Some fruit crops have already been harvested, more are to come. This is the time of year when growers find out how they are travelling compared to budget.
The die is cast: money has been spent growing the crop, fruit quality is what it is and prices are what they are.
A budget is purely a plan; a best-guess estimate into an uncertain future to finance objectives for the business and inform the grower and his banker.
However, despite the uncertainty that comes with budgets, this is the time of year when budgeting skills can be reviewed and refined in preparation for development of the next budget in a few months’ time.
Basic thinking
I have prepared plenty of budgets, listening to growers’ views for their crops and helping them turn their thoughts into a financial plan.
Although not a given, costs tend to be easier to budget than income.
Fertiliser plans can usually be simply described, and this year’s spray diary can be reviewed to determine what costs might occur in the coming year.
The largest cost is labour, but a fair proportion of this may be devoted to permanent staff, whose costs are reasonably well-known, or those of pruning and thinning contractors.
The unit rate of pickers can usually be well-estimated, but the number of bins on which this is based is harder.
Income—a challenging item
Income is usually the most challenging budgetary item.
Income depends on the number of bins picked of each fruit, and the return that will be received for each bin.
Seasonal and market conditions are substantially outside our control and, after a reasonable amount of time devoted to the process, spending more and more time trying to budget income doesn’t make the answer any more achievable.
Given that most of us want the coming season to be a good one, a degree of ‘glass half full’ thinking enters the equation—after all, the alternative is painful. Unfortunately this approach can lead to an over-optimistic view of the future.
Review timelines
In the budget review process there are a couple of important timelines.
The first occurs just when harvest is about to start and, depending on your crops, this will be different for groups of growers.
Fruit businesses dedicated to stonefruit receive their income in a relatively compact time, over a few months.
Fruit businesses that also grow pome fruit have a slow burn; those months of waiting for coolstores to empty and last season’s crop income to be finalised. This makes income forecasting more uncertain.
continues next moth
See Tree Fruit February 2014
