Veggie Compa$$ Veggie Compa$$ Which Way Do You Want To Which Way Do You Want To Grow? Grow? Paul D. Mitchell Paul D. Mitchell Assistant Professor Assistant Professor Agricultural and Applied Agricultural and Applied Economics Economics University of Wisconsin- University of Wisconsin- Madison Madison Wisconsin Fresh Market Fruit Wisconsin Fresh Market Fruit and Vegetable Conference and Vegetable Conference Wisconsin Dells, WI Wisconsin Dells, WI
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Veggie Compa$$ Which Way Do You Want To Grow? Paul D. Mitchell Assistant Professor Agricultural and Applied Economics University of Wisconsin-Madison Wisconsin.
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Veggie Compa$$Veggie Compa$$Which Way Do You Want To Which Way Do You Want To
Grow?Grow?Paul D. MitchellPaul D. Mitchell
Assistant ProfessorAssistant Professor
Agricultural and Applied Agricultural and Applied EconomicsEconomics
University of Wisconsin-MadisonUniversity of Wisconsin-Madison
Wisconsin Fresh Market Fruit and Wisconsin Fresh Market Fruit and Vegetable ConferenceVegetable Conference
Federal Risk Management ProgramsFederal Risk Management Programs Crop Insurance: AGR-Lite, NAP policyCrop Insurance: AGR-Lite, NAP policy Disaster Assistance: SURE and TAPDisaster Assistance: SURE and TAP
Veggie Compa$$Veggie Compa$$Which way do you want to Which way do you want to
grow?grow?Cast of CharactersCast of Characters Paul D. Mitchell: UW-AAEPaul D. Mitchell: UW-AAE Erin Silva: UW-CIAS/AgronomyErin Silva: UW-CIAS/Agronomy John Hendrickson: UW-CIASJohn Hendrickson: UW-CIAS Jim Munsch: Farmer, Coon Valley, WIJim Munsch: Farmer, Coon Valley, WI David Baker: (Soon-to-be) Farmer, David Baker: (Soon-to-be) Farmer,
Belleville, WIBelleville, WI Gary Luebke: USDA-RMA, St. Paul, MNGary Luebke: USDA-RMA, St. Paul, MN
““Risk Management Tools for Diversified Risk Management Tools for Diversified Vegetable Production in Wisconsin”Vegetable Production in Wisconsin” Mitchell, Silva and Hendrickson, w/ LuebkeMitchell, Silva and Hendrickson, w/ Luebke
Munsch: Developed main conceptMunsch: Developed main concept Baker: Methods to create/implementBaker: Methods to create/implement
Fruit and Vegetable Growers’ Fruit and Vegetable Growers’ ProblemProblem
Continuously making lots of decisions Continuously making lots of decisions that affect your profitabilitythat affect your profitability
Grow multiple cropsGrow multiple crops Sell through multiple channelsSell through multiple channels
CSA, direct mkt, farmers mrkts, CSA, direct mkt, farmers mrkts, wholesalewholesale
Plant, grow and sell throughout Plant, grow and sell throughout seasonseason
What market(s) do you pursue?What market(s) do you pursue? What crop(s) do you plant?What crop(s) do you plant? How much of each crop do you plant?How much of each crop do you plant? What prices do you set by crop and market?What prices do you set by crop and market? When do you abandon a crop?When do you abandon a crop? When do you harvest a crop?When do you harvest a crop? What level of mechanization do you use?What level of mechanization do you use? Make/grow versus buy decisions: nutrientsMake/grow versus buy decisions: nutrients Do you expand? By renting or buying land?Do you expand? By renting or buying land?
Veggie Compa$$Veggie Compa$$
A tool to estimate costs and returns A tool to estimate costs and returns by crop and marketing channelby crop and marketing channel In season decision makingIn season decision making For planning purposesFor planning purposes
Still in development phaseStill in development phase Hope for preliminary beta roll out next Hope for preliminary beta roll out next
yearyear Quick idea of the tools are creatingQuick idea of the tools are creating
as % of Salesas % of Sales 23.6%23.6% 27.7%27.7% 36.5%36.5% 40.6%40.6% 13.5%13.5% 31.6%31.6%
General & Administrative ExpenseGeneral & Administrative Expense
Identified to Identified to ChannelChannel $26,378$26,378 $3,029$3,029 $4,439$4,439 $34,214$34,214 $68,060$68,060
Allocated to Allocated to ChannelChannel $27,460$27,460 $7,816$7,816 $10,139$10,139 $28,516$28,516 $2,936$2,936 $76,867$76,867
Total ExpensesTotal Expenses $53,838$53,838 $10,845$10,845 $14,578$14,578 $62,730$62,730 $2,936$2,936 $144,927$144,927
as % of Salesas % of Sales 20.7%20.7% 14.7%14.7% 15.2%15.2% 23.2%23.2% 10.6%10.6% 19.9%19.9%
Operating Operating Income Income $7,604$7,604 $9,678$9,678 $20,466$20,466 $46,764$46,764 $821$821 $85,333$85,333
as % of Salesas % of Sales 2.9%2.9% 13.1%13.1% 21.3%21.3% 17.3%17.3% 3.0%3.0% 11.7%11.7%
Non Operating Income (Expense)Non Operating Income (Expense)
InterestInterest $470$470
Patronage DividendsPatronage Dividends $723$723
Other incomeOther income $396$396
Income Before TaxesIncome Before Taxes $86,922$86,922
Whole Farm Profit and Loss by ChannelWhole Farm Profit and Loss by Channel
Source: Jim Munsch
InformationInformation::•Sales by channelSales by channel•Profitability by channelProfitability by channel•Unique expenses by channelUnique expenses by channelDecisionsDecisions::•Should we emphasis one channel?Should we emphasis one channel?•Should we plant more for a channel?Should we plant more for a channel?•What prices do we need by channel?What prices do we need by channel?•Can we reduce expenses and increase Can we reduce expenses and increase returns by outsourcing?returns by outsourcing?•Should we vacate a channel?Should we vacate a channel?
Profitability by Crop before Overhead Profitability by Crop before Overhead ExpensesExpenses
CropCropCost Cost
($/lb)($/lb) Sales ($)Sales ($) UnitsUnitsCost Goods Sold Cost Goods Sold
InformationInformation::•Total sales by cropTotal sales by crop•Gross profit by crop in all channelsGross profit by crop in all channels•Profitability (Gross Margin) for all crops Profitability (Gross Margin) for all crops before overhead expensesbefore overhead expensesDecisionsDecisions::•What price should we be charging?What price should we be charging?•What crops should we look to reduce costs?What crops should we look to reduce costs?•If we can find a channel for more sales, If we can find a channel for more sales, should we plant more?should we plant more?•Given our mission statement, should we Given our mission statement, should we plant less?plant less?
Sales ($) Units CGS ($) GM %270,000 244,452 204,101 24.4%
$270,000 $204,101 24.4%
WholesaleDetailed Report of Channel ProfitabilityDetailed Report of Channel Profitability
•Total sales for channel•Overall gross profit for channel•Sales by crop•Profitability (Gross Margin) within channel for each crop
Information:
Decisions facilitated:•After looking at other expenses for channel do we make money here?•On what crops do we do well and on which do we do poorly?•Should we plant more of good crops for this channel?•Should we stop selling poor crops in this channel? Source: Jim
Munsch
Unit Cost to TotalUnit Cost up to Harvest, clean & Unit Cost
Crop cost per unit, Crop cost per unit, Pre & Post HarvestPre & Post Harvest
•Cost to bring a crop to point of harvest•Cost to harvest, clean and pack•Total cost of crop by unit•Cost comparative on similar crops
Information:
Decisions facilitated:•Should I harvest a crop or more of a crop?•How much of cost is affected by a yield problem and should I do any thing differently?•If I have a cost problem can I see anything to do about it?
Source: Jim Munsch
Planning tool to predict results of Planning tool to predict results of decisions: “What-if”decisions: “What-if”
These reports are all “backward” lookingThese reports are all “backward” looking Could use a “forward looking” planning Could use a “forward looking” planning
tool to generate “what if” reportstool to generate “what if” reports Profitability if expand/change crop/market Profitability if expand/change crop/market
mixmix Acreage needsAcreage needs Yield and sales to expectYield and sales to expect Labor and input needsLabor and input needs Break even pricesBreak even prices
Specific reports for current operationSpecific reports for current operation Whole farm profit-loss statement by channelWhole farm profit-loss statement by channel Profitability by crop before overheadProfitability by crop before overhead
Over all channelsOver all channels Detailed by crop by channelDetailed by crop by channel
Costs by crop by category: pre-harvest and Costs by crop by category: pre-harvest and harvest, clean & packharvest, clean & pack
What-if reports for scenario analysisWhat-if reports for scenario analysis Other reports?Other reports?
Conceptual Model of CostsConceptual Model of Costs
We needed a way to conceptualize We needed a way to conceptualize costscosts
Based on this developed spreadsheet Based on this developed spreadsheet system with linked cells and sheetssystem with linked cells and sheets
Want to move to a relational Want to move to a relational database system and a browser database system and a browser contextcontext
Greenhouse Growing inField
Harvesting, cleaning& packing
Transportingto CSA
Selling (CSA)
The MarketCustomers
•Labor•Seed•Utilities•Supplies
•Labor•Machinery•Seed•Supplies•Fertility
•Labor•Machinery•Supplies•Utilities
•Labor•Truck Maint•Fuel
•Labor•Office Supplies
Steps for Producing and Selling CSASteps for Producing and Selling CSA
Source: Jim Munsch
Greenhouse Growing inField
Harvesting, cleaning& packing
Selling (Wholesale)
Transporting(Wholesale)
Steps for Producing and Selling WholesaleSteps for Producing and Selling Wholesale
•Labor•Seed•Utilities•Supplies
•Labor•Machinery•Seed•Supplies•Fertility
•Labor•Machinery•Supplies•Utilities
•Labor•Maint•FuelOr: HireOutside
•Labor•Office Supplies
The MarketCustomers
Source: Jim Munsch
Greenhouse Growing inField
Harvesting, cleaning& packing
Transporting to Farmer’s
Market
Selling (f mkt)
Steps for Producing and Selling in Farmer’s MarketSteps for Producing and Selling in Farmer’s Market
The MarketCustomers
•Labor•Seed•Utilities•Supplies
•Labor•Machinery•Seed•Supplies•Fertility
•Labor•Machinery•Supplies•Utilities
•Labor•Maint•Fuel
•Labor•Office Supplies•Market expense
Source: Jim Munsch
Processes Common to All Processes Common to All SegmentsSegments
Greenhouse Growing inField
Harvesting, Cleaning& Packing
•Labor•Seed•Utilities•Supplies
•Labor•Machinery•Seed•Supplies•Fertility
•Labor•Machinery•Supplies•Utilities
Source: Jim Munsch
Processes Common to All Processes Common to All SegmentsSegments
Greenhouse Growing inField
Harvesting, Cleaning& Packing
“Cost to Grow” “Cost to harvest, clean and pack”
“Total Production Cost”
Source: Jim Munsch
Cost of Selling and Distributing for Channel
Greenhouse Growing inField
Harvesting, cleaning& packing
Transportingto CSA
Selling (CSA)
Customers
Steps Unique to Channel (CSA Example)Steps Unique to Channel (CSA Example)
Source: Jim Munsch
Typical Cost “Tree” for Cost to GrowTypical Cost “Tree” for Cost to Grow
Greenhouse
Seed
Field Cost
SpecialHandling
Labor
Fertility
Land RentOr taxes
Fuel - Heat
Supplies -Growing
MachineExpense
Labor
MachineExpense
Labor
Supplies
Wages
Benefits
Wages
Benefits
Wages
Benefits
FuelDeprMaint
FuelDeprMaint
Hours
Hours
Hours
Hours
Hours
Maint
Depr
Cost to Grow
Source: Jim Munsch
Typical Cost “Tree” for Cost toTypical Cost “Tree” for Cost toHarvest, Clean & PackHarvest, Clean & Pack
LaborWages
Benefits
MachineExpense
FuelDeprMaint
SpecialHandling
Labor
MachineExpense
Wages
Benefits
FuelDeprMaint
GeneralSupplies
Special Supplies
Cost to Harvest, Clean
& Pack
Hours
Hours
Hours
Hours
Source: Jim Munsch
Cost to Grow for a Specific CropCost to Grow for a Specific Crop
Greenhouse
Seed
Field Cost
SpecialHandling
Labor
Fertility
Land RentOr taxes
Fuel - Heat
Supplies -Growing
MachineExpense
Labor
MachineExpense
Labor
Supplies
Wages
Benefits
Wages
Benefits
Wages
Benefits
FuelDeprMaint
FuelDeprMaint
Hours
Hours
Hours
Hours
Hours
Maint
Depr
Allocate by area devoted to individual crop
Allocate to crop by number of
Plants or “flat-weeks”
Acknowledge special cost items for a crop
Keep cost by individual crop
Cost for Specific Crop
Source: Jim Munsch
Cost to Harvest, Clean & Pack a Specific Cost to Harvest, Clean & Pack a Specific CropCrop
LaborWages
BenefitsHours
MachineExpense
FuelDeprMaint
Hours
SpecialHandling
Labor
MachineExpense
Wages
Benefits
FuelDeprMaint
Hours
Hours
GeneralSupplies
Special Supplies
General supplies allocated by unit
Determine hours/unit for specific crop from
records or estimate
Acknowledge special cost items for a crop
Cost for Specific Crop
Source: Jim Munsch
Lots of farm data needed to Lots of farm data needed to make this happenmake this happen
Want to determine specific data neededWant to determine specific data needed Can we link to farm accounting systems?Can we link to farm accounting systems? Can we use Schedule F information?Can we use Schedule F information? Create “farmer-tested” user interfacesCreate “farmer-tested” user interfaces Collect data from farms to create “default Collect data from farms to create “default
values” for those without informationvalues” for those without information Can we create a database of typical costs Can we create a database of typical costs
and returns for farmers to “grade” and returns for farmers to “grade” themselves? themselves? How am I doing relative to my peersHow am I doing relative to my peers
Where are we now?Where are we now?
Have basic spreadsheet model of data, Have basic spreadsheet model of data, linkages, and reports (Jim Munsch)linkages, and reports (Jim Munsch)
Need user interface and “default values”Need user interface and “default values” ““Conceptualizing” the interface and Conceptualizing” the interface and
underlying database (David Baker)underlying database (David Baker) This summer: Farmer collection of labor This summer: Farmer collection of labor
data by crop and activitydata by crop and activity Are you interested in participating?Are you interested in participating?
Big Issue: Should Veggie Compa$$ Big Issue: Should Veggie Compa$$ be browser/web-based platform?be browser/web-based platform?
Lots of Pros (industry standard)Lots of Pros (industry standard) Hosting benefits (data, debugging)Hosting benefits (data, debugging) Browser ubiquityBrowser ubiquity Microsoft vs. Open Source Microsoft vs. Open Source
developmentdevelopment User collaboration potential User collaboration potential (blogs, (blogs,
wikis)wikis) Problem: Rural web access!Problem: Rural web access!
What can you do?What can you do?
Be patient! We are trying (really)!Be patient! We are trying (really)! Volunteer for beta testing when we get that farVolunteer for beta testing when we get that far Are you interested in collecting and reporting Are you interested in collecting and reporting
labor by crop and activity for your farm?labor by crop and activity for your farm? Contact John HendricksonContact John Hendrickson 608-265-3704 or [email protected] or [email protected]
Strong opinions regarding web access in rural Strong opinions regarding web access in rural areas: Would web-based platform be a areas: Would web-based platform be a problem?problem? Let us knowLet us know
Federal Risk Management Federal Risk Management ProgramsPrograms
Flooding/wet spring and weather in Flooding/wet spring and weather in general has some farmers wonderinggeneral has some farmers wondering
New Farm Bill has some changesNew Farm Bill has some changes Very quick overview here and Very quick overview here and
handoutshandouts If you have questions, talk to meIf you have questions, talk to me
Crop InsuranceCrop Insurance AGR-Lite AGR-Lite
Insure Schedule F income for whole farmInsure Schedule F income for whole farm RMA manages policy, subsidizes premiumsRMA manages policy, subsidizes premiums Buy from private crop insurance companyBuy from private crop insurance company
NAP PolicyNAP Policy Crop-specific catastrophic coverageCrop-specific catastrophic coverage Buy for each crop at county USDA Farm Buy for each crop at county USDA Farm
Service Agency (FSA) officeService Agency (FSA) office Heavily subsidized, but catastrophic Heavily subsidized, but catastrophic
coverage onlycoverage only
Federal Disaster AssistanceFederal Disaster Assistance Permanent programs under new Farm Permanent programs under new Farm