insurance.◦ Evaluate profitability of using cover crops in high

tunnel production, and compare BDM v conventional practices.

Production and Risk

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High tunnels act as damage abatement input

Wind speeds inside the tunnel are hypothesized to be lower than open field

High winds can damage high tunnel structure and the crop.

Extent of damage to HT depends on design, orientation, material and construction.

Wind Damage Mitigation

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Damage to crop depends on type, stage of crop.

Product quality, quantity and time of maturity may also be affected.

Objectives: To identify if statistically significant

differences in wind speed exist with in and outside tunnel.

To identify extent of damage to crops and the high tunnel stucture.

Wind Damage Mitigation

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Tasks accomplished :◦ The first three topics set the stage and provide

information for the C-B analysis.

◦ Dynamic model that reflects benefits, costs and rates of decay of pollutant (BD plastic) in soil.

◦ The model can be used to assess net benefits associated with various rates of decay.

Cost-Benefit Analysis

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Tasks to be accomplished:◦ Specify a damage function to model

damages/effects on soil from BD plastic decay.◦ Enumerate benefits and costs associated with

high tunnels – Price premiums Yield differences Structural costs Labor costs Other associated costs.

◦ Sensitivity analysis.

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Cost-Benefit Analysis

Enterprise Budgets

Production and Risk

Cost-Benefit Analysis

Summary…

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Specification of a damage function for CB analysis

Obtain feedback on enterprise budgets Obtain cost info. regarding expenses for

◦ Initial high tunnel construction◦ Maintenance costs for repairs from hail, wind, and

flooding Ensure accurate use of field data (yields)

Remaining Issues

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Thank you