Constructing a Southwest Florida Bell Peppers Enterprise Budget1
Enterprise budgets can assist with forecasting as well as help managers coordinate resources, make production decisions, carefully examine expenditures, and anticipate outcomes from changes in production practices. Once established, they become a standard for monitoring what happens in the operation. Enterprise budgets estimate revenues and expenses for a specific farm enterprise (product or commodity); they are constructed on a per-unit-of-production basis for one production cycle (or growing season) and can be used to compare the profitability of alternative enterprises, assist in development of a marketing plan, negotiate with the sources of credit, and plan adjustments to the operation. In essence, enterprise budgets can help producers determine what to produce, how many acres to produce, the cost of production, and the necessary price to be profitable. In this publication we describe the process used to create the 2019–20 enterprise budget for bell peppers in southwest Florida.
Overview
In 2019, Florida produced 31 percent of the US fresh-market bell peppers, making Florida the second largest production area in the United States (https://quickstats.nass.usda.gov). Florida growers harvested 11,800 acres of bell peppers during the 2018–19 growing season, a slight decrease (less than one percent) from the 2017–18 season. However, a 30 percent increase in price (from $14.17/bu to $18.43/bu) and no change in production levels resulted in the value of production increasing from $181 million in 2017–18 to $235 million in 2018–19 (Table 1). Yield (measured in 28-pound bushels) peaked in the 2014–15 season at 1,286 bushels per acre and averaged 1,100 bushels per acre over the following seasons (2015–16 to 2018–19); the recent average is 20 percent higher than the average yield of 913 bushels per acre observed from the 2002–03 to 2013–14 growing seasons. This could possibly be due to the development of more disease-resistant varieties (see Gordon 2015). Overall, the total nominal value of Florida's bell pepper crop has increased 66 percent since its low in the 2012–13 season.
Production Practices
Most bell pepper crops are transplanted in double rows on polyethylene-mulched raised beds using either drip or seep irrigation systems. Combinations of fumigants including: Telone, Pichlor 60 (1,3-D), Vapam, or KPam (metam sodium or potassium) and/or chloropicrin are applied prior to planting transplants for the management of soil insects, pathogens, nematodes, and weeds. Approximately 33 percent of the Florida growers use stakes and twine around the bed perimeter to construct "corrals" to contain the plants. Standard spacing is six feet between bed centers, with plants typically planted ten inches apart in the beds. Bell peppers need about 90 days between planting and harvest and are hand harvested at least twice during the growing season. South Florida pepper growers may harvest up to five times in profitable market conditions. Fertilizer can be applied during the plastic laying process, a portion during transplanting, and the rest throughout the season through the drip irrigation system.
Southwest Florida Bell Pepper Budget
Table 2 is a per-acre enterprise budget for a representative grower in southwest Florida. The budget breaks down the specific cost components used to estimate the total per-acre cost of production. Production costs for the budget are reported in two categories, variable costs and fixed costs. Variable costs include labor wages, fuel, chemicals, seed, materials, fertilizer, interest, and other costs that increase as planted land area usage increases. Fixed costs can include rent, building ownership, depreciation, taxes, repairs, and machinery; these are costs that do not vary with the level of output because they result from ownership of assets. (It should be noted that there are two types of variable costs: cash and noncash. Cash costs, such as fuel, pesticides, repairs, etc., are included in the budget. Noncash costs, such as farmer and family labor, are not included in the budget. Though not included, we urge growers to consider noncash costs in their decision-making process.)
The budget is intended to reflect the cost of production using representative production practices that are considered typical for bell peppers grown in southwest Florida. What constitutes a representative production practice is defined by a consensus of opinion of UF/IFAS field experts, industry experts, and various producers in the bell pepper production area. Cost estimates resulting from this process do not represent the average cost of production in a statistical sense, and production practices listed are not necessarily recommended production practices. The intent of these cost budgets is to establish a benchmark within a comprehensive range of potential costs that could be expected to produce the crop.
Assuming an anticipated yield of 1,100 cartons per acre, the production budget for 2019–20 indicates that pre-harvest variable costs for a representative bell pepper grower in southwest Florida totaled $10,524.55 per acre with 44 percent of the costs resulting from fertilizer (12 percent), fungicide (8 percent), tractors and equipment (15 percent), and wage labor (9 percent). Harvest and marketing costs totaled $4,356 per acre, of which 61 percent results from picking, packing, and hauling the fruit. The total cost of production is estimated to be $18,399 per acre or $16.73 per carton.
Methods
Production costs for the budget are reported in variable and fixed costs (Table 2). As in bell pepper budgets created in 2008–09 (see VanSickle et al. 2009), cost estimates are a combination of a consensus of opinion from industry experts, interviews with agriculture input retailors in the region, and applying an inflation factor to 2008–09 production costs. Two inflation factors were created to adjust 2008 fixed and variable values for those in 2020. The variable cost inflation factor is the average of the relative difference of 2008 and 2020 equipment prices. The machinery used in this estimate includes tractors and tractor implements from Mississippi State University production budgets (MSU 2019). The fixed cost inflation factor was calculated using the relative difference of the producer price index (PPI) for bell peppers in 2008 and 2019 (https://www.bls.gov/ppi/).
Resources
Interactive Budget Workbook
Interactive workbooks containing data used to create the UF/IFAS bell pepper budget in Table 2 are available at https://fred.ifas.ufl.edu/extension/commodity-production-budgets/. These workbooks can be used to produce cost estimates broken down by specific groups. Included are pesticide, herbicide, insecticide, fungicide, and fumigant worksheets; machinery worksheets listing the machinery cost coefficients so that users can estimate fixed and variable costs of machinery; and a comparative budget designed for users to compare UF/IFAS estimates with their own. Users are encouraged to input their own prices and quantities.
Common Bell Pepper Varieties for Commercial Production
• Bell Pepper Varieties: Antebellum, Aristotle, Autry, Boca, Crusader, Green Machine, HM 2641, PS 9928302, PS 09979325, Seedway 48, SV3255PB, SV6420PB, Vanguard.
• Specialty Varieties: Aruba, Boris, Natasha, Sunakku Ichigo (red), Yummy Red, Right on Red, Sopron, Yellow Sparkler, Yes to Yellow, Yummy Orange, Orange You Sweet, Sunakku Mikan (orange).
References
Gordon, R. 2015. Thirteen of the Latest Pepper Varieties. Growing Produce. https://www.growingproduce.com/vegetables/more-vegetables/13-of-the-latest-pepper-varieties/
Mississippi State University (MSU). 2019. Soybeans 2020 Planning Budgets. Mississippi State University Department of Agricultural Economics Budget Report 2019–02. https://www.agecon.msstate.edu/whatwedo/budgets/docs/20/MSUSOY20.pdf
Ozores-Hampton, M., N. S. Boyd, E. J. McAvoy, C. F. Miller, J. W. Noling, and G. E. Vallad. 2018. Pepper Production. HS732. Gainesville: University of Florida Institute of Food and Agricultural Sciences.
VanSickle, J., S. Smith, and E. McAvoy. 2009. FE810. Production Budget for Bell Peppers in Southwest Florida. Food and Resource Economics Department. Gainesville: University of Florida Institute of Food and Agricultural Sciences. https://fred.ifas.ufl.edu/extension/commodity-production-budgets/ and https://ufdc.ufl.edu/IR00003784/00001
