Вы находитесь на странице: 1из 11

Profitability and Gross Margin Analysis for Olives (for Oil)

Important Information and Disclaimer


Introduction & Instructions
Gross Margin Analysis
Establishment Costs
Annual cash flows
Profitability Analysis

Updated 1 May 2014

NOTE:
The olive enterprise tools have been developed for Tasmania.
Users of the enterprise business tools will need to adjust inputs and outputs
depending on local climate (rainfall, evaporation, min and max temperatures)
and soil types which will substantially impact on actual gross margins
achieved.

If you have questions, queries or suggestions for further development


please contact Mary Bennett, Agricultural Economist,
Department of Primary Industries, Parks, Water and Environment,
phone 03 6165 3163 or email Mary.Bennett@dpipwe.tas.gov.au

Contents
Important Information and Disclaimer
By using this workbook you accept all the terms of this disclaimer.

The information, models and spreadsheet tools accessible using this workbook have been prepared to
assist in making farm management and investment decisions and are intended as planning tools. As such,
users will need to adapt the models for their own circumstances. Users of this workbook are encouraged to
vary the input costs, yields and return assumptions to better represent their own situation.
The agricultural sector is subject to significant variations in costs, returns and yields over time and as such
budget projections will need to be reviewed to reflect the prevailing circumstances.
Changes can be readily made to the models by varying the values in the shaded cells in the individual
gross margin worksheets. Users of the models are also welcome to change the basic set-up of each gross
margin or add further enterprises.

The Crown in Right of Tasmania (Crown) which commissioned the development of these models and
spreadsheet tools, and the consultants (AK Consultants) who undertook the development work, expressly
disclaim all and any legal liability and responsibility whatsoever arising from or connected with:
the accuracy, reliability, validity, currency or completeness of any information on this website including
the models and spreadsheets;
the accuracy, reliability, validity, currency or completeness of any results obtained from the use of the
information on this website including the models and spreadsheets;
the consequences of anything done or omitted to be done by any person, either in whole or in part, in
reliance of any such information, models spreadsheet or results;
any combination of any of the above.
None of the input costs and projected yield information listed in the workbook should be treated as
recommendations or advice and the information, models and spreadsheet tools accessible in this workbook
are made available on the understanding that the Crown and AK Consultants are not providing professional
advice. The use of this workbook and information obtained from its use is not a substitute for independent
professional advice and users should obtain any appropriate professional advice relevant to their particular
circumstances.
Copyright
Copyright of all information (including the models and spreadsheets) published in this workbook
(information) is owned by the Crown. All information is protected so far as is allowed by the provisions of
the Copyright Act 1968 (Cth) ("the Act").
Apart from any use permitted by the Act, the Crown grants users of this site a licence (within the meaning of
the Act) to download, use, print and otherwise reproduce the information. This licence is granted on the
condition that the Crown (as represented by the Department of Primary Industries, Parks, Water and
Environment (Department)) must be acknowledged as the source of that information. Furthermore, users
must ensure any third party is aware that the disclaimer applies in respect of the reproduction, quotation
and use of the information.
To reproduce or use the information beyond this limited licence, permission must be sought from the
Department.
Contents

Contents

Profitability and Gross Margin Analysis for Olives


INTRODUCTION
The purpose of this spreadsheet is two-fold. Firstly, it enables calculation of the annual Gross Margin per hectare based on
an existing, mature olive grove; and secondly, it allows the user to estimate the overall profitability of investing in olives
through the inclusion of establishment and overhead costs and the expected annual cashflow over a 15 year timeframe.
Note; This spreadsheet assumes olives are being grown for wholesale oil production only. It does not include costings
associated with processing the oil or producing table olives.
Annual Gross Margin is defined as the gross income of a crop less the variable costs of production (i.e. the costs that
change in direct proportion to production). This is generally calculated on a per hectare basis for ease of comparison with
other enterprises.
Long-term profitability has been determined by calculating the Net Present Value, the Internal Rate of Return and the
Annual Equivalent Value. Definitions of each of these parameters are given below.

Net Present Value (NPV):


A number of different enterprises can be compared by calculating the Net Present Value of each investment. NPV
compares the value of a dollar today to the value of that same dollar in the future, taking into account inflation, interest
rates and net returns over the allocated timeframe. If the Net Present Value of an enterprise is negative then the
investment will make a loss. If it is positive then the investment is profitable over that timeframe. When comparing
enterprises, the greater the NPV, the more profitable the investment is likely to be.

Internal Rate of Return (IRR):


The Internal Rate of Return is the interest rate at which the NPV equals zero, that is, the breakeven point of the investment.
This allows comparison between investing in the proposed enterprise and investment elsewhere, for example a financial
institution. If the interest rate at the bank is higher than the IRR, it is more profitable to invest the money in the bank rather
than the crop.
An alternative definition is: the IRR on an investment or project is the "annualized effective compounded return rate" or
"rate of return" that makes the net present value of all cash flows (both positive and negative) from a particular investment
equal to zero. It can also be defined as the discount rate at which the present value of all future cash flow is equal to the
initial investment or in other words the rate at which an investment breaks even.

Annual Equivalent Value (AEV):


The Annual Equivalent Value is based on the NPV and gives the expected annual return, averaged over the enterprise
timeframe, expressed in present day prices. It enables direct comparisons to be made between enterprises with different
durations.

256324094.xls.ms_office

Introduction & Instructions

INSTRUCTIONS
All enterprise specific data is to be entered in the shaded cells. All other cells have been locked to prevent accidental
alteration of essential formulae. Data is entered by selecting the cell, typing the appropriate information, then either
pressing enter or moving the curser to a different cell. All calculations are updated immediately after each piece of new
information is entered.

Sheet 1: Gross Margin Analysis


Yield: The default yield is 18kg per tree. This assumes a well grown, adequately irrigated mature tree. In Tasmania olive
trees can take between 10 and 13 years to fully mature. It should be noted that this yield is somewhat less than those
achieved by Mainland plantings and is thought to be due to Tasmania's cooler summers.
Note; the relationship between tonnage yield of fruit and oil yield (what the producer is paid for) is not linear and is quite
difficult to predict. It depends on several factors including:
- oil content of the fruit - varies by year, amount of fruit on the tree and variety
- extractability of the oil from the fruit - varies by year, water content, fruit maturity and variety
- extraction process
Oil content can vary from 4% to 25%, but is generally around 13-15%.
Price: The default price is $15/litre of oil. Wholesale price can range from $10 to $25/litre, depending on quality. Retail
prices can be much higher, but involves other costs (bottling, labels, selling costs etc).
Fertilizer: Olives prefer relatively alkaline soils with a pH of 7-8.5, therefore most soils will require regular lime application.
While specific fertilizer requirements can only be determined through soil or leaf testing, olives generally have very low
fertilizer requirements - many groves are fertilized with manure and mulch only. A regular supply of nitrogen is important
during the growing season. This is commonly applied via fertigation.
Chemicals: Minimal pest and disease management is required in olives. There are six main diseases and insect pests
which can effect olive orchards in Australia. These are peacock spot (Cycloconium oleaginum or Spilocaea oleaginea),
olive lace bug, black olive scale (Saissetia oleae), verticillium wilt (Verticillium dahliae), olive moth (Prays Oleae or
Margaronia unionalis) and anthracnose. Black olive scale appears to be most prevalent and a simple, effective treatment
is to suffocate the young crawler stage using white oil.
Glyphosate is also commonly used to suppress grass and weed growth along orchard rows.
Contract: Maintenance jobs such as mowing between rows can either be done by the owner or contracted out. Either
way, this price of this work should be included to give an accurate picture of the total costs of production.
Pruning is done after harvest in late autumn/early winter. Olives are generally pruned into a vase shape to allow light and
air penetration. Light encourages faster fruit maturing times, while air circulation minimises pests and diseases. Olives are
very prone to biennial bearing (producing harvestable quantities of fruit only every second year) if pruning is not done
correctly.
Harvesting can be done either by hand using rakes or mechanical branch shaking devises; or using mechanical "tree
shaker" harvesters with fruit catching systems. If the fruit is for oil production, mechanical harvesting is sufficient. Table
olives are usually harvested by hand.
Irrigation: Olives are remarkably drought hardy, however for optimum commercial production irrigation may be required.
Adequate water is particularly important to ensure good spring flowering and subsequent fruit set. Supplementary water
may also be required to achieve good fruit size and high oil yield. Suggested defaults are 1ML/ha for the Meander Valley
and 3ML/ha for the Midlands. The user is encouraged to vary these to suit individual climatic requirements.

Note; olive trees are shallow rooted and can be prone to blowing over. Pruning to allow good air circulation will assist, as
will irrigating using individual tree sprinklers rather than drippers which tend to concentrate root development in a small
area, hence minimising root anchorage.
Fuel & Oil: Most orchards will require the use of a tractor or other vehicles for general maintenance and bringing in the
harvest. An allocation of fuel and oil should be made to cover the costs associated with this.

Sensitivity Analysis: The Gross Margin for many crops, including olives is highly dependent on the yield and price
received for the product. For this reason a sensitivity table has been included showing the effect of changes in price and
yield on the annual Gross Margin per hectare.

256324094.xls.ms_office

Introduction & Instructions

Sheet 2: Establishment Costs


In order to determine the profitability of establishing an olive grove all other costs associated with their production need to
be accounted for. On this sheet the Establishment Costs are calculated. These are entered with a Start Up Value in Year
0, i.e.; prior to annual production commencing and a Residual Value (i.e.; depreciated value) at the end of the project. They
- land (purchase price or opportunity cost based on current use, e.g.; grazing: 10 dse per ha @ $300 per
dse). A default value of $12,500 per hectare has been used to reflect the current average price of land in
the Meander Valley. The user should adjust this to reflect land prices in their area.
- water costs (dam construction, water right/allocation, irrigation infrastructure). In this default scenario it
has been assumed that water is taken directly from a stream or irrigation pipe, thus no dam construction
price is included. The irrigation infrastructure includes drip irrigation equipment plus pump and electrics.
- plant & equipment. Default values include a price for tree guards and stakes. Plants may also be
established using planting tubes which would reduce this cost to approximately $1 per tree. Other plant
includes items for general orchard maintenance (quad bike, spray unit, mower etc.) and equipment to bring
in the harvest (tractor, trailer, bins etc.) It is assumed harvesting will be done by contract and that fruit will
- stock (trees). A default value of $7.50 per tree is included. The number of trees required is based on a
conventional planting of 7m between rows and 5m between trees within the row. Higher density plantings at
2.5m between trees in the row are also used, particularly if faster returns are required, however, in order to
maximize long term yields these plantings will either need regular heavy pruning or alternate trees removed.

Sheet 3: Annual Cashflows


This sheet examines the annual cashflow over a 15 year time frame. It includes establishment costs at start-up as well as
the residual value of capital at the end of this period.
Yield: The user is encouraged to vary the yield and oil content to suit their local growing conditions.
Price: The calculations assume a constant price per litre of oil over the life of the project.
Subsequent Capital Purchases: Any capital purchases made after the initial start up year should be entered here. Note;
the residual value of these capital items also needs to be entered at the end of the analysis time frame. An example could
be delaying the purchase of harvesting equipment until the trees start bearing commercial quantities of fruit.

Expenditure: The default variable costs are based broadly on the figures in the Gross Margin Analysis Sheet. The default
overheads are set at 25% of the variable costs and a further 5% of variable costs has been included as Sundries. The user
is encouraged to enter more specific costs associated with the individual enterprise, particularly if there are loan costs etc.
that need to be included in the overhead costs.

Sheet 4: Analysis
A default discount rate of 10% is used however the user can vary this depending on the inherent risk of the venture being
undertaken. A higher risk venture may need a higher discount rate to reflect the decreased likelihood of achieving the
estimated returns. In general, it is suggested that a discount rate of between 7 and 10% is used.

Acknowledgement
Robert Goddard (Tasmanian contact for the Tasmanian sub-branch of the Australian Olive Association) provided advice
and comment on the income and cost figures in the Gross Margin Analysis.
Contents

256324094.xls.ms_office

Introduction & Instructions

Contents

Olives

GROSS MARGIN ANALYSIS:

(assume an established planting of mature trees)

Income
Nominated fruit yield:
Nominated oil price:

18
14%
$15.00

kg/tree
x
280
trees/ha
Oil percentage in fruit
/litre
(Wholesale price for Extra Virgin Oil)

Gross Income:

5.04
706

tonnes fruit/ha
litres oil/ha

$10,584 / ha

Less: Harvest & pressing


Harvesting (mechanical,by contract)
Pressing & processing
Net Income:

$100
$700

$/ha
$504
$3,528

$/ton of fruit
$/ton of fruit

$6,552 / ha

Expenses
Fertilizer:

(includes spreading cost)


Lime (1 application every 3 years)
Superphosphate (if required by soil test)
N (via fertigation)
Soil test
Leaf test

Chemicals:
White Oil (or similar)
Glyphosate for in row weed control
Other

Contract:

Pruning (labour)

Fuel & Oil:

applications
3
4

(annual water cost + pumping)

(Tractor etc.)

x
x
x
x
x

x
x
x
x

applications
6
hours
45

Mowing between rows

Irrigation:

tonnes
5
0.1
applications
4
1
1

$/tonne
$65
(x 0.33)
$350
$/application
$50
$90
$90
$/application
$60
$10

x
x

$/application
$40
$/hour
$25

Price $/litre

Sensitivity Analysis:

Contents

$180
$40
$0
$0

$240
$1,125

$/ML
300

$300

$90

ha

$90

$4,054 / hectare

PRESS F9 TO RECALCULATE THE ANALYSIS

Effect of price and fruit yield on Olive Gross Margin:


Fruit yield, kg/tree
$4,054
10
12
14
16
$8.00
-$1,602
-$1,423
-$1,244
-$1,065
$10.00
-$818
-$482
-$146
$190
$12.00
-$34
$458
$951
$1,444
$14.00
$750
$1,399
$2,049
$2,698
$16.00
$1,534
$2,340
$3,146
$3,953
$18.00
$2,318
$3,281
$4,244
$5,207
$20.00
$3,102
$4,222
$5,342
$6,462
$22.00
$3,886
$5,162
$6,439
$7,716
$24.00
$4,670
$6,103
$7,537
$8,970

$200
$90
$90

ML/ha
1

Total Expenses:

Gross Margin:

$/ha
$108
$35

18
-$886
$526
$1,937
$3,348
$4,759
$6,170
$7,582
$8,993
$10,404

20
-$706
$862
$2,430
$3,998
$5,566
$7,134
$8,702
$10,270
$11,838

$2,498

Contents

ESTABLISHMENT COSTS:

Olives
Based on a 10ha minimum planting.

ESTABLISHMENT COSTS
LAND
Purchase Price:
OR
Opportunity Cost:
WATER COST
Dam Construction:
Water Right/Allocation, allowing 3 ML/ha:
Irrigation Infrastructure (pipes, pumps, drippers etc.):
SITE PREPARATION
Deep Ripping
Pre-liming
PLANT & EQUIPMENT
Tree guards, stakes etc
Orchard Maintenance
Harvesting

Start up Value
$

Residual Value
$

$125,000

$125,000
$0

$33,900
$40,000

$33,900
$20,000

$1,500
$2,500

TOTALS

Current Values

No depreciation for a dam


No depreciation for a water right; allow $1,130/ML
Allow $2,500/ha for mains, sub mains, drip lines & 2-4
emitters/tree plus $1,500/ha for pump & electrics

$7,000
$20,000
$50,000

$0
$14,000
$35,000

$2.50 per tree, assume 280 trees/ha, 7x5 spacing


Quad bike, spray unit, mower, pruning equipment etc.
Tractor, trailer, bins. Fruit sold wholesale therefore assume no
processing or sorting (all equipment depreciated at 30% over 15
years)

$21,000
$5,000

$21,000
$5,000

$7.50/tree, 280 trees/ha


Assumed the planting retains its value

$305,900

$253,900

Contents

256324094.xls.ms_office

No depreciation

Contract rate
5 tonnes/ha @ $50/tonne

STOCK
Trees
Planting (labour cost)

Notes:

Establishment Costs

Contents

ANNUAL CASHFLOWS:

Olives

YEAR
Percent of peak yield:
Gross yield fruit (tonnes): @ trees/ha 280
Oil yield, Litres: % Oil per kg 14%
INCOME (net of harvesting & pressing)

Calculations based on a 10ha minimum planting


0

$10.00

Residual Value:
Residue value of subsequent purchases:
Total Income
EXPENDITURE
Establishment costs
Subsequent capital purchases
Variable costs
Overheads (% Variable Costs) 25%
Sundries (% Variable Costs)
5%
Total Expenditure

1
0%
0
0

2
0%
0
0

3
5%
2.52
352.8

4
15%
7.56
1058.4

$0

$0

$3,276

$9,828

5
25%
12.6
1764

6
30%
15.12
2116.8

7
40%
20.16
2822.4

8
50%
25.2
3528

9
65%
32.76
4586.4

10
80%
40.32
5644.8

11
90%
45.36
6350.4

12
100%
50.4
7056

13
100%
50.4
7056

14
100%
50.4
7056

15
100%
50.4
7056

$16,380 $19,656

$26,208

$32,760

$42,588

$52,416

$58,968

$65,520

$65,520

$65,520

$65,520

$16,380 $19,656

$26,208

$32,760

$42,588

$52,416

$58,968

$65,520

$65,520

$65,520

$253,900
$0
$319,420

14,990 19,987 24,983 24,983 24,983 24,983


3,748
4,997
6,246
6,246
6,246
6,246
750
999
1,249
1,249
1,249
1,249
$305,900 $19,487 $25,983 $32,478 $32,478 $32,478 $32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

24,983
6,246
1,249
$32,478

$0

$0

$3,276

$9,828

$305,900

Contents

256324094.xls.ms_office

256324094.xls.ms_office

Contents

ANALYSIS

Olives

All figures are for 10 hectares

Year

Annual Cash Flow

10

11

12

13

14

15

$0

$0

$3,276

$9,828

$16,380

$19,656

$26,208

$32,760

$42,588

$52,416

$58,968

$65,520

$65,520

$65,520

$319,420

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

$32,478

-$16,098

-$12,822

-$6,270

$282

$10,110

$19,938

$26,490

$33,042

$33,042

$33,042

$286,942

-$432,143 -$438,413 -$438,132 -$428,022 -$408,084 -$381,595 -$348,553 -$315,511 -$282,470

$4,472

Income
Expenditure
Annual cash flow

$305,900

$19,487

$25,983

$32,478

$32,478

-$305,900

-$19,487

-$25,983

-$29,202

-$22,650

Cumulative cash flow

-$305,900 -$325,387 -$351,370 -$380,572 -$403,222 -$419,321

Cumulative Cash Flow, Olives


$50,000
$0
-$50,000

-$100,000
-$150,000
-$200,000
-$250,000
-$300,000
-$350,000
-$400,000
-$450,000
-$500,000

Number of years
Discount rate
NPV

15
10.0%

0.1%

AEV

-$37,348

256324094.xls.ms_office

$15.00
18

-$284,069

IRR

Peak capital requirement

Selected oil price, $/L::


Selected fruit yield, kg/tree:

Drivers for the sensitivity analysis


Oil price, $/L:
Fruit yield, kg/tree:

-$438,413

Profitability Analysis

10

15

Sensitivity Analysis:

Oil price $/litre

PRESS F9 TO RECALCULATE THE ANALYSIS


Effect of price and fruit yield on NPV:
Fruit yield, kg/tree
-$284,069
10
12
14
16
$8.00
-$448,866
-$443,645
-$438,423
-$433,202
$10.00
-$426,023
-$416,233
-$406,443
-$396,653
$12.00
-$403,180
-$388,821
-$374,463
-$360,104
$14.00
-$380,337
-$361,409
-$342,482
-$323,555
$16.00
-$357,493
-$333,998
-$310,502
-$287,006
$18.00
-$334,650
-$306,586
-$278,521
-$250,457
$20.00
-$311,807
-$279,174
-$246,541
-$213,908
$22.00
-$288,964
-$251,762
-$214,561
-$177,359
$24.00
-$266,121
-$224,350
-$182,580
-$140,810

18

20

-$427,981

-$422,760

-$386,863

-$377,073

-$345,746

-$331,387

-$304,628

-$285,701

-$263,510

-$240,014

-$222,392

-$194,328

-$181,275

-$148,642

-$140,157

-$102,955

-$99,039

-$57,269

Contents

256324094.xls.ms_office

Profitability Analysis

Вам также может понравиться