This document describes an interactive budget tool for assessing the feasibility of organic apple production. The tool allows users to input production details to calculate costs, revenues, and profitability over multiple years. It also features sensitivity analysis to test the impact of varying yields and prices, breakeven analysis to determine price and yield thresholds, and risk analysis to assess probability of profitability. The presentation demonstrates the tool's capabilities and provides resources for users to access and learn more about the budget model.

1. Determining the feasibility of organic
apple production in the southern
United States
Héctor Germán Rodríguez, Ph.D.
Jennie Popp, Ph.D.
Curt Rom, Ph.D. (Presenter)
Heather Friedrich, M.S.
Jason McAfee, M.S.
Innovation in Integrated & Organic Horticulture - ISHS Symposium
Avignon University, France
June 8-12, 2015
Center for Agricultural and Rural Sustainability
Division of Agriculture - University of Arkansas

2. Fruit Production Budgets
 Tools used to assess costs and revenues
associated with production
 Traditionally paper based
 Require large amount of information from
producers to work

3. Interactive Sustainable Apple Budget
 Interactive Budgeting:
 Computer based; User specifies input, tool
automatically makes calculations
 User Friendly
 Little computer knowledge required
 Little data input needed
 True Decision Support
 Assess costs, revenues as well as break-even
points, sensitivity analysis and risk analysis

4. Interactive Sustainable Apple Budget
Visit the Specialty Crop Section of the Center for
Agricultural and Rural Sustainability (CARS) website
www.cars.uark.edu
or
e-mail
cars@uark.edu
For a free copy

5. Presentation Objective
 Describe the benefits of the Interactive
Sustainable Apple Budget
 Walk through an example

6. Interactive Sustainable Apple Budget
Budget
Tool/ Capability
Apple
Annual Calculations X
Multi Year Calculations X
Modification of inputs by year X
Breakeven Analysis X
Sensitivity Analysis X
Risk Analysis X
What does this mean?

7. Capabilities
 Multi-year present value of net benefits
 In addition to giving annual return values,
the tools calculate what the value of all net
revenues generated over all years are worth
today
 Input Modifications
 User can modify or enter new inputs
(activities, quantities and prices) each year.
The budget will be updated automatically.

8. Breakeven Analysis
 Breakeven Point
 Point at which cumulative total costs and
cumulative total revenues are equal
 Can be calculated for
 Breakeven Price
 Breakeven Yield

9. Breakeven Price
 Given yields and total costs, what price do I
need (on average over time) to break even?
Total Cost Over
Time
Expected
Average Yield
Over Time
Breakeven
Price

10. Breakeven Yield
 Given market prices and total costs, what yield
do I need (on average over time) to break
even?
Total Cost Over
Time
Expected
Average
Market Price
Over Time
Breakeven
Yield

11. Sensitivity Analysis
 “What if” analyses
 How different values of an input impact net
returns
 “What if”:
 My yields over time are actually
higher/lower than I predict?
 The market price for the fresh/processing
market over time is higher/lower than I
predict?

12. Risk Analysis
 A technique that calculates the probability of
obtaining a net present value of returns
greater than a specific dollar target
 What is the probability that I will earn a net
present value greater than $90,000 during the
life of the orchard?

13. Importance of The Tool
 Allows the user to make more informed
decisions by
 Comparing costs/revenues of different production
practices
 Estimating impacts of changes in yield/prices on
the solvency of the operation
 Assess the economic risk associated with a
particular production system
 Assessments can be made hypothetically;
without having to actually change practices

14. Example
Interactive Sustainable Apple
Budget

15. Main Menu

16. Quick Start Menu
Quick Start Menu

17. Start Menu
Start Menu

18. Help Menu
Help Menu

19. User’s Guide
User’s Guide – PDF Version
This guide explains how to use the tool (step by
step). It is linked to the tool so it can be accessed
at any time.

20. User Input
 Userform opens without information.
 User needs to enter his/her own information or click
“Demo” to fill the grey boxes before running the
model.

21. User Input: Run
 Once data are entered or selected, click “Run”

22. Summary
 The tool will generate gross returns, variable costs,
fixed costs, total costs and net returns for each year

23. Summary – Net Returns Calculator
The tool will
generate, variable
costs, fixed costs,
total costs, gross
returns and net
returns for each
year.
The “cumulative
column” will show
what year the
enterprise starts to
be profitable (in
green).

24. How to Change Levels of Activity or Prices
 Here you can enter:
 new activities
 new quantities
 new prices
 Once changed, the tool will
recalculate all costs and
returns

25. Results
 Results are presented in graphical and tabular forms

26. Breakeven Analysis
 Click the Breakeven Analysis icon located in the
“economics screen” to see calculations in more detail.
 These calculations will be updated if initial inputs are
edited or new input is entered.
 Expected values are estimated by using the input
entered by the user

27. Breakeven Analysis Results

28. Sensitivity Analysis
 “What if” analyses
 How different values of an input impact expected
net returns
 “What if”:
 My yields over time are actually higher than I
expected?
 The market price for the fresh market over time is
higher than I expected?

29. Sensitivity Analysis
Click the Sensitivity
Analysis icon located in
the “economics screen”
to change yield and
price information.

30. Increase Fresh Market Price to $1.20/lb (before $1.00/lb)
Increase Processed Market Price to $0.20/lb (before $0.15/lb)

31. BEFORE AFTER

32. Risk Analysis
The tool also calculates the risk associated with this
operation by entering some required information.

33. Risk Analysis

34. Risk Analysis
Click the Risk Analysis
icon located in the
“economics screen” to
change yield and price
information.
For instance, let’s
change “Most Likely”
yield each year
From: 36 lbs/tree
To: 40 lbs/tree

35. Risk Analysis

36. Risk Analysis
 By increasing the “most likely” yield each year from
36 lbs/tree to 40 lbs/tree, the probability that the
apple orchard generates at least $90,000 will
increase from 60.2% to 72.7%.
 The user can change yields and prices and compare
scenarios against the baseline (default values).

37. Lots to this Tool!
 The capabilities of this tool are great
 But at the same time it can be used to answer
very simple questions alone
 Built to be flexible, based on the needs of the
user

38. Visit Our Website
Center for Agricultural and Rural Sustainability
www.cars.uark.edu
Fruit budgets can be found on the “Interactive
Budgets for Fruit Crops” page
http://cars.uark.edu/ourwork/Specialty-Crop-
Production-and-Marketing/fruit_budget.aspx

39. Thank You
 For more information…
Jennie Popp
Jhpopp@uark.edu
cars@uark.edu
Hector German Rodríguez
hrodrig@uark.edu
cars@uark.edu
Curt Rom
crom@uark.edu
cars@uark.edu
Center for Agricultural and
Rural Sustainability
www.cars.uark.edu
cars@uark.edu