Orchard Business Analysis 2015-2016

By Ross Wilson

Another series of data was collected for the Future Orchards® Orchard Business Analysis during July and August 2016 – this article highlights some of the key findings. 

The objective of the Orchard Business Analysis (OBA) is to determine the productivity and economic performance of the Australian pome fruit industry over time. This last round, we collected actual data for the 2015 crop year and forecast the 2016 year’s result. At the time of data collection, the gross yields and cost of production were known for the 2016 crop, however the packouts and returns were only estimates, as only 50 per cent of the 2016 crop had been packed and sold at that point in time.

AgFirst collected the physical and financial data from 27 orchard businesses, located throughout Australia including orchards in Stanthorpe, Orange, Batlow, Goulburn Valley, southern Victoria, South Australia, Tasmania and Western Australia.

This was the seventh time the OBA modeling exercise was undertaken, following studies in 2008, and 2010 to 2015 inclusive. Each year, the data has been analysed and used to create an industry model.  This model captures the current performance of the industry and provides a:

  • Productive and financial snapshot of the state of the industry.
  • View of trends over the period 2008-2016.
  • Benchmark for individual orchard comparisons.
  • Tool for modeling different scenarios such as changes in markets and production.
  • Means of benchmarking the Australian industry’s performance internationally.

The model orchard size has been maintained at a 115 ha property, of which 40 hectares is planted to pome fruit. Prior to 2014, the model was 30 planted hectares however the dataset shows a continuing trend of increasing scale. During the most recent survey, the average planted area of the 27 businesses was 40.3 ha. Details of the model orchard are published in full within the report and we would encourage all growers to request a copy as it is a very useful resource document.

Yield

The Australian model orchard’s average gross yield increased 27 per cent, from 37.4 tonnes per ha in 2014 to 47.4 t/ha in 2015. This major jump was the highest recorded from this OBA survey since its inception in 2008. However, fruit quality in 2015 as measured by Class 1 packout was down on 2014 at an average of just 66 per cent.

The average gross production forecast for the 2016 model is 47.3 t/ha, which maintains the good result achieved in 2015. Overall, Class 1 recovery in 2016 is forecast to be up significantly on 2015, to an average level of 70 per cent, signalling a high quality fruit year.

Since 2010, gross yield has increased by 14 t/ha, which is a very significant positive trend for the industry. An even better trend is shown in Class 1 yield, increasing from just over 20 t/ha in 2010 to an estimated 33 t/ha in 2016. This represents a 65 per cent improvement in Class 1 productivity over the past six years, an excellent trend.
14 Moving Annual Totals

14 Moving Annual Totals

As in all seasons, a wide range in performance exists between Australian orchards. For example, the forecast average yield of Pink Lady in 2016 across all 27 orchards is 57 t/ha, but the range is from 21 t/ha to 108 t/ha. Class 1 forecast packout averages 72 per cent but the range is between 0 (hail affected) and 95 per cent.

14 Moving Annual Totals

The dark blue line is the model average for standard Pink Lady. The green line is the model average for the red strains of Pink Lady.

The wide range in Pink Lady performance from one orchard business to another gives hope to growers who are achieving below average performance, that there is plenty of room for improvement if they want to embrace new technology and improved management practices.

Class 1 packouts

The average Class 1 recovery for the model orchard in 2016 is forecast to increase to 70 per cent, from 66 per cent in 2015. Average Class 1 packout has been in the 65-70 per cent range over the past eight years. Because the gross yield was similar to 2015 but with improved packouts, the Class 1 production per hectare is forecast to be the highest since monitoring began at 33.1 t/ha.

26 OBA graph 5

All varieties are forecast to be up in packout in 2016, except Sundowner which is forecast to drop slightly.  The standout change is Williams, which for the first time in this report, has been recorded with a Class 1 packout, at 26 per cent. The driver of this is that three out of the four Williams growers in the survey are moving to a proportion of fresh sales of Williams pears, with the balance still being processed.

Although gross volumes were up substantially in 2015, the Class 1 recovery and Class 1 returns were both down on 2014. In summary, the 2015 growing year was a high yielding year, but because quality and returns were down, 2015 resulted in a poorer financial result than had been achieved in previous years.

The 2016 crop was looking more favourable at the time of data collection (July/August 2016). Gross volumes per hectare were similar to 2015, but a forecast lift in Class 1 packouts and slight lift in forecast returns, is forecast to deliver a healthier cash operating surplus per hectare.

14 Moving Annual Totals

2012 2013 2014 2015 2016F
Ave gross yield (t/ha) 40.9 39.1 37.4 47.4 47.3
Class 1 packout 67% 67% 69% 66% 70%
Avg Class 1 yield (t/ha) 27.4 26.2 25.8 31.3 33.1

Costs per hectare continue to rise on a per hectare basis. The 2016 forecast year is similar to 2015, with labour costs increasing slightly. The full study, which looks at cost per kilogram and costs per hectare, shows that costs per kilogram rise substantially in low cropping years.  Cost increases per hectare are caused by increased production per hectare and inflation of input costs.  

14 Moving Annual Totals

In summary, a jump in yield in 2015 did not increase revenue per hectare significantly because of the lower packouts and lower returns.  And because costs were up with increased yield, the financial result from the 2015 crop was down.

In 2016, good gross yield per hectare results are forecast, but with better packouts and a small rise in returns, growers are predicting more favorable revenues and an increased level of profitability to 2015.

Get the full report

APAL members can request a copy of the full OBA report, including the full breakdowns of cost of production and profitability trends. We really encourage all APAL members to request a full copy of this highly enlightening report. To do so, please contact Angus Crawford on 03 9329 3511 or acrawford@apal.org.au.

Class 1 packouts

The average Class 1 recovery for the model orchard in 2016 is forecast to increase to 70 per cent, from 66 per cent in 2015. Average Class 1 packout has been in the 65-70 per cent range over the past eight years. Because the gross yield was similar to 2015 but with improved packouts, the Class 1 production per hectare is forecast to be the highest since monitoring began at 33.1 t/ha.

26 OBA graph 5

All varieties are forecast to be up in packout in 2016, except Sundowner which is forecast to drop slightly.  The standout change is Williams, which for the first time in this report, has been recorded with a Class 1 packout, at 26 per cent. The driver of this is that three out of the four Williams growers in the survey are moving to a proportion of fresh sales of Williams pears, with the balance still being processed.

Although gross volumes were up substantially in 2015, the Class 1 recovery and Class 1 returns were both down on 2014. In summary, the 2015 growing year was a high yielding year, but because quality and returns were down, 2015 resulted in a poorer financial result than had been achieved in previous years.

The 2016 crop was looking more favourable at the time of data collection (July/August 2016). Gross volumes per hectare were similar to 2015, but a forecast lift in Class 1 packouts and slight lift in forecast returns, is forecast to deliver a healthier cash operating surplus per hectare.

14 Moving Annual Totals

By |January 30th, 2017|Future Orchards|

About the Author:

Horticultural Consultant, AgFirst, New Zealand
ross.wilson@agfirst.co.nz
+64 6872 7080