PECAN
ENTERPRISE
COST ANALYSIS
Cooperative Extension Service
Agricultural and Applied Economics
The University of Georgia
College of Agricultural and Environmental Sciences
Acknowledgments
We are indebted to the following retired extension employees: George Westberry, Extension
Economist, Tom Crocker, Extension Horticulturist, and Roy Goodson, Extension Coordinator, Lee
County, who masterminded the 1992 Estimated Costs of Producing Pecans, Cooperative Extension
Publication and the 1998 unpublished version of which this publication is based. Equal thanks to
Paul Sumner, Wojciech Florkoswki, William Givan, and Frank Funderburk for their various
contributions and expertise that made this publication possible.
PECAN ENTERPRISE COST ANALYSIS
SEPTEMBER 2002
Prepared by:
Greg E. Fonsah, Extension Economist, UGA
Kerry Harrison, Extension Engineer,UGA
Brad Mitchell, Extension Coordinator, Mitchell County
Pecan Production in Georgia.
Nationwide, Georgia has position herself as number one in the production of Pecans. USDA and
NASS reports (2001) indicates that in 1999, 2000 and 2001, the State of Georgia alone produced
29.5%, 38.0% and 30% of all pecans grown in the United States. For the improved varieties, GA
produced 38.7%, 40.0% and 33.8% in 1999, 2000 and 2001 (Fig 1).
Fig: 1. Percentage of Georgia Utilized Pecan Production, 1999 - 2001
40.00
35.00
% of U.S.
30.00
25.00
20.00
15.00
10.00
5.00
0.00
1999
2000
2001
Years
Improved Varieties
Native & Seedling
Source: Agricultural Statistics Board, NASS, USDA (2002) Non-citrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
2
All Pecan/USA
Fig: 2. All Pecan Production-Major States, 1999-2001
450,000
400,000
350,000
Ibs
300,000
250,000
200,000
150,000
100,000
50,000
0
1999
2000
2001
Years
GA
NM
TX
OK
USA
Source: Agricultural Statistics Board, NASS, USDA (2002) Non-citrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
The same USDA and NASS report shows that out of the 406, 209.9 and 315 million pounds of Pecan
produced in 1999, 2000 and 2001, Georgia contributed 120, 80, and 95 million pounds respectively
(Fig. 2). This is equivalent to 35, 15 and 15 million pounds of Native and Seedlings (Fig 3), and 85,
65 and 80 million pounds for the Improved Varieties respectively for the same years (Fig. 4).
3
Fig: 3. Pecan Production: Major States: Native and Seedling, 1999-2001
250,000
Million Pounds
200,000
150,000
100,000
50,000
0
1999
2000
2001
Years
GA
LA
TX
OK
Source: Agricultural Statistics Board, NASS, USDA (2002) Non-citrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
4
USA
Fig: 4. Pecan Production - Major States, Improved Varieties, 1999-2001
(1,000 Pounds)
250,000
200,000
150,000
100,000
50,000
0
1999
2000
2001
Years
GA
NM
TX
USA
Source: Agricultural Statistics Board, NASS, USDA (2002) Noncitrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
From 1991 – 2001, the United States Pecan production (in-shell basis) illustrates a chain saw trend
due to the alternate bearing cycles and the introduction of improved varieties (fig. 5).
5
Fig. 5. Pecan Production (in-shell basis): United States, 1991-2001
450000
400000
(1,000 Pounds)
350000
300000
250000
200000
150000
100000
50000
0
1
2
3
4
5
6
7
8
9
10
11
1991 - 2001
Series 1
Series 2
Source: Agricultural Statistics Board, NASS, USDA (2002) Noncitrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
It is equally important to know your market as well as cost of production to determine profit margin
and how much capital is needed especially during the establishment years. The pecan budget should
be used simply as a guide for inputting your own costs.
6
Pecan Price Trend
Pecan prices are volatile, sensitive and fluctuating. This volatility depends on several factors,
including the variety, locality and aggregate productivity. Price trend for the past ten years vary
from 154 to 43.4 cents per pound (fig. 6).
Fig: 6. Price Trend: Improved Varieties, Native & Seedling, and All Pecans, 1991-2001
180
160
(Cents per Ib)
140
120
100
80
60
40
20
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Years
Improved Varieties
Native & Seedling
All Pecans
Source: Agricultural Statistics Board, NASS, USDA (2002) Non-citrus Fruits and Nuts
2001 Preliminary Summary, pp 74-75.
Farm Input Prices
There are several factors that can influence prices of inputs, total cost of production and profit
margin respectively. Most farmers in Georgia may not invest in drip and overhead irrigation
materials or dig a new well since they already have them available. If so, that would significantly
increase profitability. Small Pecan farmers, i.e. from one to thirty acres may or may not install an
irrigation system. Also motor size (HP) may differ depending on the number of acreage. Quantity
discounts may affect prices of inputs. The cost estimate in this budget reflects a combination of the
current agricultural practices in Georgia and recommendations from UGA specialists. The prices
are actual prices from vendors around the counties involved in pecan production and they exclude
quantity discounts.
7
Machinery costs
Estimated total annual fixed machinery costs for pecans is $139.00 per acre. This cost
varies based on the size of the farm. Again, small growers (1-30 acres) may not accrue this cost.
However, if they decide to invest in machinery, overhead cost per acre may be relatively higher as
the annual machinery investment costs are spread over a smaller acreage. Growers with 40 to 100
acres large farms may incur some of the cost. Also, only one equipment like sweeper will be needed
by a farmer with less than 100 acres. A rational grower may simply purchase used equipments
such as herbicide sprayer, air-blast sprayer, rotary mower, wagon, tractor, sweeper etc. to minimize
cost and eventually maximize profit.
Types of Costs
Total costs of cultivating pecan include fixed and variable cost respectively. Variable costs are
broken down into pre-harvest, harvesting and marketing costs. Fixed cost components include
machinery, irrigation, recaptured establishment costs, land, overhead and management. Pre-harvest
variable cost is $424. Harvesting and Marketing cost is $144. Total variable cost is $568. On the
other hand, total fixed cost is $678 while the total budgeted cost per acre is $1,246, excluding cost
of land. The estimated establishment and first year maintenance cost per acre for Georgia Pecan is
$734. This cost trends down from second through fourth year to $429 and trends up from fifth
through seventh years to $626. For more costs details, please turn to the budget section of this
publication.
Irrigation Costs
Drip and solid set irrigation costs have been incorporated in this enterprise cost analysis. Annual
fixed costs per acre for drip irrigation is estimated at $66 while total annual costs per acre is $103.
The estimated annual fixed costs per acre for the solid set irrigation system is $105 while the total
annual costs per acre is $184. The solid set system is relatively more expensive in terms of initial
investment per acre. Micro-sprayer irrigation system is also used by some pecan growers in
Georgia. This system is the most efficient especially on sandy soil and due to its water dispersal
surface area coverage of to 3 to 20 ft diameter (1– 7 meters). However, the system is not
incorporated in this enterprise cost analysis but would be very much in line with the estimated drip
costs. Therefore, it is recommended that growers with micro-sprayer system should use the drip
irrigation budget and those with micro-sprinkler system, should use the solid set irrigation budget
respectively.
8
PECANS
(Total Cost Budget)
*Number of acres =
IRRIGATION: Enter 0 for none, 1 for drip, 2 for Solid Set
*Yield (lbs)
*Price per lb.
Best
Opt
1600
1.25
Item
Variable Costs
Lime, applied
Nitrogen
Phosphorus
Potassium
Zinc Sulfate
Fungicides
Herbicides
Insecticide
Labor
Machinery
Fuel
Rep & maint.
Land rent
Irrigation
Other
Interest on Oper. Cap.
Pre-Harvest Variable Costs
Harvest and Marketing Costs
Fuel
Machinery
Labor
Cleaning & Drying
Median
Pess
Worst
1400
1.05
1200
0.85
1000
0.65
800
0.45
Unit
Quant.
Price
$Amt/ac
TOTAL
Ton
Lbs.
Lbs.
Lbs.
Lbs.
Appl
Appl
Appl
Hr.
0.5
150
30
100
10
9
2
8
3.46
22.00
0.300
0.250
0.140
0.30
12.22
6.79
10.83
7.00
11.00
45.00
7.50
14.00
3.00
109.98
13.58
86.64
24.20
11
45
8
14
3
110
14
87
24
Gal.
Acre
Acre
Acre
Acre
$
32.25
1
1
1
1
386.84
0.95
41.30
0.00
37.49
0.00
0.10
30.64
41.30
0.00
37.49
0.00
19.34
424.33
31
41
0
37
0
19
424
Gal.
Acre
Hr.
Lbs.
14.21
1
3.44
1200
0.95
20.26
7.00
0.08
3.27
20.26
24.08
96.00
3
20
24
96
143.60
567.93
144
568
139.07
65.92
430.76
0.00
42.43
678.17
139
66
431
0
42
678
1246.10
1246
Total Harvesting and Marketing Costs
Total Variable Costs
FIXED COST
Machinery Cost
Irrigation
Recapture estab. costs
Land
Overhead and Management
Total Fixed Costs
1
1
Hr.
Acre
Acre
Acre
$
1.00
1.00
1.00
1.00
424
139.07
65.92
430.76
Total budgeted cost per acre
Costs Per Lb.
Pre-harvest variable cost per lb.
Harvest & marketing cost per lb.
Fixed costs
per lb.
Total budgeted cost per lb.
0.10
0.35
0.12
0.57
1.04
(continued on next page)
9
EXPECTED RETURNS FROM TOTAL ACREAGE
ACRES
EXPECTED
YIELD/AC
VOLUME
MARKETED
EXPECTED
PRICE
TOTAL
RETURNS
1
1200
1200
0.85
1020
RISK RATED RETURNS OVER TOTAL COSTS
Net return levels (TOP ROW);
The chances of obtaining this level or more (MIDDLE ROW); and
The chances of obtaining this level or less (BOTTOM ROW).
Optimistic
*Returns($)
Chances
Chances
CHANCES FOR PROFIT =
195
7%
55
16%
21%
Expected
(86)
31%
(226)
50%
50%
Pessimistic
(367)
(507)
(648)
31%
16%
7%
BASE BUDGETED NET REVENUE =
10
(226)
ESTIMATED ESTABLISHMENT AND FIRST YEAR MAINTENANCE
COST PER ACRE FOR GEORGIA PECAN, 2002
ITEM
UNIT
QUANT.
PRICE AMOUNT
TON
Ib
LBS
APPL
TREE
ACRE
HRS
2
120
50
3
27
1
20
22.00
0.30
0.30
6.79
8.25
15.00
7.00
44.00
36.00
15.00
20.37
222.75
15.00
140.00
16.02
1
1
0.95
48.00
37.49
15.22
48.00
37.49
OPERATING COSTS
LIME (DOL.)
FERT (10-10-10)
ZINC SULFATE
HERBICIDES
TREES
SPRAY MAT'L
LABOR
MACHINERY
FUEL
REP & MAINT
IRRIGATION
OTHER
GAL
ACRE
TOTAL OPERATING COSTS
593.83
FIXED COSTS
TRACT & EQUIP
GEN OVERHEAD
IRRIGATION
LAND
OTHER
TOTAL FIXED COSTS
$
$
$
$
1
593.83
1
45.00
0.05
65.92
0.06
45.00
29.69
65.92
0
140.61
TOTAL ESTABLISHMENT COSTS
734.44
11
ESTIMATED ANNUAL MAINTENANCE COST FOR PECANS,
SECOND THROUGH FOURTH YEARS, GEORGIA, 2002
ITEM
UNIT
QUANT.
PRICE AMOUNT
TON
Ib
LBS
APPL
ACRE
HRS
0.33
480
0
3
1
6
22.00
0.30
0.30
6.79
15.00
7.00
7.26
144.00
0.00
20.37
15.00
42.00
GAL
9.07
1
1
0.95
28.00
37.49
8.62
28.00
37.49
OPERATING COSTS
LIME (DOL.)
FERT (10-10-10)
ZINC SULFATE
HERBICIDES
SPRAY MAT'L
LABOR
MACHINERY
FUEL
REP & MAINT
IRRIGATION
OTHER
ACRE
TOTAL OPERATING COSTS
302.74
FIXED COSTS
TRACT & EQUIP
GEN OVERHEAD
IRRIGATION
LAND
OTHER
TOTAL FIXED COSTS
$
$
$
$
1
302.74
1
45.00
0.05
65.92
0.06
45.00
15.14
65.92
0.00
126.05
TOTAL COSTS
428.79
12
ESTIMATED ANNUAL MAINTENANCE COST FOR PECANS,
FIFTH THROUGH SEVENTH YEARS, GEORGIA, 2002
ITEM
UNIT
QUANT.
PRICE
AMOUNT
TON
IBS
LBS
APPL
TREE
ACRE
HRS
0.33
960
15
3
0
1
9
22.00
0.30
0.30
6.79
8.00
15.00
7.00
7.26
288.00
4.50
20.37
0.00
15.00
63.00
GAL
15.88
1
1
0.95
40.00
37.49
15.09
40.00
37.49
OPERATING COSTS
LIME (DOL.)
FERT (10-10-10)
ZINC SULFATE
HERBICIDES
TREES
SPRAY MAT'L
LABOR
MACHINERY
FUEL
REP & MAINT
IRRIGATION
OTHER
ACRE
TOTAL OPERATING COSTS
490.70
FIXED COSTS
TRACT & EQUIP
GEN OVERHEAD
IRRIGATION
LAND
OTHER
TOTAL FIXED COSTS
$
$
$
$
1
490.70
1
45.00
0.05
65.92
0.06
45.00
24.54
65.92
0.00
135.45
TOTAL COSTS
626.16
COMPOUND AND RECAPTURE OF ESTABLISHMENT COSTS
COMPOUNDING RATE
COMPOUND ESTAB. COST
RECAPTURE ESTAB. COST
YEARS
INTEREST
ANNUAL COST
YEARS TO
PRODUCTION
0.06
7
6
5
4
3
2
1
1.50
1.42
1.34
1.26
1.19
1.12
1.06
734
429
429
429
626
626
626
1104
608
574
541
746
704
664
4941
20
0.06
-------------->
13
431
CHEMICALS FOR PECANS
Item
Unit
Quantity
Price
Amt/Ac.
Herbicide
Herbicide
Herbicide
Appl.
Appl.
Appl.
1
1
0
$6.42
$7.15
$0.00
$6.42
$7.15
$0.00
Insecticide
Insecticide
Insecticide
Insecticide
Insecticide
Appl.
Appl.
Appl.
Appl.
Appl.
1
3
1
3
0
$4.00
$11.00
$7.65
$14.00
$0.00
$4.00
$33.00
$7.65
$42.00
$0.00
Fungicide
Fungicide
Fungicide
Fungicide
Fungicide
Fungicide
Appl.
Appl.
Appl.
Appl.
Appl.
Appl.
4
5
0
0
0
0
$10.00
$14.00
$0.00
$0.00
$0.00
$0.00
$40.00
$70.00
$0.00
$0.00
$0.00
$0.00
Other
Other
Other
Other
Appl.
Appl.
Appl.
Appl.
0
0
0
0
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Total
19
$210.22
14
ESTIMATING MACHINERY OPERATING COSTS FOR PECANS
Operation
Equip.
Width
(ft.)
Field
Speed
(mph)
Field
Effic.
%
Acres
Per
Hour
Number
Times
Over
Fuel
Use
(Gal.)
Mach
Repairs
($)
Labor
Use
(Hr.)
Pre-Harvest
Sprayer:
Herbicide
Air Blast
Rotary Mower
20.00
40.00
15.00
3.00
2.50
6.00
70
65
95
5.09
7.88
10.36
2
12
10
1.47
24.75
6.03
1.72
35.43
4.14
0.47
1.83
1.16
32.25
41.30
3.46
3.09
3.44
2.68
5.00
5.50
9.37
4.89
0.50
0.83
1.10
0.51
1.00
14.21
20.26
3.44
Total Pre-Harvest
Harvest
Shake
Sweep
Harvest
Haul
40
10
10
1.00
3.00
2.00
90
90
80
4.36
3.27
7.00
Total Harvest
15
3
3
3
ESTIMATED TOTAL ANNUAL FIXED MACHINERY COSTS FOR PECANS
Acres
Interest
400
10.0%
Item
Percent
Used
For
Crop
Sprayer,herbicide
Sprayer,airblast
Rotary Mower(15')
Wagon(dump)
Wagons(4 used)
Tractor(2)*
Tractor
Truck
Blower
Sweeper(2)**
Harvester
Shaker
Total Investment
75%
100%
75%
100%
50%
60%
50%
30%
100%
100%
100%
100%
Purchase
Price
Salvage
Value
Yrs.
Life
Deprec.
600
65000
7500
10000
3600
67500
57000
20000
3700
10000
32000
95000
120
13000
1500
2000
500
13500
11400
4000
740
2000
6400
19000
5
5
7
15
5
8
8
1
5
10
10
10
72
10400
643
533
310
4050
2850
4800
592
800
2560
7600
27
3900
338
600
103
2430
1710
360
222
600
1920
5700
4
546
47
84
14
340
239
50
31
84
269
798
0.26
37.12
2.57
3.04
1.07
17.05
12.00
13.03
2.11
3.71
11.87
35.25
371,900
74160
35210
17909
2507
139
Int Tax & Ins
35210
17909
2507
TOTAL FIXED COSTS
FIXED COSTS per ACRE
$
* These prices are for new equipments. Used equipments could be purchased.
**Only one sweeper is required for 100 acres or less.
16
55626
139.07
FC/Ac
DRIP IRRIGATION FOR PECANS
BASED ON
SPACING
40
by
INTEREST ON INVESTMENT CAPITAL
TAXES & INSURANCE
DEPTH OF WELL IN FEET
100
40
ACRES
10.00%
0.015
350
INVESTMENT AND ANNUAL FIXED COSTS
PIPE & FITTINGS
TUBING & EMITTERS
WELL
PUMP & MOTOR
FILTER & AUTO
MISC.
INSTALLATION
TOTAL INVESTMENT
NEW COST
10300
9500
8400
3500
2600
1029
20600
55929
YRS.LIFE
20
10
25
15
10
20
20
DEPREC. INTEREST TAX & INS.
515
515
77
950
475
71
336
420
63
233
175
26
260
130
20
51
51
8
1030
1030
155
3376
2796
419
TOTAL ANNUAL FIXED COSTS
6592
ANNUAL FIXED COSTS PER ACRE
65.92
OPERATING COSTS
MOTOR SIZE (HP)
REPAIRS
ANNUAL PUMPING HOURS
ELECTRICITY
Demand (standby charge) per YEAR
Rate $ per KWH
ANNUAL ENERGY COST
ANNUAL ENERGY COST PER ACRE
OPERATING COST PER ACRE PER YEAR
20
1337
1820
240
0.08
2412
24.12
37.49
TOTAL ANNUAL COSTS PER ACRE
103.41
17
SOLID SET IRRIGATION FOR PECANS
BASED ON
SPACING
40
by
INTEREST ON INVESTMENT CAPITAL
TAXES & INSURANCE
DEPTH OF WELL IN FEET
100
40
10.00%
0.015
400
INVESTMENT AND ANNUAL FIXED COSTS
NEW COST YRS.LIFE
PIPE & FITTINGS
SPRINKLERS
WELL
PUMP & MOTOR
FILTER & AUTO
MISC.
INSTALLATION
TOTAL INVESTMENT
30900
10000
9600
6500
2600
1550
30900
92050
ACRES
20
10
25
15
10
20
20
DEPREC.
1545
1000
384
433
260
77
1545
5245
INTEREST TAX & INS.
1545
500
480
325
130
77
1545
4602
232
75
72
49
20
12
232
690
TOTAL ANNUAL FIXED COSTS
10538
ANNUAL FIXED COSTS PER ACRE
105.38
OPERATING COSTS
MOTOR SIZE (HP)
REPAIRS
ANNUAL PUMPING HOURS
ELECTRICITY
Demand (standby charge) per YEAR
Rate $ per KWH
ANNUAL ENERGY COST
ANNUAL ENERGY COST PER ACRE
OPERATING COST PER ACRE PER YEAR
TOTAL ANNUAL COSTS PER ACRE
50
1823
1820
600
0.08
6031
60.31
78.54
183.92
18
PECAN RETURNS
This example assumes very good management practices.
Year
Yield
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0
0
0
0
0
0
0
135
270
405
540
675
810
945
1190
****
Price
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
Var. Cost
593.83
302.74
302.74
302.74
490.70
490.70
490.70
508.25
525.80
476.98
494.53
512.08
529.63
547.18
579.03
Return over
Return over
Var. Cost Total Cost Total Cost
-593.83
-302.74
-302.74
-302.74
-490.70
-490.70
-490.70
-386.75
-282.80
-112.48
-8.53
95.42
199.37
303.32
491.97
734.44
428.79
428.79
428.79
626.16
626.16
626.16
643.71
661.26
1155.15
1172.70
1190.25
1207.80
1225.35
1257.20
-734.44
-428.79
-428.79
-428.79
-626.16
-626.16
-626.16
-522.21
-418.26
-790.65 ****
-686.70
-582.75
-478.80
-374.85
-186.20
This year fixed costs for the mature orchard was used.
In reality , the higher fixed costs may begin earlier or later.
19
Prepared by: Greg E. Fonsah, Extension Economist, UGA,
Kerry Harrison, Extension Engineer, UGA and
Brad Mitchell, Extension Coordinator, Mitchell County
The University of Georgia College and Agricultural & Environmental Sciences and Ft. Valley State
University, and the U.S. Department of Agricultural and counties of the state cooperating. The
Cooperative Extension Service offers educational programs, assistance and materials to all people
without regard to race, color, national origin, age, sex or disability.
An equal opportunity/affirmative action organization committed to a diverse work force.
AGECON -02-077
September 2002
Issued in furtherance of Cooperative Extension, Acts of May 8 and June 30, 1914, the University of
Georgia College of Agricultural and Environmental Sciences and Fort Valley State University, and
the U.S. Department of Agriculture Cooperating.
Dr. Gale A. Buchanan, Dean & Director
College of Agricultural & Environmental Sciences