Financial

Financial factors are important to consider when evaluating an alternative crop. For elderberries, producers should understand the possible risk and return associated with establishing and maintaining elderberries plants and marketing their fruit. Producers may ask several questions when assessing elderberry production’s financial viability. Is the selling price high enough to cover my production costs and provide an economic return? Are elderberry market opportunities accessible and stable? Is crop insurance available? These and other key financial issues should be researched thoroughly when determining whether to proceed with elderberry production.

Selling Prices

Like for all crops, selling prices influence elderberry production’s profitability potential. Typically, producers sell elderberries based on price per pound. Prices that growers receive depend on the selected marketing strategy and target market. The following table shares estimated fresh elderberry prices collected from survey data. Based on these data, destemmed berries command a strong premium relative to berries with stems. For example, wineries may pay as much as 10 times more for elderberries without stems. However, wineries may pay a higher premium for destemmed berries than other buyers, such as those purchasing elderberries to make pies. You-pick berry prices average $1.25 per pound.

Estimated Fresh Elderberry Prices

Production Costs

Similar to many other horticultural fruit crops, elderberries are perennials. Growers must allow plantings to mature before they can begin harvesting fruit and earning revenue. If plants perform well, they may yield some fruit during the year after planting. However, achieving full production takes three years. Production costs include those incurred during plant establishment, and in subsequent years, elderberry producers will incur management and harvesting costs.

Establishment costs will vary depending on factors such as site preparation practices, mulch applied, irrigation used, plant material grown and method chosen to plant the elderberry plantings. Management costs also will vary depending on a grower’s preferences. Possible costs include those related to mulching, providing fertilizer, applying compost, pruning plants, managing weeds and deterring deer. Harvesting preferences – either by hand or using a mechanical harvester – will also influence total operating costs.

To access an elderberry production budget, go to Elderberry Cost-Return Budget. Using this decision model as a template, producers may customize the revenue and cost assumptions to fit their unique operations and estimate the financial viability of planned elderberry operations.

Crop Insurance

Although elderberry crop insurance programs haven’t been available, the most recent farm bill, passed in early 2014, includes provisions that may open opportunities to insure an elderberry crop. Through the Whole-Farm Revenue Protection program, 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. 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 elderberry 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

Byers, Patrick L., Andrew L. Thomas, Mihaela M.Cernusca, Larry D. Godsey and Michael A. Gold. 2014. Growing and Marketing Elderberries in Missouri. Columbia, MO 65211.

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

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

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)