UNIVERSITY OF CALIFORNIA COLLEGE OF AGRICULTURE AGRICULTURAL EXPERIMENT STATION BERKELEY, CALIFORNIA CITRUS ENTERPRISE-EFFICIENCY STUDIES IN SOUTHERN CALIFORNIA ARTHUR SHULTIS BULLETIN 620 May, 1938 CONTRIBUTION FROM THE GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS UNIVERSITY OF CALIFORNIA BERKELEY, CALIFORNIA CONTENTS PAGE Introduction 3 Purpose of enterprise-efficiency studies 4 Method of conducting enterprise-efficiency studies 4 Explanation of terms 5 Total income 5 Net income 5 Depreciation 6 Capital and management income 6 Management income 6 Capital income 7 Factors influencing net income 7 Yield 8 Effect of age of trees 9 Effect of climate 9 Effect of soil 12 Effect of cultural care 12 Price 14 Costs. 16 Relation of various factors to net income of selected orchards 16 Costs and returns in mature orchards, 1931-1935 20 Detailed analysis of costs in mature orchards 24 Cultural costs 26 Pruning and brush disposal 27 Covercropping 27 Fertilization 29 Pest control 30 Disease control 31 Frost protection 31 Cultivation 32 Irrigation 33 Miscellaneous labor and material costs 34 Cash-overhead costs 34 Investment 35 Depreciation on equipment and improvements 37 Interest on investment 38 Standards of costs 39 A standard of costs for oranges 44 A standard of costs for lemons 45 Costs in young orchards 45 Cost of developing an acre of orange trees 47 Effect of yields on costs and net income 51 Effect of yield on costs per box 52 Planning for the future 53 Future yields 53 Future prices 53 Future costs 55 Valuation of orchards 55 Size of orchard 59 Summary 62 Acknowledgments 65 Appendix: basic tables 67 [2] CITRUS ENTERPRISE-EFFICIENCY STUDIES IN SOUTHERN CALIFORNIA 1 ARTHUR SHULTIS 3 INTRODUCTION In order to assist citrus growers in their management problems, the Agricultural Extension Service has been conducting enterprise-effi- ciency studies in several California counties since 1926. The following studies have been completed in southern California : County Study Santa Barbara Lemons — 1930, 1932 to 1936 Ventura Valencias — 1930 Los Angeles Valencias, navels, lemons — 1931 to 1936 Orange Valencias, lemons — 1926 to 1936 San Diego Lemons— 1931, 1932 Riverside Navels— 1934 to 1936 San Bernardino Navels, Valencias, lemons, grapefruit — 1928 to 1934, 1936. The purpose of this bulletin is to summarize and present data ob- tained from the above studies. The data for years prior to 1928 are omitted because the small number of records available were all from one county. The 1936 records were completed after the original compilation of data. They are included in the tables in the Appendix but have not been incorporated in the body of the text because the changes which would have resulted were not significant or important and would not justify a further delay. Although it is recognized that there is some vari- ation in the different districts, data in this report are presented in the form of averages for southern California as a whole. Those wishing fig- ures more applicable to a particular locality should obtain the latest report from the office of the county farm advisor. Data presented in this report are limited to lemons and to navel* and Valencia oranges, since the grapefruit records available were too small in number to be significant. General principles and some of the cost items shown for oranges and lemons are applicable to grapefruit also, although total costs, returns, and net income are quite different. 1 Received for publication June 12, 1937. 2 Paper No. 72, Giannini Foundation of Agricultural Economics. 3 Extension Specialist in Farm Management and Associate on the Giannini Foun- dation. 4 The navel oranges in this study consist almost exclusively of the Washington Navel variety, but a few scattered trees of other navel varieties are present in some orchards. [3] 4 University of California — Experiment Station Purpose of Enterprise-Efficiency Studies. — As the name of the study implies, its fundamental purpose is to study the efficiency of citrus-fruit production in individual orchards with a view to improving it. To accom- plish this purpose, accurate information on the quantity and quality of fruit produced in actual orchards has been obtained as well as on the labor, material, and facilities used in that production. The results are expressed in terms of income and costs; hence these studies came to be commonly known as "cost studies" or "cost records." Emphasis is placed, however, on methods of improving efficiency of production rather than on discovering average cost of production. Doubtless there are several methods of expressing orchard efficiency aside from the relation between income and costs, but the universal appeal of net income led to its being used as the final measure of orchard efficiency. Economic security is assumed to be the goal of the citrus grower. A stable, dependable net income over a long period may likewise be assumed to be more desirable than high profits in occasional years. Hence, enter- prise-efficiency studies are conducted to disclose opportunities for achiev- ing this goal through improving average yield and quality of fruit and lowering production costs. Method of Conducting Enterprise-Efficiency Studies. — An enterprise- efficiency study is conducted by a local farm advisor in cooperation with a group of progressive local growers who volunteer to provide accurate and detailed records on a particular orchard or block of trees of a certain variety. Such an individual record may comprise the operator's entire farm business or be only a part of it. Some cooperators may provide more than one record, the orchards covered being of different age or variety or in a different location. Since participation is voluntary, the orchard records obtained may not be a true cross section of the entire citrus-fruit industry. Good, poor, old, and young orchards are not neces- sarily included in the same proportion in which they occur in the district. Probably orchards included in this study are above the average in effi- ciency, since participation would be more readily expected of growers with above-average managerial ability. In fact, orchards in this study show an average annual yield per acre about 62 per cent above the state average yield given by the California Cooperative Crop Reporting Serv- ice for the last eight years. As each year of an enterprise-efficiency study is completed, cooperat- ing growers receive a detailed record and analysis of their orchards, and a mimeographed progress report for limited public distribution is issued by the local farm advisor's office. These local reports contain separate summaries or averages for the different kinds of fruit covered. Bul. 620] Citrus Enterprise-Efficiency Studies 5 EXPLANATION OF TERMS Total Income. — Income, when taken at the same point in the production and marketing process, is an exact and comparable figure, for it is usually the result of the yield and price of the main product, in this case oranges or lemons. Some growers compute their income for fruit on the trees, since their returns from marketing organizations usually have charges for picking and perhaps hauling to the packing-house deducted. In the citrus enterprise-efficiency studies, picking and hauling fruit to the packing-house are considered as part of the production process and are treated as costs rather than as deductions from income. Packing and sell- ing costs are considered a part of the marketing process and are deducted from income. Hence, income and prices are computed upon delivery to the packing-house door. All fruit actually harvested is included in the yield and in the computation of the average price of fruit. The packed box, or its equivalent in quantity of fruit, is used as the unit of product, and all fruit harvested is converted to this unit, whether actually packed or not. The standard packed box for oranges usually contains 72 to 75 pounds of fruit while that for lemons contains 78 to 80 pounds. Thus, the average price per packed box shown in the following tables is the average for the above quantity of orchard-run fruit at the packing- house door. This price times the yield expressed in packed boxes equals the total income per acre. Net Income. — Citrus growers own and operate orchards for the pri- mary purpose of obtaining therefrom a net income. By "net income" is meant the difference between income and expense, or, the amount real- ized from the ownership and operation of the enterprise. In this report net income is used as a general term to cover all measurements of profit or orchard earnings. "Net profit" is considered a matter for individual determination by the owner's personal accounting system. Net-profit figures for different orchards are seldom comparable because of varia- tions in the proportion of labor, management, and investment provided by the owner, and because of differences in accounting procedure. Practices ordinarily followed in computing and deducting costs to ob- tain net income vary. In order to afford opportunities to compare net income, several different net-income terms, each having an exact defini- tion and method of computation, are used in all enterprise-efficiency studies. These are : capital and management income, management in- come, and capital income. Where income is insufficient to cover the ex- penses used in computing any of these net-income figures, a minus sign before the amount indicates a loss. 6 University of California — Experiment Station In all of these, labor performed by the operator, although not always recognized in personal accounting, has been included as part of the labor cost in these records along with hired labor and the value or cost of tractor, truck, and horse work. Although part of this labor cost may not be a matter of actual cash outlay, in these records it is considered a cash cost. A net cash income would result if this labor cost, both cultural and harvesting, plus the cost of materials and other annual cash outlays, such as taxes, repairs, and insurance, which constitute the total current cash costs, were deducted from the total income. But this figure is not recom- mended as a profit figure and is not shown in this report because it does not recognize depreciation as a cost. Depreciation. — Depreciation is that part of the original cost of facili- ties that should be charged to each year of use in order to include the cost of such facilities in annual operating expenses by the time they are worn out and require replacement. Depreciation may vary widely in its manner of computation. In citrus enterprise-efficiency studies, deprecia- tion is computed at the most suitable rate for each improvement and piece of equipment used for the citrus orchard. No charge is included for depreciation of the trees themselves, since most citrus orchards are re- ceiving current replacements as needed and are not being allowed to decline in productivity. Addition of depreciation to the total current cash costs results in the subtotal, "total cash and depreciation costs," which appears in all tables showing all cost groups. Capital and Management Income. — The amount by which income ex- ceeds cash costs and depreciation, or all costs except interest and man- agement, is "capital and management income." It is the amount available to reimburse management and capital. It is comparable to the net profit shown by a personal accounting system where the owner's labor has been included as a cost and where no interest on indebtedness or interest on investment is so included. Management Income. — Where interest on investment (at 5 per cent in these records) is included as a cost, the net-income figure obtained is called "management income." It is the amount by which income exceeds all costs, except an allowance made for management. It may be consid- ered as the residual available for the reimbursement of management, if the computed interest is deemed sufficient reimbursement for invested capital. Interest actually paid on indebtedness is not recorded in these studies, the computed interest on investment being assumed sufficient to cover interest paid and a return to the operator for the use of his capital. In studying orchard efficiency, management income is one of the best Bul. 620] Citrus Enterprise-Efficiency Studies 7 measures of performance, since allowance for more valuable facilities is usually covered by greater interest on investment. Capital Income. — The amount by which income exceeds an allowance for management and all costs except interest is called "capital income." It is an arbitrary figure obtained by deducting an estimated allowance for management from the capital and management income and attrib- uting the remainder to capital. An orchard operator, in addition to per- forming varying amounts of labor, ordinarily devotes additional time and energy to managerial activities which have not been included as a cost in this study. In these studies an estimate of $30 an acre is used to cover management. Capital income, representing the return to capital, may be used in computing the rate of return on an actual investment or the value upon which a certain rate of return was earned. In this report a rate of 5 per cent has been used in computing interest on the inventory value of facilities and in capitalizing the net return to capital into the agricultural value of the orchard. FACTORS INFLUENCING NET INCOME The factors influencing net income are yield per acre, price of fruit per box, and costs per acre. The most favorable combination of good yield, high price, and low cost would result in a relatively high net income. Low net incomes or losses may likewise be traced to unfavorable yields, prices, or costs. Observation of several hundred of these citrus-orchard records discloses that yield is the major factor responsible for relatively low net income in the majority of cases but that occasionally abnormally low prices or high costs are responsible. In order to illustrate some typical causes of variations in net income, table 1 is presented. It shows a general summary of yield, prices, costs, and net-income figures for six individual orchards. Orchard 315 was the most profitable orchard in the study in 1936 be- cause of its high yield and relatively good price for fruit. Total cash and depreciation costs, although highest of any orchard shown above, were not high enough to be excessive when yield and income are considered. This orchard also had the highest average annual net income of any in the Los Angeles study for the period 1931 to 1935, inclusive. Orchard 21A shows a good profit with a fairly good yield, a below- average price for fruit, and relatively low costs. Orchard 10 shows a fair yield and only a fair price but good net in- come because of low costs. Orchard 56 A had a good yield and a high average fruit price but a lower net income because of high costs. 8 University of California — Experiment Station Orchard 725 failed to return 5 per cent on investment by $67.82 an acre because of its low yield. Fruit price and costs were satisfactory. This orchard shows a slightly below-average net income as compared with similar orchards in the study for the last six years. Orchard 64 is decidedly unprofitable because of low yields. The low TABLE 1 General Summary of Selected Valencia-Orange-Orchard Records, Los Angeles County, 1936 Orchard 31£ Orchard 21A Orchard 10 Orchard 56A Orchard 725 Orchard 64 Yield , packed boxes per acre 374 9 42 2.13 269.1 22 1.78 195.0 42 1.96 241.3 23 2.21 111 3 47 2.08 29 Age of trees, years Average price, dollars per packed box 21 1.75 Costs and returns in dollars per acre Cultural labor cost 66.50 61.69 34.09 48.72 47.76 26.11 145.33 36.28 67.36 14.89 59.81 Harvesting cost 5.70 Material cost 162.84 41.69 1.16 92.75 29.49 6.14 41.94 38.55 6.58 84.76 37 41 20.16 85.70 22.43 4.71 47.16 Cash-overhead cost 19 50 Depreciation 5.24 Total cash and depreciation costs . . . 333.88 211 .19 160.94 323 94 195.09 137 41 Total income 797.84 480 29 381.20 535.25 231.45 50 68 Capital and management income. 463 96 269.10 220.26 211.31 36 36 - 86.73 Management income* 362.71 163.41 116.89 99.52 -67.82 -191 87 Capital incomef 433.96 239.10 190 26 181 31 6.36 -116.73 Investment per acre 2,025.00 2,113.89 2,067.72 2,235 91 2,083.50 2,102.80 Rate earned on investment, per cent 21.4 11.8 9.2 8.1 0.8 -5.5 * Management income is calculated by deducting interest on investment at 5 per cent from capital and management income. t Capital income is calculated by deducting an allowance of $30 for management from capital and management income. yield and low fruit price resulted in income lower than the lowest cost that could conceivably be attained. Although doing somewhat better over the previous five years, this orchard showed the largest loss of any in the study. YIELD Yield per acre so definitely limits total income and the opportunity to make a net income that it may be said to be of first importance as a profit- determining factor. In order to obtain a good net income over a period of years, good yields must be obtained. Bul. 620] Citrus Enterprise-Efficiency Studies 9 The average annual yield of an orchard over a long period is depend- ent upon the age of the trees, their soil and climatic environment, and the cultural care which they have received. Most influences to which an orchard is subject affect it in about the same way every season, although variations in temperature at blooming time, frosts, and destructive winds may cause considerable variation in crops from year to year. These seasonal variations require that an annual average covering a period of years be used in stating the yield of a particular orchard. In analyzing the yield of an orchard or in selecting a site for one, factors which influence yield are of the greatest importance. The managerial decisions of where, when, and what citrus fruit to plant transcend all other factors in determining future net income. After an orchard is once planted, its soil and climatic environment, its variety and rootstock, and even the age of the trees are largely determined for its lifetime, and the only further influence the operator can exert on yield will be through the cultural care and protection he provides. In evaluating or comparing yields, the age of the trees must be considered. Effect of Age of Trees. — An orchard takes many years to develop suffi- ciently to produce maximum crops. A young orchard on suitable soil may be expected to have increasing yields until the trees have reached their maximum development, which will usually be between twenty-five and forty years of age. In order to know whether an orchard is produc- ing as much as it should for its age, normal yields for different ages of trees should be used as a standard of comparison. A single year, however, is seldom representative ; an average of several years should be used and this average compared with the standard production for that average age. Figure 1 shows a smoothed yield-by-age curve for Valencia-orange orchards in this study. Too few records for navel-orange and lemon or- chards were available to provide similar curves. Since the varietal differ- ences in yield shown by these records are small, the Valencia yield-by-age curve is suggested as a standard for oranges and lemons in southern California. Effect of Climate. — Climate definitely limits the area where citrus or- chards may be grown. There is no clear-cut line of demarcation between areas definitely adapted to citrus production and those that are not. One site may be very favorable, while only a short distance away a higher frequency of killing frosts or destructive winds may constitute such a handicap as to render citrus unprofitable because of low average yields. The most important climatic factor appears to be the total amount of warmth and sunshine available during the season. This requirement is largely met in the citrus areas of southern California. But temperatures, 10 University of California — Experiment Station humidity, wind, and killing frosts vary widely from place to place and result in climatic advantages and handicaps. Some of these handicaps may be overcome by protection in the form of special cultural care through providing windbreaks to reduce wind damage and heating to prevent frost losses. Where such cultural care is provided at additional cost, the handicap becomes one which increases costs in addition to or in place of a reduction in yield. Frost losses in many orchards are being satisfactorily and economi- Yield by Age of Tree Shown by Valencia-Orange Records in Enterprise- Efficiency Studies in Southern California, 1926 through 1935 300 35 40 5 10 15 20 25 30 Age of trees in years at beginning of season Fig. 1. — Orange orchards begin to produce when two or three years old and in- crease in production rapidly for the next ten years. Although they may be said to be practically in full-bearing Avhen fifteen to twenty years of age, yield is shown to increase gradually up to about the fortieth year. The above curve represents only the orchards in these studies and, therefore, cannot be taken as average for the district. cally prevented by orchard heating. There are many areas, however, where frost losses occur so rarely that equipment for heating has not been installed. Many of these so-called "frost-free" areas suffered heavy loss of fruit in the freezes of 1913 and 1937. In these areas, however, it may still be more economical to take the occasional loss of crop from these freezes, which occur only once in ten to fifteen years, than to make the large outlay for heating equipment and prepare to heat each season. The only widely and successfully used system for protecting citrus orchards from frost damage is to burn enough fuel in enough heaters to raise the temperature in the orchard above the danger point. Most citrus orchards needing protection are now heated with stack-type oil Bul. 620] Citrus Enterprise-Efficiency Studies 11 heaters. In orange orchards, 40 to 50 of such heaters are used to the acre, while lemons, which require greater protection or more heat, should have from 60 to 80 heaters per acre. A more detailed discussion of heating will appear under the heading "Cultural Costs" (p. 26). Extension Cir- cular 40 and Bulletin 536 5 will provide the reader with more information on frost protection. Heating costs and requirements vary so from or- chard to orchard and from year to year that no significant cost figure can be given. Where the total cost over a period of years is less than the value of the fruit saved, heating is profitable. There are frosty valley bottoms in southern California where citrus trees are not grown because of the excessive cost of frost protection. It is economically sound to avoid growing citrus fruits where the frost hazard is unusually high, to protect orchards where protection is needed and can be economically provided, and to leave unprotected those orchards that are not subject to damage except from the occasional bad freeze. Wind damage is another variable and serious yield handicap in cer- tain areas. A destructive wind occurred in southern California in Oc- tober, 1935, which demonstrated the value of windbreaks, since many orchards not protected suffered the loss of a large portion of the 1936 crop as well as considerable damage to the trees and the fruit that re- mained. Observation of the relative damage in Orange County orchards by a similar windstorm in 1932 led H. E. Wahlberg, Farm Advisor of Orange County, to make a survey of fruit harvested from selected pro- tected and unprotected orchards. Thirteen pairs of orchards were se- lected, each pair containing one protected and one unprotected orchard in the same location, on similar soil, of similar age, and with similar cul- tural care except for windbreaks. The fruit harvested was the 1933 crop and even with the low prices of fruit in that year, the protected orchards showed $90 an acre greater gross income because of heavier yield and better quality of fruit. Table 2 presents a summary and comparison of fruit quality, yield, and income. If such a difference in income as that shown in table 2 came only once in four years, with normal orange prices, the difference in income could easily average about $30 to $40 a year, which would surely cover the cost of the windbreaks. Cost figures are not available, since the cost of culti- vation and irrigation and the use of land devoted to windbreaks is spread over the producing part of the citrus orchards in these records. 5 Sehoonover, Warren E., Eobert W. Hodgson, and Floyd D. Young. Frost protec- tion in California orchards. California Agr. Ext. Cir. 40:1-73. 1930. (Out of print.) Sehoonover, Warren E., and F. A. Brooks. The smokiness of oil-burning orchard heaters. California Agr. Exp. Sta. Bul. 536:1-67. 1932. 12 University of California — Experiment Station However, if as much as 10 per cent of the available area were devoted to windbreaks, the production and income saved by that area would be from $300 to $400 an acre, which would be comparable in value to production of the land in citrus trees, while cost of maintenance would be less. Effect of Soil. — Over a long period, trees may be observed to develop faster and bear more heavily on soil of good depth, permeability, and fertility. Soil may thus be said to influence production, the effect being more pronounced where it has not been offset by cultural care. To a con- TABLE 2 Valencia-Orange Orchards with and without Windbreaks, Orange County, 1933* Number of orchards Average yield , packed boxes per acre . Per cent of fruit Fancy Per cent of fruit Extra Choice Per cent of fruit Choice and lower Average price per box in dollars Average income per acre in dollars . . . Orchards with windbreaks Orchards without windbreaks 13 13 268 202 7.2 12 74.1 59.3 18.7 39.5 0.86 0.68 229.64 137.68 * Data from unpublished survey conducted by H. E. Wahlberg, Farm Advisor, Orange County, California. siderable extent soil handicaps may be wholly or partially overcome by careful and suitable fertilization, irrigation, and soil management. How- ever, there are orchards on soils so shallow, or heavy, or light that even the best of management cannot obtain as good results as are obtained with less effort on better soils. Where yields are too low to be profitable because of unsuitable soil, and where no change in management can over- come this handicap, the orchard might well be removed or abandoned. Every citrus grower would do well to know his soil and to know how it compares with other soils. Practically all the citrus areas in southern California are included in the soil surveys made cooperatively by the United States Department of Agriculture Bureau of Soils and the Cali- fornia Agricultural Experiment Station. These published surveys and maps make possible the identification of a particular soil and describe its characteristics and advantages or shortcomings. Many of the soil surveys which are no longer available for distribution may be consulted in public libraries or in the office of the local farm advisor. Effect of Cultural Care. — Aside from some climatic influences, and soil and tree-age limitations over which the grower has little control, orchard yield over a long period is largely influenced by the cultural Bul. 620] Citrus Enterprise-Efficiency Studies 13 care provided by the operator. One frequently hears of a certain orchard that is said to be highly productive because the owner is a "good grower" or "understands citrus fruits." The human factor is certainly very im- portant in determining results. That which accomplishes these results, however, is not merely the grower's knowledge of or sympathy for his trees, but rather the work actually done in the orchard such as irrigat- ing, fertilizing, and pest control. Trees do not need to be forced to bear. All they need is enough soil moisture, soil fertility, sunshine, protection from pests and diseases, and an environment free from any limiting in- TABLE 3 Comparison of Groups of Valencia-Orange Orchards in Orange County, Receiving Heavy, Medium, and Light Irrigation, 1927 to 1931* Heavily irrigated orchards Moderately irrigated orchards Lightly irrigated orchards Average annual acre-inches of water applied per acre Average number of applications per year Average age of trees for five-year period, years Average annual yield, packed boxes per acre Average annual irrigation labor cost, dollars per acre Average annual water cost, dollars per acre Average annual management income, dollars per acre 31.1 7 17 222 15.59 19.14 40.93 17.3 6 17 241 14.43 14.81 220.21 11.1 5 15 171 12.33 10.52 64.53 * Wahlberg, H. E. Sixth annual summary of cost and efficiency analysis in Valencia orange produc- tion, 1931. California Agr. Ext. Ser. 20 p. 1932. (Mimeo.) fluences. The operations by means of which growers strive with varying degrees of success to secure good yields will be discussed in detail under the heading "Cultural Costs." A single example of the effect of one of the most important operations on yield may be drawn from observations on the application of irrigation water. Irrigation is absolutely necessary in all citrus orchards in southern California. The continuous presence of adequate available moisture in the soil during the entire year is essential to maximum growth and pro- duction. Water in the soil, however, must not be excessive or roots will rot and trees will be damaged. Overirrigation is particularly dangerous in poorly drained soils that become waterlogged; it may also be harmful in well-drained soils, both through leaching soluble plant food below the root zone and by causing some decay of roots by keeping the soil too wet. The application of water in proper amounts at proper intervals and with good distribution is frequently the most difficult and important job of the orchard operator. Extension Circular 50 6 discusses irrigation and 6 Veihmeyer, F. J., and A. H. Hendrickson. Essentials of irrigation and cultiva- tion of orchards. California Agr. Ext. Cir. 50:1-24. 1930. Revised 1936. 14 University of California — Experiment Station cultivation in detail, and the reader is referred to that publication for a complete presentation of these operations. The amount of water required by citrus trees varies with the climatic environment. In more humid areas near the coast less water is used by the trees than in the hotter, drier interior. The amount applied also varies with the rainfall and soil type from orchard to orchard and from year to year. During the last ten years of these enterprise-efficiency studies the quantity of irrigation water applied in individual orchards has been recorded and compared. In every comparison, groups of or- chards using a moderate amount of water for the locality showed as good yields or better than those using more water or less. Table 3 presents one of these comparisons of three groups of ten or more orchards each. All were in the coastal section of Orange County where water require- ments are relatively low. In table 3 the moderately irrigated orchards had the best yield. Although they also had the best management income, only part of that difference can be attributed to difference in irrigation practice. pRICE The price received per box of orchard-run fruit is an important factor in determining the net income from an orchard. The general level of orange or lemon prices for a particular season may be assumed to affect all orchards alike, but although it very definitely influences earning in each orchard, it has little influence on the relative profit in one orchard as compared with another. The grower, by his own efforts alone, cannot influence the general level of prices for the season. In any given year, however, some growers receive a better price than others for their fruit, the difference sometimes being great enough to cause a loss in one orchard while in others with the same yield a profit is made. This variation in price of fruit from different orchards in the same season is important to individual growers, because to a certain extent, it is due to their influ- ence, or a result of their location. These price variations between orchards are usually due to the quality and size of the fruit or the time of mar- keting. Better fruit brings better prices, so that the grower producing a higher percentage of fruit in the highest-quality grades will obtain a higher average price per box for all his fruit. A grower, however, usually has only limited control over quality. There are cases where pruning, par- ticularly with old lemons, may result in better size of fruit. Thinning 7 can be effective in increasing the size of the fruit sold but has not been 7 Further discussion on the effects and economic feasibility of thinning oranges is given in : Parker, E. R. Some effects of thinning orange fruits. California Agr. Exp. Sta. Bui. 576:1-32. 1934. Bul. 620] Citrus Enterprise-Efficiency Studies 15 found profitable because increase in size has seldom resulted in enough additional income to offset reduced yield and the cost of thinning. As a rule, the most feasible practices to improve size and quality of fruit are the same as those which produce maximum yield. High-quality fruit and resultant higher prices have practically always been associated with high yields in individual records in this study; this correlation is due, of course, to environmental factors as well as cultural practices. The average price per box received for fruit from a particular orchard TABLE 4 Effect of the Proportions of By-product Fruit on Price and Net Income in Four Selected Lemon Orchards, Los Angeles County, 1935 Yield, packed boxes per acre Per cent of fruit sold as No. 1 Per cent of fruit sold as No. 2 Per cent of fruit sold as No. 3 Per cent cull and by-product fruit Average price in dollars per box all fruit Total income in dollars per acre Total cost in dollars per acre Management income in dollars per acre . Orchard A 474.8 54.1 23.8 2.8 19.3 1.84 874.27 659.84 214.43 Orchard B 472.6 41.7 21.5 9.4 27.4 1.24 587.33 462.04 125.29 Orchard C 477.7 20.5 17.3 3.6 58.6* 0.75 357.02 521.08 -164.06 Orchard D 472.6 12.8 26.2 1.6 59.4* 0.69 325.13 508.84 -183.71 * By-product fruit in orchards C and D includes some merchantable fruit that would have been marketed in the higher grades and for a higher price if it had not been in a time pool from which a large proportion of fruit was diverted to by-products, or if its sale had not been delayed so that the fruit fell in quality because of overripeness. is also affected by the method and time of sale. In southern California, most citrus fruits are sold through cooperative packing and marketing associations which also pick the fruit. Fruit picked within a certain period is usually sold through a certain pool 8 from which a uniform price is returned to members of that association for each size and quality of fruit. Where all fruit is sold through a single seasonal pool, as is the case with many orange houses, the time of picking does not account for much variation in price. But the shorter the time pools the greater will be the variation in price between the different growers. For example, with lemons, the summer pools frequently bring better prices, and hence a grower with a larger part of his fruit sold at that time would receive a higher price. There is no known method of delaying or hastening the maturity of fruit. It is largely a matter of climate and location. Although there is nothing the grower can do to influence the time of maturity, he should at least know the handicap or advantage of his orchard in this 8 Further discussion of pooling methods is given in : Wellman, H. R., and M. D. Street. Maintenance of substantial equity in the pooling of lemons. California Agr. Exp. Sta. Bul. (In press.) 16 University of California — Experiment Station particular. When surpluses occur the diversion of some merchantable fruit to by-products reduces the average price, and such diversion may fall more heavily on certain pools and on certain growers than on others. This difference was greatly accentuated in 1935 when there was a con- siderable surplus of lemons at certain times of year. The effect of this situation on four heavy-yielding lemon orchards is shown in table 4. Table 4 shows that in a given season fruit sold from a certain orchard may bring a price considerably above or below the general seasonal level of prices and that the price obtained will, to a considerable degree, in- fluence net income. In the illustrations usegl, this difference in price happened to result largely from the time of maturity or from the time of picking the fruit. If all the fruit from the four orchards had been sold through a single seasonal pool, the percentage of fruit sold in each qual- ity grade or diverted to by-products and the average price would have been more nearly the same. Aside from selecting the institution or method and sometimes the time of marketing his fruit, there is little the individual can do about the price he will receive for his fruit except through production practices that will improve its quality. Good cul- tural care of the orchard contributes to better quality of fruit as well as to higher yields. COSTS The third main factor influencing net income is the expense, or cost, per acre. Many citrus orchards receiving fair returns are able to show a sat- isfactory profit, while others with about the same returns show a loss because of high costs, which might indicate extravagant or inefficient management. The study and comparison of costs, however, require in- spection of many separate items if the causes of high costs are to be discovered and corrected. The section on "Detailed Analysis of Costs in Mature Orchards" provides a complete discussion of most cost items, record averages being shown in detail in tables 6 to 9. RELATION OF VARIOUS FACTORS TO NET INCOME OF SELECTED ORCHARDS The influence of the above-mentioned factors affecting net income may be demonstrated in the records of individual orchards included in this study. Table 5 shows six such records of mature Valencia-orange or- chards in Orange County which have been in the local enterprise-effi- ciency study, conducted by H. E. Wahlberg, for the entire ten-year period. The reader is urged to go over the material in table 5 with a view to discovering why some orchards were more profitable than others and then to check his findings with the comments which follow on each orchard. Bul. 620] Citrus Enterprise-Efficiency Studies 17 Orchard No. 2. 9 — This orchard is located in the Olive district on Ra- mona clay loam soil, which has a comparatively high moisture-holding capacity. In earlier years this orchard was irrigated too frequently, which retarded its normal growth during that period. A more careful irrigation program has been practiced in recent years. The average yield of 120 boxes over the ten years is only 51 per cent of the 235 boxes shown as average for eighteen-year-old orchards in figure 1. The small size of the trees for their age, the comparatively low production, and the poor quality of fruit are probably attributable to wind exposure and exces- TABLE 5 Analysis and Comparison of Individual Valencia-Orange-Orchard Becords in Southern California for the 10-Year Period, 1926-1935 Orchard 38 21.5 361 74.8 13 12.2 2.27 Average age of trees, years Average annual yield, packed boxes per acre First quality, Fancy and Extra Choice, per cent Second quality, Choice, per cent All other, Standard, cull, and by- product, per cent Average price in dollars per packed box Orchard 2 Orchard 11 Orchard 9 Orchard 13 Orchard 16 18.5 18.5 17.5 18.5 22 5 120 180 228 230 312 39.6 58.4 53.0 56.7 54.5 34.1 28.4 29.1 24.9 24 5 26.3 13.2 17.9 18.4 21.0 2.03 2.19 2.12 1.93 2.03 Soil and location factors f Soil survey classification of soil* Soil indexf Severity of wind in location Frost hazard , none heated Ramona Ramona Hanford Hanford Ramona clay loam clay loam sandy loam sandy loam loam 72 72 90 90 77 Strong Strong Strong Moderate Moderate Infre- Infre- Infre- Infre- Little quent quent quent quent Yolo loam 100 Windbreak Some Cultural factors Irrigation water used , average annual, acre-inches , Organic matter applied, average lbs. per acre Nitrogen applied, average lbs. per acre Covercrop, number in 10 years Number fumigations in 10 years Number of sprays in 10 years Times pruned in 10 years 13.5 13.1 20.5 14.1 14.9 4,664 6,609 7,141 4,287 5,620 146 271 251 196 210 6 9 3 8 3 7 10 5 8 6 9 4 8 4 3 9 4 5 9 32.4 8,304 287 8 4 7 7 * Eckmann, E. C, et al. Soil survey of the Anaheim area, California. U. S. Dept. Agr. Bur. Soils Field Operations 1916. Map. 1919. t Weir, W. W., and R. E. Storie. A rating of California soils. California Agr. Exp. Sta. Bul. 599:15-16. 1936. These notes were provided by H. E. Wahlberg, Farm Advisor, Orange County. 18 University of California — Experiment Station TABLE 5— (Concluded) Analysis and Comparison of Individual Valencia-Orange-Orchard Records in Southern California for the 10-Year Period, 1926-1935 Orchard 2 Orchard 11 Orchard 9 Orchard 13 Orchard 16 Orchard 38 Average annual cost and returns in dollars per acre Costs Pruning and brush disposal Covercropping, labor, and seed Fertilizing, labor, and materials. . . . Fumigation, labor, and materials... Spraying, labor, and materials Disease control, labor Cultivation and furrowing Irrigation labor Irrigation water Miscellaneous cultural costs Subtotal — cultural costs Harvesting fruit Total cash-overhead, taxes, etc Depreciation, improvements, equip- ment Subtotal — cash and depreciation costs Total income Earnings Capital and management income. . . Management incomet Capital income§ Agricultural valuel to earn 5 per cent Investment per acre Rate earned on investment, per cent. . . . 2.79 1.28 40 06 5.64 7.70 0.23 25.67 2.97 8.16 0.00 94.50 16.05 25.41 4.27 140.23 243.25 103.02 13.21 73.02 1,460.04 1,796.17 4-1 4.06 0.00 53.84 14.69 4.89 0.17 14.88 5.68 7.12 0.47 105.80 26.03 29.53 6.44 167.80 395.43 227.63 137.74 197.63 3,952.60 1,797.86 13.2 64 2.27 63.19 26.30 5.33 1 18 22.32 8.26 15.74 3 92 149.15 34 85 32.01 5 70 221.71 483 06 261.35 158 37 231.35 4,627 00 2,059 55 11.2 2.46 0.88 50.44 7.93 8.11 1.32 13.70 5.91 13 03 54 104 32 29.11 28 21 4 34 165.98 444.10 278.12 181.69 248.12 4.962.40 1,928.67 12.9 15.87 1.87 49.76 29.17 10.85 2.47 15.23 7.25 24 48 0.82 157.77 47.33 46.90 8.99 260 99 635.99 375.00 271 04 345.00 7,900 00 2,079.17 16.6 12.64 2.25 65.76 14.02 24.82 3.53 31.75 14.79 18.18 4.63 192 37 55 61 55 64 7 53 311.18 820.84 509.66 381.42 479.66 9,593.20 2,564.86 18.7 ^Management income is calculated by deducting interest on investment at 5 per cent from capital and management income. § Capital income is calculated by deducting an allowance of $30 for management from capital and management income. H Agricultural value is the value upon which the capital income shown is a 5 per cent return. sive irrigation in early years. The orchard would benefit by windbreak protection. Cultivation expense can be reduced. Orchard No. 11. — Located west of the Villa Park district, this orchard is on a clay loam soil underlaid with a clay subsoil. Its yield has averaged about 77 per cent of normal (fig. 1), owing to wind exposure and exces- sive irrigation practice in former years, which retarded tree growth and vigor. Parts of the orchard are infected with psorosis (scaly bark) and other gum diseases, which further reduce tree vitality and yield. Cover- cropping would undoubtedly improve the tilth and fertility of the soil. The planting of two windbreak lines would improve production and Bul. 620] Citrus Enterprise-Efficiency Studies 19 quality of fruit and reduce the need for heavy pruning expense in con- nection with wind injury. A few replacements of weak trees will improve future income. Orchard No. 9. — This orchard is located east of Anaheim on the Han- ford sandy loam type of soil, which is generally considered a good citrus soil. Production in this orchard is considered normal and would have been better if the 1916 flood had not deposited a foot or so of silt in much of the orchard and buried the roots and bud nnions too deep. In spite of considerable psorosis and other gummosis infection, good production has been maintained by heavy fertilization practically every year, a good covercrop program, and efficient pest-control measures. Better wind pro- tection would improve yield and quality of fruit. The removal of a hundred or more weak trees and replacement by selected nursery stock will in time greatly build up the earning power of this orchard. Cultiva- tion costs can be materially reduced. Orchard No. 13. — A normal production is maintained in orchard No. 13 on well-drained Hanford sandy loam north and west of Santa Ana. The fertilizer program has been conservative — one of the two lowest in nitrogen and organic applications among the six orchards herein an- alyzed. Only three covercrops were grown in the ten years. However, an annual early-maturing fall crop turned under in December would pro- vide an additional supply of organic matter much needed in this type of soil. The installation of orchard-heating equipment would probably be justified in this locality. The orchard has been sprayed eight years in the ten-year period, which is responsible for the occurrence of considerable interior dead wood. Alternating spraying and fumigation is considered a safer practice from the standpoint of interior growth than several suc- cessive applications of oil spray. Orchard No. 16. — The oldest orchard in the group is No. 16. It is sit- uated in La Habra valley on Ramona loam soil running into the Yolo clay loam phase. The trees are full-sized for their age, vigorous, and show little evidence of psorosis. The orchard is seldom subject to wind. A cov- ercrop was grown eight years in the ten. It has received generous appli- cations of bulky organic and nitrogenous fertilizers, which, with good soil and good management, have produced crops averaging 27 per cent above normal. The average seasonal use of irrigation water in this or- chard has been 14.9 acre-inches per acre. The satisfactory production obtained with this small amount of water is additional evidence that heavy irrigation is unnecessary. Orchard No. 38. — This orchard is located south of Orange on Yolo loam soil, one of the ideal soils for citrus production. The soil is uniformly 20 University of California — Experiment Station deep, fertile, and well drained. The trees are of maximum size for their age. These factors, together with a generous fertilizer program as in- dicated in table 5, have made possible the high yield reported, which is 50 per cent above normal for the age of the trees. Eight covercrops in ten years have also helped to build up a satisfactory root-feeding zone. The orchard is protected by windbreak against fall winds that reduce grade of fruit and yields in neighboring unprotected orchards. Because of good drainage conditions in this orchard, the excessive use of water reported apparently has not affected production ; the excessive leaching of soluble nitrates and other plant foods is balanced by heavy applica- tions of manures and nitrogen at considerable cost. Use of less water could reduce fertilizer cost, as well as cost of water, irrigation labor, and extra cultivation, all of which are higher than normally required. COSTS AND RETURNS IN MATURE ORCHARDS, 1931-1935 Costs, total income, and net income over the ten years of this study have shown a considerable decline. During the period 1926 to 1930 — one of high prices and good profits in the citrus industry — costs were much higher than during the recent past. In fact, they were in many cases much higher than they needed to be under the prevailing labor and mate- rial price schedule of the time. During the next five-year period, 1931 to 1935, inclusive, costs were considerably reduced from their previous high level. Wage rates were lower ; tractor and other field-power costs were slightly lower ; and the cost of fertilizers, spraying, and fumigation came down considerably. County taxes were materially lowered in 1933 with the shifting of a large portion of local school support to state rev- enues obtained by the sales and income taxes, which fall more heavily on the citrus grower's personal income and expenses than on his produc- tion costs. In addition to all the expense savings mentioned above, there has been a strong tendency to reduce cultural care. Some of this reduction in fertilization, pruning, cultivation, and other operations was justified as a reduction from unnecessary high costs to minimum essentials. A large part of the reduction came as a result of the greater amount of technical information available and its more widespread application, which might well be called a normal progress toward higher efficiency. There was, however, some additional elimination of needed cultural care which resulted from reduced income. The low prices prevailing, particularly for oranges from 1931 to 1933, resulted in income too low to meet orchard and personal needs in many cases. Hence, costs shown by some growers Bul. 620] Citrus Enterprise-Efficiency Studies 21 TABLE 6 Annual Average Income, Costs, and Net Income for Mature Orange and Lemon Orchards in Southern California, 1931 through 1935* Navel orange records Valencia orange records Lemon records Number of records 192 1,373 7.1 30.4 90.8 274.2 488 4,586 9.4 19.9 78.7 237.4 207 Total acres in study 1,708 Average number of acres per record. . .... 8.2 Average age of trees, years 19.8 Average number of trees per acre 86.0 Yield per acre, packed boxes 246.4 Dollars per packet} box Average price all fruit . . . Total cost of production . Management income . 1.95 1.50 0.45 Costs and returns in dollars per acre Cultural labor cost 54.27 34.23 49.60 31.99 64.54 Harvesting cost 85.03 Total labor cost 88.50 75.99 33.62 81.59 60.45 31.51 149.57 Material cost 81.40 Cash-overhead cost 32.34 Total current cash costs 198.11 10.88 173.55 8.05 263.31 Depreciation of facilities and equipment 8.97 Total cash and depreciation costs 208.99 299.65 181.60 304.83 272.28 Total income 479.79 Capital and management income Less 5 per cent interest on investment 90.66 104.08 123.23 103.93 207.51 95.31 Management income -13.42 60.66 1,213 20 2,081.58 19.30 93.23 1,864.60 2,078.51 112.20 Capital incomef 177.51 Total investment to earn 5 per cent Average investment 3,550.20 1,906.16 Rate earned on investment, per cent 8.9 4.5 9.8 * The above data are averages of all enterprise-efficiency-study records for orchards nine years and over in age, obtained in southern California during the five-year period. t Capital income is calculated by deducting an allowance of $30 for management from capital and management income. 22 University of California — Experiment Station in recent years may be too low. But the average of all records during the period 1931 through 1935 will provide a satisfactory basis for the study of costs in detail. General summaries of costs, returns, and net income are shown by years for lemons and for navel and Valencia oranges in the Appendix, tables 16 to 21. The 1931-1935 averages used for detailed presentation of costs include all typical mature-orchard records of the citrus fruit covered. All orchards nine years old and over are considered to be in commercial bearing and are therefore included in the mature-orchard groups. A general summary of the three kinds of fruit is presented in table 6, so that the reader may see the different cost groups before they are given in detail. Total income and net-income figures are also given to provide a complete picture of the status of each fruit during the period covered. The navel-orange records during 1931-1935 show an average annual yield of 274 packed boxes per acre. The orchards had an average age of thirty years and an average of about 90 trees per acre. For the same five- year period, average annual yield for all navel orchards in California was given by the California Cooperative Crop Reporting Service as 155 packed boxes. Navel orchards included in the cost survey of the Cali- fornia Citrus League had an average yield of 228 packed boxes for the five years. The average price of navels over the period was $1.09 a packed box, a rather low figure. Navels received heavy competition from in- creasing production of winter oranges and grapefruit from other states and therefore brought the lowest price of the three fruits shown in table 6. Because of this low price the navel records show a negative man- agement income, or loss, of $13.42 an acre, which means that income was insufficient by that amount to cover all costs including interest. Without interest, however, they show a capital and management income of $90.66 an acre, which would provide an allowance of $30.00 for management and leave $60.66 as a return to capital. This is a 2.9 per cent return on the actual inventory value of $2,081.58. In order to realize a 5 per cent return, the investment would have to be $1,213.60. The Valencia-orange records summarized in table 6 show an average annual yield of 237 packed boxes per acre with an average tree age of about twenty years and an average of 79 trees per acre. The state aver- age annual yield of Valencias for the period, as given by the California Cooperative Crop Reporting Service, was 151 packed boxes. Valencia orchards in the cost surveys of the California Citrus League showed an average yield of 205 packed boxes. Since all these figures show lower yields for Valencias than for navels, one should not overlook the fact Bul. 620] Citrus Enterprise-Efficiency Studies 23 that Valencia orchards in this study and in the state are much younger, and that the state figures cover a considerable acreage of only partial- bearing age. Valencia production will continue to increase both per acre and in total as bearing orchards become older and the full-bearing acre- age increases with the addition of a large nonbearing acreage already planted. The Valencia price of $1.28 is $0.19 higher than that of navels. Valencias, being sold in the summer, do not meet much competition with citrus fruits from other states. This higher price brought Valencia growers a slightly higher total income per acre. Costs per acre were lower than for the navel orchards partly because of the younger, smaller trees and lower yield and partly because a larger proportion of the Valencia records were from lower-cost areas. The greater income and lower costs allowed Valencia orchards to show a management income of $19.30 an acre. The capital and management income of $123.23 provides a managerial allowance of $30.00 and a return to capital of $93.23 an acre. This capital return is 4.5 per cent of the actual inventory value. To realize a 5.0 per cent return the investment would have to be capitalized at $1,864.40. The lemon records show an average annual production of 246 packed boxes per acre for the five-year period. Trees were about twenty years old and averaged 86 to the acre. The state annual average production for the period was estimated at 187 packed boxes by the California Coopera- tive Crop Reporting Service. The California Citrus League figures show an average annual yield for the five years of 198 packed boxes. The higher average annual yields of orchards in the enterprise-efficiency studies show these orchards to be above the district average in produc- tion efficiency. Lemons brought higher prices than oranges, the average price per packed box being $1.95 (table 6) . This high price, coupled with a good yield, resulted in a total income of $479.79 an acre. Costs were also higher in lemon orchards, but a management income of $112.20 an acre was obtained over the five years. A capital and management income of $207.51 an acre provided the $30.00 managerial return and a capital income of $177.51 an acre. This is 9.3 per cent of the actual inventory value or a 5.0 per cent return On $3,550.20. It is evident from a comparison of the net incomes from citrus fruits that in the recent past, lemons have been most profitable, with Valencias next, and then navels. The reader is warned against assuming that this order will continue into the future. A large nonbearing acreage of lemons already planted will result in increased future production which could easily result in prices unprofitable to many growers. Valencia acreage is likewise on the increase, and greater future production can 24 University of California — Experiment Station be expected. Future price expectations are presented in the annual out- look reports which have, in the past, been published and released each January. 10 DETAILED ANALYSIS OF COSTS IN MATURE ORCHARDS Costs are shown in detail in tables 7 to 9 in such a way as to be useful to individual growers in checking and comparing their own costs. A com- plete schedule of costs for an individual orchard should be compiled on a basis similar to that used in these records and then compared item for item with those shown in this bulletin — record averages or computed standards. When the cost of an operation is considerably above those shown by the averages of a large number of records, a definite cost handi- cap is present. Such a high cost may be due to extravagance Or unneces- sary inputs, high cost of materials such as water, or higher-than-usual requirements for pest-control measures or heating. Only when this higher cost is due to extravagance, however, can it be safely reduced. The obtaining of a good, heavy yield of high-quality fruit year after year must always be kept in mind as the first essential, and no expense saving should jeopardize this result. Reduction in fertilization or pest-control work or some other cultural care in order to save money could easily re- duce yield and income far more than costs. Cost items should be scruti- nized also with a view to discovering those which may be too low for the good of an orchard. For example, a low average annual fertilizer expen- diture may be the first indication of inadequate fertilization. The pro- vision of needed cultural care and materials at as low a cost as can be consistent with good production, should be the goal of the citrus-orchard manager. In analyzing costs, a uniform method of computation and grouping of separate items is essential. The records obtained in enterprise-efficiency studies are comparable because of standardized procedure. Methods and segregations may not, however, be the same as those used in the many personal accounting systems of citrus growers. It is, therefore, necessary that certain items and groupings be presented in detail with sufficient definition so that the reader may compute comparable items for his own orchard in order to make genuine comparisons with the costs shown in the following tables. For convenience in analyzing and comparing costs under a wide variety of conditions, a uniform grouping has been used in all fruit enterprise-efficiency studies ; this is outlined on the next page. 10 Wilcox, F. R., et dl. The 1937 agricultural outlook for California. California Agr. Ext. Cir. 102:1-83. 1936. This is the latest edition available. At the time of writing this bulletin, the agricultural outlook reports have been discontinued, at least temporarily, but it is hoped that when funds again become available, the outlook will be published annually as before. Bul. 620] Citrus Enterprise-Efficiency Studies 25 1. Cultural labor — labor and field-power costs in caring for the or- chard and growing the crop. 2. Harvesting — picking the fruit and hauling it to the packing-house. Although picking is largely performed for the grower by packing-houses in southern California, it is included as a production cost. Growers wish- ing comparable costs, must add picking and hauling to their costs and income for fruit "on the trees" if their accounting goes only to that point. 3. Material costs — water, fertilizers, and other cultural materials ap- plied to or used in the orchard. 4. Cash-overhead costs — taxes, general expense, insurance, etc. 5. Depreciation on improvements and equipment. 6. Interest on investment in trees, improvements, equipment, and land. The segregation of items into the above groups becomes difficult at times, particularly in the case of contract operations, such as fumigation and spraying and the application of organic fertilizers. In the individual records in this study, such segregations were made, although in some cases arbitrary division between labor and material was necessary. In some tables cultural labor and material costs are combined into a single group called cultural costs. The operations for which a grower pays a lump sum for both labor and materials are shown as a single item in table 7. In all the tables presenting general summaries of costs, however, the segregation of labor and material has been retained. Labor costs as they appear in these data are composed of the value of the operator's actual labor, the cost of hired labor, the labor portion of the cost-of-contract operations, and the cost or value of horse, tractor, and truck work. Such field supervision as was hired by the cooperators in this study is considered as hired labor and is included in the cost of the operations covered. No allowance for the operator's management or supervision is included. The value of his actual labor is computed at the going wage for that kind of labor. The cost of horse, tractor, and truck work is included in the cost of each operation. Where operations, such as cultivating, spraying, hauling, etc., are hired on contract basis, the cost of the man labor involved, the cost of tractor, truck, or other field power used, and the cost of owning and oper- ating the implements, spray rig, or other equipment used, are all in- cluded in the labor cost since they cannot be separated. Where the orchard operator owns and operates his own tractor, truck, or horses, the cost or value of such service is charged to the operation at a rate suffi- cient to cover the total cost of owning and operating these field-power units on that particular farm. The rate for each unit is taken from actual records or is estimated at the average annual cost for similar units di- 26 University of California — Experiment Station vided by the average hours operated annually. Thus, depreciation and interest on investment for these field-power units are included in labor costs in a manner comparable to a situation where the work is hired on a contract basis. Depreciation and interest on investment for owned equipment other than the field-power units appear under those headings and are not in the labor costs. Further explanation of other cost groups will appear with tables 7 to 9, which show the items in detail. Since the record costs appearing in tables 7 to 9 are averages covering many orchards operated with varying degrees of efficiency and were obtained under the lower cost conditions of the recent past, they have been supplemented with standard costs (also shown in tables 7 to 9) for the present and immediate future. These standard costs are based on those shown by actual records but are adjusted to current conditions and to a high level of efficiency. Computations cover minimum essentials of cultural care provided in the most economical manner. Man labor is computed at $0.30 an hour and other items at the price levels of 1935 and 1936. Both Valencia and navel oranges are assumed to have prac- tically identical costs where grown under the same conditions ; thus a single standard is provided for all oranges, this standard being designed to fit a twenty-year-old orchard producing an average annual yield of 240 packed boxes an acre. The lemon standard is designed to fit an or- chard of the same age but with an average yield of 250 packed boxes. Both these standards provide for all the costs normally occurring every year in most of the districts in southern California, although there are many individual orchards which may require more or less of a particular operation than is provided. High levels of efficiency are assumed in order that these standards may serve as a goal which the efficient orchardist may well strive to attain. They are not .to be regarded as average costs under current conditions. CULTURAL COSTS Cultural costs are composed of the labor and material costs involved in caring for the orchard and producing the fruit up to but not including harvesting. Table 7 shows costs for each operation as obtained from rec- ords during the period 1931-1935, with the standards which are sug- gested as being more applicable to well-managed citrus orchards in the near future. The cost of an operation is expressed in two ways : (1) the cost for the year in which it is performed, and (2) the average annual cost which would be different in cases where such costs are not incurred each year. The percentage of acreage for which each operation was re- ported is shown as an indication of the frequency or extent to which operations are performed. In the column labeled "cost where reported," Bul. 620] Citrus Enterprise-Efficiency Studies 27 the cost per acre is for the acreage reporting that operation. In that labeled "average annual cost," the cost of the same operation is spread over all the acreage in the study, part of which did not receive the oper- ation in all years. The costs shown for the standards are on an average annual basis and are the same as those given in detail in tables 10 and 11. Priming and Brush Disposal. — The removal of certain unwanted or dead parts of the tree so that the remaining portion may be better sup- plied with sunlight, moisture, and plant food, is known as "pruning." Hauling out, or otherwise disposing, of the resulting brush or prunings is called "brush disposal." Tests with oranges show no advantage in any pruning beyond the removal of deadwood, occasional interfering limbs, and undesired suckers, or water-sprouts. Table 7 shows that costs were incurred in 79 per cent of the navel acreage and 62 per cent of the Valen- cia acreage, with a cost where reported of $8.42 and $8.19 an acre, respec- tively, for both pruning and brush disposal. In other words, the navels were pruned in about four out of the five years at a cost of $8.42 for each of those four years. If, however, this cost were to be spread over the whole five years, the annual average would be $6.53 for navels and $5.08 for Valencias. The orange standard is based on the assumption that there would be 12 hours spent in pruning an acre of mature trees each year and 1 hour with a truck in removing the brush, which would result in a total cost of $5.00 an acre for both operations. With lemons, pruning is more important in obtaining a profitable suc- cession of crops of high quality. Table 7 shows that pruning was done in 82 per cent of the acreage at a cost of $13.20 an acre, where performed, which would result in an annual average of $10.74 for pruning and brush disposal. With conservative pruning each year as assumed in the standard for the twenty-year-old orchard, the average annual cost would be $10.30. C overcropping. — As an operation cost, covercropping consists of the planting of a green-manure crop and the cost of the seed. Any labor in- volved in preparing the ground or turning under the crop would be included in cultivation cost. Covercropping, or green-manuring, is the practice of growing an annual crop for the purpose of turning it under to improve the fertility and physical condition of the soil. Many citrus growers in southern California plant such a crop in the fall so that its water requirements will be largely met by the winter rains and then turn it under in the early spring. A good covercrop will frequently add as much organic matter to the soil as would be applied in 2 or 3 tons of barn- yard manure. Winter covercrops also reduce leaching by using part of the surplus water and by using and holding nitrates and other plant 10 co w o P o Pn M iH CO OS rH of p is W o O P W IS 5g W Eh Ph o ft w P P ag W W En fe P p O cc p Eh «l o h h4 HH O w P4 o <{ P5 W Pm CO Eh CO O O « P Eh i-h P O 7 «» b 05 .5 ^ d ec o o o p o o «5 O O O O o c o o m *^ CO ~ o CO o O H o OO o co !>• «5 O O CO ^* ^4 ^< ^< OS o o CO lO o ->> 1-H CO O >-H 1— t t-H CO »"4 >-4 CN "5 "« ■— ' CO P " H CD_ is s « > C U to ^ CO CD t~ o cc ce CM CM O t~- OS t~- Hi lO CO 00 1- •»H IB 1 - »— l rt< co >o >o •^ !C O 00 t^. CO t— O CM O o o o> ss o O O CO CO 1 — 1 i^ CO O O O CO CM t^ 00 CO cc 1-H >o © >-H CI 1— ( ^^ ^H eo »—i CM ^»< co ■« 1-1 ~C I- O 4— °^ o Ui CO CO o OO o >o O CM ■ i-4 O >C US m co on 1^ CD C3 . 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US CO f CO eo ** ^H CO 00 t^. a OS 00 CO t^ CO CO os oo "o •«f fr- CM a o» oo t- OS 00 t~ 00 co t- oo OO 00 1-1 l~ CO oo Q i-H " i—i -a £$$ 00 OS OO CM «N Oi CN ^H •V 00 o CO -r 1—4 IO If ■a OS i-H t^ oo CO co >o i—l OS 00 t~ ^H t^ CD CO eo Ol ■<*< eo Ol iC CO i-H 03h£ 03 o3 i-i o o CM CO oo ex •^< oo l-H co T-< "* «3 CN •* ^» CO ■*< eo CO f Tf 1-H 1— ( ^H ^H o> 00 o w~< CN "t< CO' t-^ CO 00 eo Ol oo < — 1 t--. o3 «s 1-H •*« l~ •o »o CO '-= U3 CO I--. t^ O >r>. CO »» t~ l>- CO CO IO s 1 oo ^- •<* CO er CM IH "5 «C5 -f a OS OS OS o OS CO iri HJ •^ ETC! *H -2 03 os CO O0 co »o CNI 00 eo CM CN 1- i-H o OS OS i — i PQ o CO 1-H CN CO o l-H co IN l-H in O o T-t CM «N o ,_l »o OS co 1—1 ^H CO i-H CO Ol 00 1*1 OS iO -f o CN -t-> eo if co «5 tH CN CO co rH CO eo •o OS H IO o ^o co n 00 3 •o ■« >o ■<# U3 ■<1< -<»< »o IO «5 "3 i-O IO |Q IO IO IO •o IO If o 0) to X Averag price in dollar o C/-; OS OO CO on CO i — i OS CO — . CO •-3 OS co ~v 1— CO If o t- as IO CD CO 30 OO eo m t^ Ol « OS CN r~ o CD eo (h a •^ »H ^H i— ( CM CM CN * CO CO CD os >* o i- •^1 o co- CO f o 03 i-H C4 »-H !-H Ol CN ^H CN CN Ol Ol Ol CN ■*; co "3 °v CO SO o OO OO CO 99 CD ■^ * CCi 00 co IO cr< O Q » O T— 1 ,—1 CN eo ■* its CO i« If >o >o ■* if 03 fci « CO *o ? a*-" S ■o r^ OS CD »o CD •«*< CN t- tC i-H OS o ^H i-H OS CO? •— l IH CN CO <* Ifl co IO Tf IO IO if eo 3 S z n ge of ses in ars at inning d o s CO I— c CM co -t< iO CO b- 00 C^> O i— l ^H Ol co -f IO CO r^ X. 09 o CN tf ■„ M ^^ o fl -£ o -e 03 O g CO CO ■f >o CO t-» oo os O CN CO "* U3 CO t^ 00 CT2 a i-H Ol CN (72 60 T3 -c a a> to 03 a> Ih o ca as = o hQ 03 9 M o od M 3 V -u 7-. r, , C3 S -., H-> u cu r; a ^Q ti O O -ti c o o ■fj as (h S ~ r^ us • H ••H r — o 01 <+H >. 4S -C Q if 01 m w Bul. 620] Citrus Enterprise-Efficiency Studies 47 eluded in the mature-orchard summaries presented elsewhere (p. 21). There were no records available for the first season of orchard history, that is, the zero-old year in which trees are planted and which would show the cost of planting the trees. COST OF DEVELOPING AN ACRE OF ORANGE TREES Figure 1 shows that it takes an orange orchard a long time to come into full bearing. For many years, therefore, income would be below costs, and additional capital would be required to continue the development of the young orchard. Any grower considering the planting of an orchard would like to know how soon income would meet annual costs and how much the trees would have cost by that time. The grower with ample funds to develop an orchard without borrowing will not have to pay interest on the investment during the waiting period and is likely to consider only cash costs and depreciation as the cost of developing an orchard. During the time the young orchard is showing a loss, however, there is no chance to earn a return on the investment in land, facilities, and trees ; therefore, the operator will have lost the return on his capital which he might have obtained had it been otherwise invested. The owner of a good piece of land may be able to rent it for truck crops for a sub- stantial sum. If trees are planted, however, such rental income is very soon reduced or eliminated, so that the development of the orchard would at least cost this difference in rent received in addition to outlay for development. If interest on investment in mature orchards is to be considered as a production cost, then the investment in trees upon which this charge is computed should likewise consider interest on investment during the waiting period. To provide this and other information, a standard sched- ule of costs in a young orange orchard has been prepared and is shown in table 13. Costs are computed in a manner similar to those in the standard for mature orange orchards, but with adjustments to age and production of the trees. Table 13 is, of course, based on several assumptions : One is that yield would be according to the curve for Valencia oranges in figure 1. The second assumption is that costs would be as shown in group totals for each age of orchard and that they would increase gradually each year. Heating equipment is to be provided and used in the fourth season at which time fertilization and pest-control measures comparable with those in older orchards would begin. A third assumption is that part of the soil between tree rows would be used for intercrops, and thus bring in some income shown as rent in the first three years. Fourth, to show CO I— I w PQ * I-H o fa M <1 Q fa W Eh & O m w ft W O O o p> o p o O fa fa W o fa fa in 02 O Q fa o ft < ft Eh < Accumu- lative net cash and deprecia- tion cost of trees S-. o 03 u a> ft co Si J3 o Q OOOtOH kfj lO •<*• CO CO t-li-tNCNN Accumu- lative net cost of trees lOCD«5(OiO CO if* CM CO i-H ©CO t^ © CO ©CO CM © OO as cn © © © MCOlOOJi-c i-l © CO t^ 00 NO3C01OC0 CONO)0)00 CO CO CM lO CM lO i-l © © -«f CO t^ t^ OO 00 if CN if CN t- 1-- © CN -«f >0 oo os © os © o^osioce r^ oo oo os os OS OS OS OS OS Manage- ment income ©CO if OO 00 Iflrt OS © 00 CO kfti-l rn k« kOCN •f CO CM OS © © OO OO 10C3N010 kO CO © -«f CN © OS kO i-H © kO CO © oo © © <-l oo 7 1 77 i CM t— © CM r— I>. kO tJ< r»< CO 1 1 1 1 1 NNHNlO CO CN CM -H i— c 1 1 1 1 1 CO © OO CO CO 1—1 1— 1 1 1 II 1 Income at $1.30 a box ©o ©©© © © CO kO © © © © ©© »o ko if o © ©©©©© NH1OM00 ©©©©© O CM ■«»• CO 00 © © CM CO "0© ©i-i © COCO if t- CO CO OO © CM CO ih rt cs es m kO © CO if © if no CO t-- OO CM CN CN C-3 CM © ^H © i-H CO 00 © © © o CN CM CM CO CO Total cost for year ©CO if OO 00 CO kO i-H *^ kO © t- OO CO CM OS CO CO 00 00 CM if CN CN OO k« CO © •*»< CM © ~ © f~ 00 kO eo i-H l-H CO CM h i-< -1 CM CO if lO © t— CM CN CM CM CM 00 CO 00 CM 1C t>- OO OO OS OS CN CM CN CM CN OlN^NOS OS © © © © CM CO CO CO CO Interest on net cost of trees ©CO 00 00 OO OHfflllN oo © r- if m i-H OOCOt-i cm NiOihOO »— 1 IT- »— < CM •— 1 lO'HkOCOO) 00 k« © t*< t^ © © © »o © © MO) •* «— 1 T-l CM OS CN lO 00© CM CO COCO if CNf5"OON t^ OO © OS © Interest at 5 per cent on land and equip- ment ©©©©•o ©© © ©oo OO 00 OO 00 00 lO»OkOlO lO 00 OOOO OO 00 lO kO lO kO kO oo oo oo oo oo kO OO CO kO CM C^ CM kO© co co co © co kO kO kO kO kO co co co © co IO>000>0 co co © co © kO kO kO kO kO Subtotal cash and deprecia- tion costs ©©CO © >o kO © lO -*f CM © © OS kO iC © i-i CM CO <-i CM © © coco CO 00 CO CM © kO l~— OS i— I 00 CONO^iH o kO © CM U5COOOC3CO tOONOW OS © CN 00 if OS CM CO OS i— c r^ oo oo oo os •^ © OS i-l CO OS OS OS © © i a (-, o ft'_3 2 03 ©© © no k« ©© ©CM CM kO kO kO kO kO CM CM CM CN CM lO»OiO»OiO CM CN CN CN CN lOkOkOiOiO CM CM 0 kOLOkOkO lO Cash- overhead cost ©©©©© kO © ©© © o©o o© ©©©© © ©©©©© lOO^COH ©© ©QUO kO © CN kO lr~ UO 00 I— CM 1-- CO -f kO oo ©i-l CN CO i*l CM CN CM CM CM if »o no no CO CM CM CN CN CM co co ir^ t^ i^- CN CN (M CN C3 Total material cost ©©©© © ©o ©o © © © OO © kO © >o © kO OO ©o© © ©©©© ©©©© © © O © © kO © © m © io © © ©CO CO "* kfl CM kO l~- ©CM ns m m co co no CO i-— 00 OS CO CO CO CO CO © i—l - l-^ t^ Harvest- ing at $0.13 a box • ■ © kO © • • HO i-H © lOiOfOO CM OOiO i— I -^ NiHlOMCC no © CO ■* © O CN •>* CO OO © i—l © i-H © © OS o CO • 'iHNCO i— 1 CO 00 © CM CO i-H i-H CM CM CM TCiOCONCO CM (M CM CM CM oo os os © © CM CN CN CO CO Cultural labor cost ©©©o© ©©©©© ©©©©© ©©©©© © © © iO © © © ©r^io ©©© © © © kO © kO © © kO CO kfi © © lO >o © •>** CM CM CO if lOCDNQOOi ©— H CM CM CO iOkO»OkOiO Tf ^f kO kO CO U3lOlOlO»0 Yield, packed boxes per acre ©© CM kO © •HOO lOlOCOOO (N'tiONOO © t^ lO i-l CO OOOlOHrt rH rt CM CM CM © *** OO CM CO CM CN CM CO CO CM CM CN CN CN © CN Age of trees in years at beginning of season O -1 CI M •* io co r-- oo os ohnm* kO © t~ OO OS © CM Season of growth iHNM^iO CONCOOJO 1-H t-i CM CO Tfl lO HHrtHH © t~ 00 © © i— 1 i— I i-l i-H CM CM 03 T3 a 09 a; <& T3 03 E a CO CO 03 2 C 03

IS £ © -S x £i JS& -a S <& S CD Sco u 00 »-l p t-,^_ ?> T3 O 03 CD 2 ® X) CO fl CD II ^5 CD ^_j — kO CO ft CO O G «*■ C o o CD co © © © CO 03 CD >> CD os a ^8 o S 5 t-H 03 t3^H is cDua <-i os a co" - C co os a ^j CD 3-^3 O o * > ■-. a o Bul. 620] Citrus Enterprise-Efficiency Studies 49 income for fruit and net cost or profit by ages, a price of $1.30 a packed box is assumed. Inasmuch as this table is based upon these assumptions, a different schedule of income and costs will have to be constructed if conditions vary much from those assumed. This table is also based upon Valencia oranges. It is safe to assume that the data for navel oranges would be almost identical. For lemons, probably both costs and returns would be slightly higher, but the net cost for each year and the cumula- tive costs would be about the same if lemons were to bring $1.55 a packed box, which is a price comparable to the $1.30 for oranges. Table 13 shows that under the conditions assumed, an orchard would take twenty years to attain a level of annual income that would cover all costs, including the 5 per cent interest on the investment. The column in table 13 labeled "accumulative net cost of trees" shows the accumulation of annual development costs to be $998.91 by the close of the twentieth season. Thus, the cost of developing an acre of orange trees under these conditions may be said to be about $1,000. The time and capital required to develop an orchard to a point where it will pay interest on investment and a managerial salary under present cost and price conditions, would certainly discourage further planting of citrus trees by those in posses- sion of these facts. Under the high prices for citrus fruits which pre- vailed before 1931, the picture was entirely different, and planting was justifiable and profitable. With prices no higher than $1.30 a box for oranges, or $1.55 for lemons, planting can only be profitable after a long waiting period and under the best of conditions. With lower prices than those mentioned above, and standards of costs as assumed, the planting of citrus fruit trees could not be profitable. With a price of $1.40 a box for oranges, the young orchard would come into profitable bearing at an age of twelve years and a cost of $890.00 per acre. At $1.50 a box for oranges, ten years and $760.00 per acre would bring the trees into profit- able bearing. Where interest on investment is not included as a cost, the accumula- tive net cash and depreciation cost is shown in the last column of table 13 to reach its maximum by the end of the fifth season, by which time the net outlay per acre would be $248.61 with estimated intercrop rent, or about $350.00 if there were no intercrop the first three years. This figure, plus any amount paid out as interest on money borrowed to own and develop the orchard, would be the net cost of trees shown by the operator in his personal accounting system and the basis of valuation of his trees. It would, therefore, appear that the net cost of developing an orchard in actual new capital would vary somewhere between $250.00 and $1,000.00 an acre according to the amount of interest which had to be Eh W H Eh >— < a w M >H P !zi to w <3 03 p > < Eh »q W H CO go 5^ o i—l i-H © © ©c> Tf CO U3 CM © i-l O 00t>. CM l~- i-H i— ( CM OS rH © CO CM CO CO 00 CM 1 r^ oo CO "5 ©©» CO os ©o ©oo OO© oo©o o© 00 © o oo © © © CM © © CO oo oo© © o — < i-H© US CM tHOJlC t~- CO CM US ■»»< CO 1-H 1— i © i-H oo © CM OO CM OO OS 1 -H CO CO 1 1 ©o >0 1 t^ 1 1-H ©© ©CO o© o CO © © ©© CO »o © 1-H o © © U0 oo ©o rH O o ©Co oo»o ■^*i-H CO t^ CO CO CO CM COCO fcO i-H i-H co 1-H CO 1-H 1-H 1-H 1 oo OS oo 1 1-H CM ■^< CM ^ 1 «o 1 i-H o© ©©© ■^ ©© ©© ■^" © © © © © o © o 1* ©o i*! © o ©00 io o •># rH lOUJH U0 © CM i—i CO ■^< i-H 1-H 1-H © *-H © U0 1 © © CM 7 ©oo oo© 1 °. i-H © »cs i-H to 03 a 03 s d 03 S « Ss .-S o a 03 O 03 O CD CJ (H e a co c a 3 CD CD sa S co .9 > o3-~ § * 2 — ' -S 03 M<+s 03 O OH OJ «J cu S > o c ■a w (I) ~ i^ ^' w 03 OS £i u o PhQh x o £t 01 V e3 a (h cu a o T3 C 03 O O ©CM 00-h»< CO© CM CO 1H i-H o© ©© © C3S CO i-H o^n i-H i-H o© ©OO CM CO CO-H i— t lO 1-H rH ©© ©© © >o COCO © 1j< 1— 1 1-H ©© © -1* Tt< Ttl CO-* i-H CO 1-H 1-H ©o 1 ©f- t-»oo CO © CO i-H 1-H 1-H ©© 1 o»o iO OS CO o t^ © i-H CM ©© 1 1 OO ©CO CO oc lO CO t-i CN 1-H O 1 1 — a p- 4. ■ji c b D e V ~ a i_ o c E .2 r a % '+; § s c. 2 ® H d b(l T ■^ s C u i§ o ^ < §a S c cut3 a ^ m d T3 « 2 * 53 +j 3 OJ to -e s, a co C 03 < H o Bul. 620] Citrus Enterprise-Efficiency Studies 51 met. Many young citrus orchards do not do so well in production or have as low costs as shown in the standard ; thus, they would have an even higher total cost of development. The grower who wishes to develop a young orchard will need the land and about $275.00 an acre for pipe line and other equipment, $250.00 an acre to bring the trees through the first five years, and an outside income for personal maintenance during that period. In the sixth season the net cash income above operating costs will still be small with a normal yield and a price of $1.30 a packed box. The present outlook for future production and demand for citrus fruits does not indicate the desirability of additional plantings of any citrus fruit at this time. There is enough potential increase in produc- tion from young orchards already planted to supply expected increase in demand from improved business conditions and increase in popula- tion without much increase in prices above present levels. Conditions could, of course, conceivably change in a few years, and the outlook turn toward better prices. When it appears that prices will average above $1.30 for oranges and $1.55 for lemons, with costs remaining about as they are at present, then it might again be profitable to develop more citrus orchards, provided there is not already too much young acreage. EFFECT OF YIELDS ON COSTS AND NET INCOME The influence of yield on income is a very obvious one. But the difference in income resulting from a difference in yield seldom results in an equal difference in net income because costs also vary with yields. There are two ways in which differences in yield are associated with differences in costs : (1) in orchards with different average yields and (2) in the same- orchard with yields fluctuating from year to year. The standards in tables 10 and 11 apply to orchards yielding 240 boxes of oranges and 250 boxes of lemons, respectively. Costs per acre will be higher or lower where yields are higher or lower. For example costs of picking and haul- ing of fruit vary with the yield. Costs of cultural operations will also vary with the size and productivity of the trees. Small trees in younger or poorly developed orchards require less labor and material for spray- ing, fumigation, and pruning. Orchards located upon poor soil where heavy yields cannot be obtained will probably not receive as much fer- tilization and other cultural -care. Such poor soils are usually lower in cost or value and hence have lower taxes and interest on investment. In order to show costs as they would be most likely to vary in orange orchards of higher or lower average annual yields, table 14 has been prepared. Costs in mature orchards having different yields have been summarized and then adjusted by the standard costs shown in table 10 52 University of California — Experiment Station to give the results in table 14. A similar table has not been prepared for lemons, since it is assumed that the one table would adequately illustrate the influence of yield on costs and net income. Where interest is included, the costs shown in table 14 vary from a low of about $224 per acre with an 80-box average annual yield to a high of about $366 with a 360-box yield. These costs are all based upon eco- nomical management and hence are doubtless below the average for all orchards of a particular yield in the district. They may be used, however, for purposes of illustrating the effect of yield on net income. In order to show probable earnings for orchards of different producing ability, a price of $1.30 a packed box was assumed in computing total income. This price just covers all costs but management in the standard example which has an average annual yield of 240 packed boxes. Capital and management income is shown in table 14 to be negative in the 80- and 120-box orchards, while production levels of 160 boxes and above show some net income above cash and depreciation costs. Not until a 240-box yield is reached would income be great enough to meet all costs including 5 per cent interest on the probable investment, and only above this yield would there be any management income. Thus, at $1.30 a packed box for orchard-run fruit, orchards with average annual yields of less than 240 packed boxes would not be profitable if costs were the same as those shown in table 14. EFFECT OF YIELD ON COSTS PER BOX Low-producing orchards may practically always be assumed to have higher total costs per box of fruit than heavier-producing ones. Although costs per acre in table 14 are shown to be much lower in an 80-box or- chard, total cost per box (in lower part of table 14) is shown to be $2.80. At the other extreme an orchard with an average annual yield of 360 packed boxes would have a total cost of $1.02 per box. This is the result of spreading the relatively fixed costs per acre over more boxes. The reader may compare any chosen price with the costs per box in order to see what production level must be attained if an orchard is to be profit- able at that price. For example, a price of $1.50 a packed box would be profitable for orchards with average yields of 200 packed boxes or more. The cost of $1.44 would leave a management income of $0.06 a box, or $12.00 an acre. Variations in yield in a particular orchard also result in wide ranges in total cost per box. An average annual yield of 240 packed boxes might result from yields varying from as low as 150 boxes to as high as 350 in different years. Aside from harvesting, however, costs per acre would Bul. 620] Citrus Enterprise-Efficiency Studies 53 stay about the same every year. Total costs per box would vary from a high of $2.00 with a 150-box yield to a low of $0.93 for a yield of 350 boxes. Usually, a short crop in a well-located and properly managed or- chard is due to climatic conditions which cause lower yields in most other orchards and result in lower total production. This lower total produc- tion results in a higher price for the fruit, which largely offsets the higher cost per box. Likewise, heavy yields in most orchards result in heavy total production and lower prices. Variations in costs per box due to differences in yields from year to year in a particular orchard are not serious if the average of these yields is high enough. PLANNING FOR THE FUTURE The material presented in previous sections is ready for use by estab- lished growers who wish to apply it in the business management of exist- ing orchards. More specific illustrations of the use of this and other material in making decisions regarding the ownership of citrus orchards in the future are given in this section. Future net income per acre from any particular citrus orchard depends, of course, on the three main fac- tors : yield, price, and costs. Any decision concerning operation, sale, purchase, or development involves the forecasting of those factors for the orchard in question. The fact that this bulletin cannot be kept up to date on current developments in the citrus industry makes specific predic- tions unwise and hence limits this discussion to a suggestion and illus- tration of method. Future Yields. — The probable future yield of a particular orchard is of paramount importance in estimating its probable or potential net in- come. Past performance and a reasonable expectation of future yield increases due to advancing age or improved cultural care, furnish infor- mation for the prediction of future average annual yields. Past perform- ance should be based upon an annual average of at least five years in order to avoid undue influence of seasonal climatic conditions. Such an average may be compared with the yields shown in figure 1. An orchard above that curve in yield will tend to remain above with continued good cultural care. One having less than the yield shown for its age will re- quire study to discover opportunities of increasing yield, if they exist. An orchard with certain handicaps, which result in a yield much below standard, offers little hope of future profitable operation. Future Prices. — So much in the way of financial success or failure de- pends upon future prices that no individual should make plans without carefully considering the outlook for the kind and variety of fruit in- volved. Past prices should be obtained and studied. Actual prices for 54 University of California — Experiment Station fruit from a given orchard should be compared with the general level of all fruit of that variety. If the price has been consistently below aver- age, some handicap to fruit quality or time of maturity may be involved. The price of such fruit in the future would tend to retain its position in comparison with average prices. The average price of fruit in the past is not a safe indication of what it will be in the future, although it provides a level from which one may predict an increase or a decrease. A study of past prices and the factors that have influenced them and current infor- mation concerning future bearing acreage makes possible a fair estimate of future prices. Outlook and situation reports and news releases on prices, production, and bearing acreage originating from the Coopera- tive Crop Reporting Service, the United States Department of Agricul- ture Bureau of Agricultural Economics, and the College of Agriculture provide authentic current information. More detailed information on factors determining prices of specific crops has appeared from time to time in a series of bulletins published by the College of Agriculture on the economic status of California crops. 13 Although any definite prediction concerning future prices cannot-be made, an illustration of the procedure may serve as a guide for those who are forced to select a price for use in future plans. Navel oranges will be used in the example. The average price from 1931 through 1935 was shown in table 6 to be $1.09 a packed box. If all conditions were to remain the same, the price might be expected to remain the same. But business conditions and purchasing power have improved since 1933. In 1935 (see table 17) the average price was $1.23 with a fairly normal California crop, and in 1936 the price was $1.28. Production of California navels will not increase much because most of the acreage is in full-bearing, and new plantings are negligible. Increased competition from winter oranges and grapefruit, particularly from Florida, is forecast by the most recent outlook information. The stabilization of shipments, or marketing under federal and state marketing laws, agreements, and prorates, has had a beneficial effect on prices the last few years and might work even better in the future if other states participate in similar programs. This factor might tend to improve prices. Export business has passed its low point and is on the increase, particularly with Canada since the reciprocal tariff agreement. After consideration of all these factors, all favorable except one, the average person would expect prices the next five years to be higher than the last five, and perhaps higher than the price of $1.28 in 1936. If the person 13 See: Thompson, J. M. The orange industry: an economic study. California Agr. Sta. Bui. (In press.) Bul. 620] Citrus Enterprise-Efficiency Studies 55 making the forecast wished to be conservative, he might use $1.20 or $1.25 as a future price for the purpose of forecasting earnings. If, how- ever, he were definitely optimistic, he might prefer to use $1.30 or even $1.35. In illustrating income and earnings with standard costs, the author has chosen to use $1.30 for oranges and $1.55 for lemons, not as definite predictions, but simply as examples. Future Costs. — Costs are the third important factor which must be forecast in order to estimate future earnings. The standards of costs in tables 10 and 11 have been presented for use in estimating future costs. Enough detail is shown so that they may be adjusted to future condi- tions in a particular orchard. Table 14 shows typical cost differences for orchards with different annual average yields. Costs in general rise and fall with changes in the general price level, but they do this somewhat more slowly. Many cost items change so slowly that adjustments for the immediate future are not necessary. The cost of man labor is the most likely to need adjustment. If wage rates are $0.40 an hour instead of the $0.30 used in the standard, the adjustment would be $8.50 for the 85 hours of labor shown for oranges in table 10. Cost of contract operations including picking would probably increase by a similar amount. The computation of a detailed schedule of costs for a particular orchard, even if some items are estimated, would be the only safe procedure. After an estimate of future yields, costs, and prices has been made, the simple calculation of net income will provide the answer to most questions concerning the desirability of ownership and operation of a particular orchard. Where there is no chance of making a net income from citrus-fruit production, the orchard might well be removed and the land devoted to more suitable crops or uses. Most established orchards in southern California will show enough probable net income to justify their continued operation. Some will show such excellent opportunities as to make them highly desirable and hence more valuable. VALUATION OF ORCHARDS The economic value of a citrus orchard to its owner will, in the last analysis, be largely determined by its earning power. Orchards which provide wages for labor and management and earn a satisfactory rate of interest on invested capital will not be for sale at prices below a conserva- tive capitalization of earning power. On the other hand, orchards with low earnings will be offered for sale in order that the invested capital may be more gainfully employed, and prices for such orchards will be relatively lower. Prices at which orchards are sold tend to be based almost as much on past earning power as on future expectancy because 56 University of California — Experiment Station of a lack of definite predictions for the future. The above methods of estimating future net income may well be applied to the problem of ar- riving at a price for a particular orchard. In considering the value of a citrus orchard, the agricultural value should first be obtained, and then other influences may be considered in adjusting that value to a market price. The agricultural value (some- times called "productive value") is the value upon which the going rate of return to capital can be earned after meeting all other expenses. Its determination necessitates estimating future net income and the rate of interest which may be expected from the investment of capital. There are, of course, certain residential and speculative values involved in the valuation of southern California citrus orchards which may result in prices differing from those determined by the agricultural value alone. These nonagricultural factors influencing prices, however, are beyond the scope of this presentation and in any event have little influence on agricultural value. The first step in estimating agricultural value is to compute probable future income by means of the yield and price forecasts illustrated in the previous sections. Probable costs are then compiled for labor, material, cash overhead, and depreciation groups. The subtraction from income of the total of these four groups, referred to in this bulletin as "total cash and depreciation costs," will leave the probable capital and management income. Observation of the capitalization of earnings in many agricul- tural enterprises leads to the conclusion that an allowance for manage- ment is also made before net income is capitalized into an agricultural value. A managerial allowance of $30.00 an acre has been used in this bulletin. Although this assumption is somewhat arbitrary, it was chosen by the author because it seemed to fit valuations in good, owner-operated orchards of medium size. It is also rather close to the cost of full manage- ment where hired for orchards of this size. There would be some justifica- tion for using a smaller figure for low-yielding orchards or large orchard units. In the following illustration, this $30.00 is deducted from capital and management income to obtain capital income, which is the amount available to pay interest on investment. The agricultural value is ob- tained by dividing capital income by the rate of interest to be expected. The rate used in capitalizing agricultural enterprises tends to vary from 2 to 6 per cent, or, for very speculative enterprises, may go as high as 10 per cent, although the recent trend of interest rates has been down- ward. For land where there is little risk of decline in earning power, the future rate may go as low as 2 or 3 per cent. With citrus orchards, where a large part of the investment is in trees that could be killed by a freeze Bul. 620] Citrus Enterprise-Efficiency Studies 57 or otherwise destroyed, and where the market for the product could col- lapse and require a shift to other crops, a higher rate of return is doubt- less required to attract capital. It would, therefore, seem that a rate of 5 per cent is the lowest that should be used in the capitalization of citrus orchards, and many people will wish to use a rate as high as 10 per cent. Current values would seem to justify a rate of about 5 per cent. Agricultural Value per Acre of Orange Orchard with Varying Yields and Prices 5,000 200 240 280 Average annual yield, packed boxes per acre Fig. 2. — Agricultural values in the above chart are computed to yield a 5 per cent return on the investment after the standard costs shown in table 14 and a $30.00 allowance for management have been deducted from income. Agricultural value, being a resultant of yield, price, costs, and interest rate, will be influenced by a variation in any one of them. Higher-yield- ing orchards will have higher earning power and higher agricultural value than lower yielding ones. Lower prices result in lower agricultural values. A rise in costs tends to lower values. Lower interest rates result in higher values. In order to illustrate the difference in agricultural value resulting from yield and price variations, figure 2 has been pre- pared. This chart shows the value upon which 5 per cent would be earned by orchards with different yields at various prices and with costs as shown in table 14. 58 University of California — Experiment Station Figure 2 shows that with standard costs as given in table 14, no orange orchard having an average annual yield of less than 125 packed boxes per acre would have any agricultural value with oranges below $1.60 a box, the highest price shown on the chart. To use figure 2, look along the bottom for the yield of the orchard in question and choose a diagonal line that shows the price you expect to receive. From the selected point on the yield scale at the bottom of the chart, draw an imaginary vertical line up- ward until it intersects the chosen diagonal price line. From this point of intersection, draw an imaginary horizontal line to the left-hand side of the chart. The capitalized agricultural value in dollars per acre can then be read on the left-hand scale at the point of intersection of the horizontal line. To illustrate the use of figure 2 further, for a 200-box orchard and a price of $1.30 for oranges, the agricultural value of an orange orchard would be $750.00 an acre. In other words, a buyer could pay $750.00 an acre for an orange orchard producing an average annual yield of 200 boxes per acre and expect to make 5 per cent on his investment over all costs and a managerial salary of $30.00 an acre, if oranges were to aver- age $1.30 a box. With oranges at $1.20 a box, the 200-box orchard would pay 5 per cent on about $375.00 an acre, and at $1.10, income would be too low to pay any interest. Many interesting questions could be answered from figure 2 if the assumptions upon which it is based are accepted as valid or applicable to the orchard in question. Actual computations for a particular orchard are, of course, more applicable ; therefore, this chart should be used only when there are no more valid data. A similar chart may be prepared for any other set of conditions of costs, prices, or return on investment. This chart is based upon the capitalization of earning power at 5 per cent. If the earnings were capitalized at 10 per cent, the agricultural value would be 50 per cent of those shown in the chart, or if the earnings were capi- talized at 4 per cent, the agricultural value shown in figure 2 should be multiplied by 125 per cent. For example, if the 200-box orchard gives a return of 5 per cent on $750.00 an acre, it would return 4 per cent on a value of $937.50. Figure 2 shows the great difference in value between orchards of low- and high-producing ability. Growers who have high average annual yields can make a profit at a considerably lower price than those obtain- ing low yields. With a yield of 360 packed boxes per acre, even a price of $0.90 a packed box will make possible a return of 5 per cent on $1,150.00 an acre. At this price, no orchard with any average annual yield of less than 270 boxes per acre will have any net income to apply as a return on Bul. 620] Citrus Enterprise-Efficiency Studies 59 investment. A price of $1.30 a packed box would allow a return to capital invested only in orchards yielding above 162 boxes. This chart proves the statement that poor orchards are dear at any price, and good orchards are generally worth more than they cost. SIZE OF ORCHARD The grower's personal net income from the operation of an orchard de- pends upon its size and the net income per acre it will produce. The large amount of capital required for the ownership of a citrus orchard has resulted in many units too small to provide an adequate income. In plan- ning the purchase of an orchard, one should see whether the orchard can meet the purposes for which it is acquired. The owner of any size of orchard should also know something of the cost handicaps in the small orchard. Costs per acre on large units tend to be somewhat lower since certain total overhead costs, such as the ownership of a tractor and tillage tools, increase very little with an increase in the acreage served. Small orchards for which the ownership of such equipment is not justified incur much higher costs through hiring of work on a contract basis. The operator's net income from his orchard may be considered to be from three sources : wages for actual labor, interest on invested capital, and returns to management. In a citrus orchard the labor which can be performed by the operator is limited to pruning, cultivation, irrigation, some fertilization, hauling fruit, and miscellaneous jobs totaling not much over 80 hours per acre for oranges and 90 for lemons. Of course, the grower with idle hours can put in additional time, but the above amount of labor should be adequate under most conditions. From the standpoint of labor requirement, a grower can perform the labor on 20 acres of citrus orchard which would amount to about 1,600 to 1,800 hours a year, the equivalent of 200 to 225 8-hour days. Thus, a 20-acre citrus orchard is about the right size for the full-time working farmer who wishes to hire no labor aside from the operations usually performed on a contract basis, with the exception of help in heating. A part-time farmer, or one who, because of advanced age, cannot do so much work, may find an orchard of from 5 to 10 acres better suited to his needs as far as work is concerned. Beyond 20 acres (or the acreage on which the grower can handle most of the work) , the larger the orchard the greater the proportion of income from invested capital and the lower the proportion from labor. A grower with an orchard over 30 acres would hire most of the labor performed and would derive a greater proportion of his income from invested capi- tal and from management. In order to show the labor that can be per- 60 University of California — Experiment Station TABLE 15 Standard Labor Utilization, Costs, and Net Income per Acre for Orange Orchards of Different Sizes in Southern California* (Yield, 240 packed boxes; price, $1.30 per box) 5 acres 10 acres 15 acres 20 acres 30 acres 40 acres Hours of labor per acre Rate of labor in dollars per hour Costs and returns in dollars per acre Performed by working operator Hiredf 69 61 8 75 10 73 12 55 30 85 7 12 42 43 Total noncontract man labor Owned tractor use per acre 69 69 85 7 12 85 7 12 85 7 Owned truck use per acre 12 All man labor 10 drawbar-horsepower tractor lj^-ton truck 30 30 30 1.58 1 33 30 1 30 1 10 30 1 01 0.88 30 0.86 0.77 Pruning and brush disposal Fertilizing and covercrop Pest control, fumigation, spray, etc Disease control, handwork Frost protection, labor, and oil Cultivation and furrowing Irrigation, labor, and water Miscellaneous labor and materials Total cultural labor and materials. . Picking contract, by packing-house. . . . Hauling fruit to packing-house Total labor and material cost Cash-overhead cost Subtotal, cash and labor costs Depreciation Subtotal , cash costs and depreciation Interest on investment Total all costs of production Income from 240 boxes at $1.30 Management income Interest if free of debt Operator's capital and manage- ment income Value of operator's labor Operator's farm income 5 30 33 40 31 00 3 60 16.30 14 50 26 00 9.00 139 21 11 10 60 00 171 27 70 10 198.80 15 00 213.80 106.00 319.80 312.00 -7.80 106.00 98.20 20.70 118.90 5 30 33.30 30.50 3 60 16 30 14 50 26.00 9 00 138 21 11 50 60 00 171 27 10 50 198.60 14 50 213 10 106.35 319.45 312.00 -7.45 106.35 98.90 18.30 117.20 5.23 33.23 30 00 3 60 15.79 11 28 26.00 8 71 133.84 21.60 10.68 166.12 28.25 194.37 15 75 210 107 12 10 317.22 312.00 -5.22 107.10 101.88 22.50 124.38 5.00 33.00 30 00 3.60 15.10 9 60 26.00 8.20 130.50 21.60 9.30 161.40 27.85 189.25 15.25 204.50 106.85 311.35 312.00 0.65 106.85 107.50 21.90 129.40 4.78 32.78 30.00 3.60 14.44 7.86 26.00 7.69 127.15 21.60 7.98 156.73 27.35 184.08 14.64 198.72 105.92 304.64 312.00 7.36 105.92 113.28 16.50 129.78 4.67 32.67 30.00 3.60 14.11 6.96 26.00 7.43 125.44 21.60 7.32 154.36 27.20 181.56 14.29 195.85 105.59 301.44 312.00 10.56 105.59 116.15 12.60 128.75 Total income in dollars Operator's net farm income . 594.50 1,172.00 1,865.70 2,588.00 3,893.40 5,150.00 * Costs for the 20-acre orchard are the same as in table 10. Adjustments in certain costs are made for orchards of other sizes. The same cultural care is assumed in all cases, although the method of providing it would vary somewhat. In the 5- and 10-acre orchard, all tractor and truck work is assumed to be hired on a contract basis, while in the larger orchards, a truck and tractor would be owned. t Hired labor for the 10-, 15-, and 20-acre orchards is for heating. Bul. 620] Citrus Enterprise-Efficiency Studies 61 formed by the operator and the personal income that would be obtained from orchards of different sizes, computations based on the standard for oranges in table 10 are presented in table 15. A yield of 240 packed boxes is assumed in all cases. The labor and material input per acre is assumed to be the same for all sizes of orchard, but the proportion of the labor hired and the overhead costs are adjusted to what they would be in the orchards of each particular size. It is assumed that on orchards of 10 Farm Income of Working Owner-Operator from Orange Orchards of Varying Size with Different Prices 5,000 £4,000 (0 o §3,000 § 2,000 a u o *> E ■ <§* 1,000 ifo f/ J? 7/ £r yr £ \^^ *2^ jzj£>- 10 15 20 25 Size of orchard in acres 30 35 40 Fig. 3. — Farm income shown above is the operator's total income above the cash costs and depreciation shown in table 15. Total income is based on a yield of 240 packed boxes. acres or less, all work involving trucks, tractors, or horses would be hired and the operator would perform only the handwork required. Cultiva- tion and hauling costs are estimated in such orchards at the usual con- tract prices. It is also assumed that fumigation and spraying will be hired at contract prices for all sizes of orchards. No outside use of any owned facilities is assumed, although such equipment could be used in many cases to do some outside contract work, which would reduce overhead costs of that equipment through the service of additional acreage. By making proper adjustments to actual conditions, the costs shown in table 15 may be made use of in estimating probable future costs and in- come for a certain size orchard. To obtain total cost or income for a given orchard, multiply per-acre figures for the nearest size illustrated, by the 62 University of California — Experiment Station number of acres in the orchard. For example, a 7-acre orchard would produce about the same operator's net income per acre as shown for a 5-acre orchard; therefore, multiplying the latter by 7 would give an operator's net income of $837.90 for the 7 acres with a yield of 240 boxes and a price of $1.30 per box. Naturally, the net income would vary con- siderably with the price of oranges. Should future prices average above or below the $1.30 used in table 15, then personal income would be above or below. Figure 3 has been prepared to show operator's net income at varying prices for oranges. That this net income is personal net income for wages, interest, and profit must be borne in mind, and from it would have to come living expenses and interest and principal payments on any indebtedness. Figure 3 is also based upon the standard yield of 240 packed boxes per acre which is considerably above the district average. Yields smaller than this would require larger acreages to provide a given level of income. This figure shows the net personal income or income above actual cash outlay and depreciation obtainable with good manage- ment from a fully-mature orange orchard by a working owner-operator without any deduction for interest paid on indebtedness. Figure 3 shows that to obtain an income of $2,000 a year, about 16 acres of orange orchard would be necessary if prices are $1.30 a box, while 19 acres would be necessary if prices were $1.20 a box. It would, therefore, appear that in order to be assured of a satisfactory income, sufficient to maintain a comfortable standard of living for an American family, 20 acres would be necessary. This also coincides with the acreage which would provide enough employment to be considered a full-time occupation. If orchards are selling at their agricultural value as shown by figure 2, 20 acres of a 240-box orchard with a price of $1.20 would cost $1,100.00 an acre, or $22,000.00. This is a large investment for a family farm, but is probably considerably below that which would be required to purchase such an orchard, since most orchards are valued on the basis of past rather than future earnings. SUMMARY The net income obtained from the ownership and operation of an acre of citrus orchard is dependent upon the yield per acre, the price of fruit, and costs per acre. Any analysis or study of an orchard enterprise with a view to improving profits or deciding upon a purchase or sale should begin with a study and comparison of these factors with certain normals or standards. Yield per acre is more likely to account for large differences in net income. The average annual yield in an individual orchard depends upon Bul. 620] Citrus Enterprise-Efficiency Studies 63 the age of the trees, the character of the soil, local climatic conditions, and the cultural care it has received. After an orchard is once established, the grower can only influence yield in the degree to which he supplies necessary cultural care. Trees, apparently, cannot be forced to produce beyond a certain limit, but adequate provision of water and fertilizers and protection from pests, diseases, frost, and damaging winds will allow production up to that limit. The price an individual grower receives for his fruit may be higher or lower than the season average for that kind of fruit according to the quality of the fruit, the time of its maturity and sale, and the marketing channel through which it is sold. About the only influence the grower can exert on the quality or time of maturity of fruit from a certain or- chard is through a provision of the same favorable cultural conditions that promote high yields. The general level of prices of a citrus fruit exerts a considerable in- fluence on orchard income but is largely beyond the control of the indi- vidual grower, and since it affects all orchard enterprises the same in a particular year, it is not responsible for differences in earnings in differ- ent orchards. Prices of citrus fruits in recent years have been on a somewhat lower level than they were before 1931. Part of this drop in prices came as a result of increased planting stimulated by the high prices and profits prevailing in the 1920's. Additional decrease in prices may be attributed to the reduction in consumer purchasing power associated with the de- pression. In recent years an increase in purchasing power has resulted in some improvement in prices. The present status of the citrus industry with recent increases in bearing acreages is such that in years of heavy total production, fruit cannot be sold at prices profitable to the majority of growers. Costs can, when unnecessarily high, eliminate or greatly reduce a po- tential net income. With careful management, adequate cultural care need not cost over $200 an acre in mature orchards yielding 240 packed boxes per acre. At current prices this would leave a net income as a return to invested capital and a reward to management. Enterprise-eniciency-study records show a fair capital and manage- ment income for the five-year period 1931 through 1935, although this income was much below that of the preceding five years. It is reasonable to expect net income in orange orchards to be as good as that for the last five years, or slightly better. It is doubtful, however, whether lemons will be as profitable as in the period just passed. 64 University of California — Experiment Station Present and probable future orange prices will support the present valuation of high-producing orchards. Orchards with average or mod- erate yields can only earn a return on a lower value per acre than that which prevailed before the depression. Orchards with very low yields owing to environmental or cultural handicaps will have little or no agricultural value. The cost of developing a young citrus orchard is higher under present low fruit prices than it was some years ago, because of the much longer waiting period which must elapse before income will rise to a level that will exceed costs. With interest on the unproductive investment during the waiting period included, trees will have cost about $1,000 an acre by the time they reach the profitable bearing age of twenty years. With this long waiting period and with the large investment required, the plant- ing of additional acreage to citrus fruits does not appear profitable con- sidering prices as they are. When the peak of production from acreage already planted has been reached, the prices and outlook at that time should indicate the extent to which additional plantings would be profit- able. Decisions pertaining to the operation, purchase, or sale of any indi- vidual citrus orchard may be more wisely made by forecasting future net income for that particular orchard. This can be computed by using forecasts of yield and price and by adjusting past costs to fit the future. The agricultural value, or value upon which a certain rate of interest can be obtained, is determined for a particular orchard from its probable future net income. An allowance for management is deducted from the probable future capital and management income, and the remaining re- turn to capital is divided by the expected rate of return, or interest, to obtain the agricultural value. A fair market price would be the agricul- tural value adjusted for any speculative or residential values. The operator's personal income from a citrus orchard depends upon the size of that orchard and the net income per acre secured from its operation. A working owner can do most of the work, except that usually hired on a contract basis, on any orchard up to about 20 or 25 acres. Un- der current and probable future prices about 20 acres, free of debt, are required to provide a working operator with a personal income of $2,000. Economic security and future welfare of the citrus grower are somewhat dependent upon an adequately sized farm unit. However, even after wise selection of a particular orchard, its profitable operation will require good management in order that satisfactory yields may be obtained at relatively low costs. Bul. 620] Citrus Enterprise-Efficiency Studies 65 ACKNOWLEDGMENTS The material upon which this bulletin was based is the result of the work of many people : citrus growers, packing-house managers, and others who cooperated in the citrus enterprise-efficiency studies. The farm advisors and assistant farm advisors who conducted these studies and other mem- bers of the Agricultural Extension Service who participated in the sum- marization and analysis of records, all had their part. Particular mention should be made of H. E. Wahlberg, Farm Advisor of Orange County, who contributed sections of this manuscript. The writer also wishes to acknowledge the help of the following in the arrangement and presentation of the material in this bulletin : W. R. Schoonover, Specialist in Agricultural Extension; R. L. Adams, Profes- sor of Farm Management ; H. R. Wellman, Associate Professor of Agri- cultural Economics ; L. D. Batchelor, Director of the Citrus Experiment Station; E. R. Parker, Assistant Horticulturist in the Citrus Experi- ment Station; and R. E. Hodgson, Professor of Subtropical Horticul- ture. 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