DETERMINING THE COST OF PRODUCTION (doing the math)

MAKING LAVENDER PAY

Get your facts first, then you can distort them as you please.

Mark Twain

VARIABLES IN LAVENDER PRODUCTION

Is it ‘stand alone’ or part of another enterprise? Does lavender absorb 100% of the costs? Are costs shared with other enterprises?

What will you sell? Buds Bundles Oil Value-added

How will you sell it? Retail from the farm To wholesalers At farm markets Internet sales

LET’S LOOK AT 2 EXISTING BUDGETS

Colorado State University

British Columbia

COLORADO STATE UNIVERSITY

PRODUCTION ONLY Start up costs Annual maintenance costs Harvest costs (bundles only)

ASSUMPTIONS 8 ft (2.4 m) by 100 ft (30.5 m) planting area (2 rows) 46 plants per row (230 bundles @ $4.00/bundle) All numbers based on 1 row

CSU – GETTING STARTED (1 row)

ITEM COST

Enclosed drying shed 1,800.00

Irrigation system (installation & materials)

150.00

Soil test 25.00

Soil prep (labour & amendments) 100.00

Weed fabric (labour & materials) 250.00

Mulch (labour & materials) 85.00

Lavender plants ($2 x 46 plants) 92.00

Misc supplies (pins, sickles, rubber bands, torches etc.)

125.00

TOTAL PROJECTED START-UP COSTS $2,627.00

CSU ….. ESTIMATED ANNUAL COSTS

OPERATION(1 row = 46 plants)

UNITS

UNIT COST

UNITS /ROW

(YR 1) COST/ROW

(YR 2 +) COST/ROW

Labour hours 10.25

weeding hours 10.25 24 246.00 246.00

irrigation hours 10.25 2 20.50 20.50

harvesting bundles hours 10.25 6 - 12 61.15 102.50 – 123.00

hanging bundles hours 10.25 6 - 12 61.15 102.50 – 123.00

marketing hours 10.25 2 - 4 20.50 30.75 – 41.00

Irrigation expenses row 50.00 1 50.00 50.00

Replacement plants plants 2.00 5 10.00 10.00

EST ANN. COSTS 469.30 562.25 – 613.50

EST ANN. REVENUES 460.00 920.00 – 1,380.00

NET (???) RETURNS -9.30 357.75– 766.50

STARTING POINTS WILL VARY

Sometimes it is useful to know how large your zero is.  ~Author Unknown

B.C. Planning for Profithttp://www.agf.gov.bc.ca/busmgmt/budgets/herb_specialty.htm

ASSUMPTIONS Buds only ¼ acre First 2 years Does not consider general farm inputs

General labour costs, general marketing costs, irrigation fees, repair and maintenance, certification fees

Does not consider indirect expenses Interest, insurance, administration, legal/accounting

B.C. EXPENSES/INCOME (1/4 acre)

COST Qty-YR 1

Qty-YR 2

UNIT

AVG $ Yr 1 Yr 2

Planting labour 24 hr 10.25 246.00

Harvest labour 40 hr 10.25 410.00

Cost of plants 1,600 each

0.50 800.00

Tractor fuel 14 litres

1.20 16.8

Tractor oil/lube 1.05

bags 50 each

0.03 1.50

Corrugated boxes

2 each

2.50 5.00

Advertising/faxes/phone

100.00

irrigation .25 .25 acres

60.00 15.00 15.00

TOTAL Exp 1,078.85

531.5

INCOME 50 lb 44.00 2,200.00

USEFUL REFERENCE NUMBERS (???)compiled from other lavender-growing areas

150 stems/bundle4 – 7 bundles/plant ….. 14,000 – 25,000/acre12 – 15 bundles yield 0.5 kg dried buds (500 gm)100 – 225 gm dried buds/plant (454 gm=1 lb)@ 4,000 plants/acre (6’ x 24” = 3,630 plants per acre)

http://www.headstartnursery.com/vegetable_transplants/plants_per_acre_calculator.php

Lavenders produce ~ 12,000 dried bunches/acre Lavendins produce ~ 16,000 dried bunches/acre Buds/acre ~ 1,000 lb (454 kg) – 1,500 lb (680 kg)

Oil production: Lavenders: 2.8 – 14 L/acre Lavendins: 18 – 90 L/acre Depends on variety, harvest method, pruning, weather, plant

health

THE TRUTH BEHIND THE NUMBERS

Mathematics are well and good but nature keeps dragging us around by the nose. 

~Albert Einstein

THAT’S MY STORY AND I’M STICKING TO IT