Financial

Financial implications are important factors to consider when evaluating an alternative crop. For blueberries, producers should understand the possible risk and return associated with establishing and maintaining blueberry plants. Producers may ask several questions when assessing the financial viability of blueberry production. Is the selling price high enough to cover production costs and provide an economic return? Are blueberry market opportunities accessible and stable? Is crop insurance available? These and other key financial issues should be addressed when assessing the financial viability of blueberry production.

Selling Prices

Blueberry production profitability depends on selling prices. Typically, producers sell blueberries based on price per pound. In 2012, U.S. season-average grower prices for cultivated blueberries averaged $2.19 per pound for fresh berries and $0.92 per pound for processed berries. Between 2010 and 2012, U.S. fresh berry prices trended higher, and processed berry prices were highest during 2011.

Blueberry prices vary by state. The following table shares 2010, 2011 and 2012 prices from three states near Missouri – USDA doesn’t report Missouri prices – and compares those prices to the U.S. average for fresh and processed blueberries. Between 2010 and 2012, processed blueberry prices ranged from 40 percent to nearly 60 percent lower than fresh blueberry prices.

Cultivated Blueberry Season-Average Grower Prices, Commercial Acreage

Production Costs

Blueberries are a perennial crop that requires significant investment before plants mature and yield well enough to generate revenue. Before producers may begin growing blueberry plants, they must prepare the planting site and apply the necessary soil amendments. During land preparation, producers incur costs related to testing the soil; adding soil amendments and herbicides; and operating machinery to carry out these activities. After adjusting soil nutrient levels to fit blueberry needs, producers may plant and mulch blueberry bushes. Newly planted bushes mature slowly, and they don’t generate income until they produce berries. Typically, berry production starts in the third year, and by the seventh to ninth year, blueberry plants will yield very well. However, a blueberry plant may live as long as 50 years.

For a full blueberry production budget that producers may customize to fit their unique operations, go to Blueberry Cost-Return Budget. Keep in mind that this cost-return budget makes assumptions that may vary from those at your farm. For example, nutrient supplementation will depend on the site’s current conditions. Use the spreadsheet as a sample framework for a budget that you may adapt for your farm.

Crop Insurance

Although the USDA Risk Management Agency manages a blueberry crop insurance program, no Missouri counties offer the program. The Whole-Farm Revenue Protection program, a new crop insurance alternative introduced in the farm bill passed in early 2014, may enable Missouri specialty crop producers, including those growing blueberries, to have crop insurance options.

Through Whole-Farm Revenue Protection, which USDA will launch in 2015 and expand in later years, producers may access insurance coverage for specialty crops, organic crops and diversified production systems. Given current crop insurance programs, a producer choosing between a traditional commodity crop and a specialty crop may only have had insurance coverage options for the commodity crop. Initial provisions outlined in the Whole-Farm Revenue Protection program include discounted rates for diversified operations and 50 percent to 85 percent coverage levels. Specific program details will be available later.

The Noninsured Disaster Assistance program may also provide protection to blueberry growers. To be eligible for the coverage, producers must earn less than $900,000 in average adjusted gross income, pay an annual administrative fee and report losing at least 50 percent of the crop or planting 35 percent or less of the planned acreage due to disaster. The 2014 farm bill expanded the program to insure 50 percent to 65 percent of established yield at 100 percent of the average market price.

For More Information

Carriker, Gordon. n.d. Examination of Blueberry Start-up Costs. University of Missouri Extension. Ozark, MO 65721.

Demchak, Kathleen. 2013-2014. The Mid-Atlantic Berry Guide for Commercial Growers. The Pennsylvania State University, Rutgers University, University of Delaware, University of Maryland, Virginia Tech and West Virginia University.

Johnson, Renee. 2014. Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs. Congressional Research Service. Washington, DC 20540.

Morgan, Kim, John Braswell, Frank Matta, David Ingram and Blake Layton. 2010. Blueberry 2010 Fruit and Planning Budgets. Mississippi State University. Mississippi State, MS 39762.

Office of Communications. 2014. New Pilot Program Offers Coverage for Fruits and Vegetables, Organic and Diversified Farms. USDA. Washington, DC 20250.

Safley, Charles D., William O. Cline and Charles M. Mainland. n.d. Evaluating the Profitability of Blueberry Production. North Carolina State University. Raleigh, NC 27695.

Farm Financial Assessment

Farm financial performance and records are important to consider when evaluating a new alternative crop. Past financial performance, current financial condition and the capacity to take on risk influence alternative crop adoption viability. If you need external financing to kick start your entry into alternative crop production, then your lender will likely want to see a good business plan and, if available, financial and production histories.

Financial recordkeeping systems are important for tracking financial performance and making decisions. You can keep records manually through a written system or electronically through a computerized system such as Quicken or Quickbooks. For you to make sound decisions, financial records need to be kept current and accurate.

Information from financial statements and income tax records can measure a farm’s financial position and performance. The balance sheet, statement of cash flows and income statement are three important financial statements. Balance sheets communicate the financial condition of a farming business on a specific day, such as the beginning or end of the year. They share detailed information about a farm’s assets, liabilities and equity. The statement of cash flows (cash in, cash out) shows cash receipts and cash expenditures during a certain time period. The income statement reports the revenue, expenses and profit during a given time period. Historical balance sheets, statements of cash flows and income statements demonstrate how the business has performed. Additionally, these statements can be used to project the business’ future performance. IRS Schedule F and 4797 tax forms are important to existing producers for accurately conducting accrual-adjusted financial analysis.

Key financial measures also help to evaluate a farm’s financial condition. Numerous financial measures can help with evaluating a farm. Usually, these measures tend to look at the profitability, financial efficiency, liquidity and solvency of the business. Examples include return on assets, the operating expense ratio and the debt-to-asset ratio. Lenders typically use a set of key measures when they evaluate loan applicants. Key financial measures can also help with benchmarking your farm relative to other operations. Benchmarking data can be obtained through developing good relationships with other local farmers who are willing to share some of their key financial measures. Alternatively, you may try contacting state recordkeeping business associations, universities or extension services.

Many tools and spreadsheets available online may assist producers in developing financial statements, keeping records and conducting financial analysis. Additionally, accountants, bankers and other business specialists are good resources who may assist with assessing farm financial performance.

For More Information

Measuring and Analyzing Farm Financial Performance (Purdue)

Worksheets for Measuring and Analyzing Farm Financial Performance (Purdue)

Farm Finance Scorecard (Minnesota)

Establishing and Using a Farm Financial Record-Keeping System (eXtension)

Farm Analysis Solutions Tools (FAST) (Illinois)