Fixed Cost In Break-Even Analysis Refers To The Cost That Comparison of Harvesting Methods for Aronia Berries

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Comparison of Harvesting Methods for Aronia Berries

Introduction

There are at least three ways to harvest aronia berries. These are hand harvesting, machine harvesting, and self pick harvesting. Each of these are discussed in this article and the cost involve with each method.

Hand Harvesting

Hand-harvesting affords more precise selection and tends to do a better job of picking more of the berries. Mechanical harvesters allow for a more efficient, often a more cost-effective process. Mechanical harvesting is well-suited for large aronia berry plantings that lay on a flat patch of earth. The type of harvesting by hand-picking, mechanical harvesters or a combination of the two is influenced by multiple factors.

For hand harvesting, from an employer’s perspective, a piece rate system provides two advantages over an hourly wage system. First, a piece rate establishes in advance the unit cost for the job a worker is hired to do. Second, a piece rate system does not require close and constant supervision of a worker’s productivity. This means the workers need to be self-motivated. While a flat hourly, or wage payment system guarantees a fixed rate income, it also removes the opportunity for a worker to earn more than the stated hourly wage. In addition an hourly wage system removes the productivity incentive, employers may be disadvantaged if worker performance is below that of more efficient pickers. Under an hourly wage system close supervision of worker effort is required.

The following example assumes 700 bushes planted per acre with an average yield of 20 pounds of berries per bush. A picking rate of 16.1 pounds per hour and an hourly wage of $8.00 is used. You can use the numbers that apply to your operation. The worksheet also allows you to calculate your hand harvest costs if you pay pickers on a per pound basis. With these assumptions, hand harvesting an acre of berries requires 870 hours of labor at a wage of $8.00/hour. The operating cost of hand harvesting is (870 hours × $8.00/hour) $6957/acre.

a. Aronia berry bushes – 700 bushes

b. Yield per bush – 20 lbs

c. Picking rate – 16.1lbs/hour

d. Per pound labor rate – $ 0.50 $/lb

Total production a × b =14,000 lbs

Hours (a × b) / c = 870 hours

Total cost (a × b) × d = $ $6957 dollars

Cost per bush (b × d)= $ 9.94 dollars

Hourly wage (c × d) = $8.00 dollars

Number of pickers/week ((a × b) / c) / 40= 22 pickers

Thus for hand picking a 14000 lb harvest at $1.00 per lb would be. $14,000 gross with a harvesting cost of$ 6957 the net profit would be $7043 per acre not counting other production cost. 10 acres could net $70,430.

Machine Harvesting

There are two categories for machinery costs: ownership costs (or fixed costs) and operating costs (or variable costs). Ownership costs include the cost of the equipment which are a fixed cost no matter how much (or how little) you use the picking machine. The other related cost include repairs, housing costs, depreciation, interest, and insurance,. The variable operating costs associated with using the machine and will vary depending on how much you use the equipment. The operating costs include the labor required for running the equipment, fuel, lubrication, and the costs of other necessary equipment.

Ownership Costs

You may be able to buy a pull-type harvester for $30,000.

Repairs

Repair cost for belts, pulleys, motors etc is estimated to cost $200 per year. You should also figure in an amount for maintenance and repairs. A suggested amount is 8% of the purchase price, or $2400 over the 20 year time period.

Housing Cost

Housing cost is estimated to be $500 per year. You may have storage space available on your farm.

Depreciation

Since you are using the picker infrequently and on a small amount of land, the useful life of the implement may be about 20 years after which it has no market value. With these assumptions, your depreciation cost can be computed to be ($30,000/20 years) = $1500/year.

Interest

If you borrow money to purchase the harvester the cost of borrowing must be considered. The interest rate should be included in your cost calculation. Even if you use your own funds to purchase the equipment, you should figure in what you could earn from using that money elsewhere. Since the value of the machine declines over time (due to depreciation) the standard method is to calculate interest costs using the average value over the life of the machine, in this case, $15,000. Assuming an interest rate of 6% and an average value your interest cost is $15,000 × 0.06 = $900 per year.

Insurance

You will need to insure your new aronia berry harvester. An estimate for Insurance cost are often about $10 per $1000 of valuation. For $30,000 berry picker that would be $300 per year. Your current insurance policy may be sufficient to cover your new purchase.

Total Ownership Costs $ 1500 + $200 + $500 + $900 + 300 = $ 3,400.00 per year

Cost comparison breakeven acres =

Total Ownership Costs (per year) = $ 3,400

Hand Variable Costs/acre – Machine Variable Costs/acre $ 3,400.00 per acre- $ 6957/acre = $3557 additional cost to hand harvest one acre compared to machine harvesting. 3400/6957 = 0.49 %

Thus for anything over 0.5 acres machine harvesting is most economical.

3400/6957 = 0.49 %

Thus for machine harvesting a 14000 lb harvest at $1.00 per lb would be. $14,000 gross with a harvesting cost of $ 3400 the net profit would be $10,600 per acre not counting other production cost. 10 acres could net $106,000.

You Pick Operations

One way to help control cost is to have a “you pick” berry operation. You pick is not as popular as you pick blueberry operations because the aronia berries are bitter and must be made into juices, jams and other products.

Marketing aronia berries as fundraisers for schools and church youth groups work well for some operations. It is a good way to market aronia berries. It eliminates the cost of hand harvesting. Marketing aronia berries as fundraisers for schools and church youth groups also provides are opportunity to educate people about the health benefits of aronia berries. This method can increase your profits and make small farms profitable.

Summary

For aronia plantings of greater than ½ acre in size machine harvesting is the most economical operation. As an interim measure you use pick operations to be profitable. For commercial operations not only is machine harvesting is most practical, it is essential. In addition large acreages are required to attract large buyers for the production of juices. Large acreages are also required to be profitable and competitive because Europe has many thousands of acres of arona and are marketing them in the United States at very competitive prices.

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