FE837
Sample Avocado Production Costs and Protability
Analysis for Florida
1
Edward A. Evans and Ingrid Bernal Lozano
2
1. This is EDIS document FE837, a publication of the Food and Resource Economics Department, UF/IFAS Extension. Published June 2010; revised
December 2014. Please visit the EDIS website at http://edis.ifas.u.edu.
2. Edward A. Evans, assistant professor, and Ingrid Bernal Lozano, research assistant, Food and Resource Economics Department, University of Florida,
Tropical Research and Education Center, Homestead, FL; UF/IFAS Extension, Gainesville, FL 32611
The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services
only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status,
national origin, political opinions or aliations. For more information on obtaining other UF/IFAS Extension publications, contact your county’s UF/IFAS Extension oce.
U.S. Department of Agriculture, UF/IFAS Extension Service, University of Florida, IFAS, Florida A & M University Cooperative Extension Program, and Boards of County
Commissioners Cooperating. Nick T. Place, dean for UF/IFAS Extension.
Introduction
As an important tree fruit crop to the agricultural economy
of Florida, the avocado industry is second only to citrus
(NASS/USDA 2008). Annual farm gate sales are worth
about $24.4 million. At the wholesale end of the market, the
Florida avocado industry is worth upwards of $35 million
per year (P. Brooks, personal communication, 2014).
Approximately 80 percent of the crop is sold outside of the
state; hence, the industry brings in a substantial amount of
“new dollars” to the state, resulting in an overall economic
impact of close to $100 million per annum (A. Hodges,
personal communication, 2014). e industry consists of
about 7,000 acres (NASS/USDA 2013), representing about
60 percent of the total tropical fruit crop acreage. ere
are about 500 registered growers and about 30 registered
avocado handlers and shippers (A. Flinn, personal com-
munication, 2014). Over 98 percent of the avocados are
grown in Miami-Dade County. Orchard size ranges from
0.1 to over 500 acres, with 93 percent of the farms less than
15 acres (NASS/USDA 2009).
Although avocado varieties produced in South Florida look
similar due to their “green skin” and are easily distinguish-
able from the “purplish-black skin” varieties grown in
California, they dier somewhat and fall into one of three
main types: West Indian, Guatemalan, and Mexican. ese
three avocado types collectively comprise some 60 major
and minor commercial varieties that mature at dierent
times during the season in various weights and sizes. As
a consequence, yields per acre vary among producers,
depending on the production techniques and varieties
grown. ere is also a tendency of alternate-year bearing,
implying high yields one year and lower yields the next
(although, recently, the pattern is less obvious). In recent
years, there has been an upward trend with respect to
average yields. is is due in part to trees being replanted
with higher-yielding varieties and closer planting density.
is practice started aer the devastation to the industry
caused by Hurricane Andrew in 1992 and has intensied
within recent years.
is article provides an estimate of the costs and returns as-
sociated with avocado production in Miami-Dade County
and a brief analysis of the protability of the industry. Our
sample budget is based on a ve-year average marketable
yield of 16,500 pounds, or 300 bushels (1 bushel = 55
pounds), per acre, and on estimates of the eld run price.
is price represents the average price the growers receive
from the packing house for the total quantity marketed
(delivered to the packing house), assuming a pack-out
rate of about 80 percent. e budget does not make any
provision for establishment costs. If the grove were recently
established, an additional charge (amortization) should be
included in the xed costs (FE956) Although the assump-
tions made in computing the costs reect the practices of
the avocado growers in the area, the information provided
here is intended only as a guide to facilitate estimating the
2
Sample Avocado Production Costs and Protability Analysis for Florida
nancial requirements of maintaining avocado groves. Data
used in the analysis were obtained from interviews with
growers and Extension specialists.
Cost of Production
Table 1 illustrates a sample budget, indicating a total
pre-harvest cost of $2,741 per acre, or $0.17 per pound of
avocados produced (on the tree). Of the total pre-harvest
cost, operating costs totaled $1,596 and xed costs were
estimated at $1,145 per acre. e main operating costs were
fungicide, fertilizer, and mow, with shares of 25.5 percent,
22.1 percent, and 15.9 percent, respectively. is is not
surprising, given that fungicide is now the main cost item
due to the threat of Laurel Wilt Disease, a deadly fungus
that was discovered in the commercial avocado production
area in 2012. Several growers have been applying fungicide
as a spot treatment or in a prophylactic manner (P. Brooks,
personal communications, 2014). Included under xed
costs were land rent, insurance, taxes, and overhead
expenses (investment repairs and cost recovery for owned
machinery). Although the majority of farmers own the
land, an opportunity cost for the land was included equal to
the existing land rental rate ($500 per acre). is reects the
standard practice of valuing the contribution of the land.
When harvesting and marketing costs are added to
production costs, the total per-acre cost increases to
$3,797. is translates into a cost of $0.23 per pound to
produce, harvest, and market avocados ($0.064 per pound
is added to the $0.17 per pound cost of production to cover
harvesting and marketing costs). e only contributor to
the harvesting and marketing costs is the cost associated
with picking and hauling. Because the fruit is easily
bruised and scratched, avocados are hand-picked with the
aid of self-propelled, hydraulically-powered equipment
for positioning the worker in areas of the tree not easily
reached from the ground. is makes harvesting a highly
labor-intensive operation and relatively expensive. Federal
Marketing Order 915, in existence since 1954, regulates
production practices and harvesting procedures, such as
those governing the size and quality of the fruit, as well as
packing and shipping containers, and shipping dates. e
Order is aimed at increasing grower returns by promoting
orderly marketing conditions while at the same time ensur-
ing consumer satisfaction. Harvested avocados are placed
in bins and transported to packing houses.
Figure 1 illustrates the proportion of costs by category.
Harvest and marketing costs account for approximately
28 percent of the total cost of producing and marketing
the crop. e cultural cost (e.g., pruning, fertilization, and
pest control) is about 40 percent; xed or overhead cost
accounts for 30 percent; and, interest on capital is 2 percent.
Returns and Protability Analysis
Avocado yield varies from less than 11,000 pounds per acre
in a poorly managed orchard to more than 20,000 pounds
per acre in a well-managed orchard, Yield also varies by
variety. For this study, we used an average yield of about
16,500 pounds (300 bushels) per acre for a reasonably
well-managed orchard. Assuming a planting density of 100
trees per acre, this implies a yield of about 165 pounds (3
bushels) per tree. As mentioned earlier, we assumed a Field
Run Price (grower’s price) of $0.31 per pound, resulting in
gross revenue of $5,122 per acre. Subtracting the total cost
of production and marketing ($3,797) from the revenue
($5,122) gives a net return to the grower of about $1,325
per acre, or around $0.08 per pound of marketable fruit
(Table 1). is represents a return of 34.9 percent on the
total cost of producing and marketing avocados. Given that
most Florida avocado growers (93%) produce on farms less
than 15 acres and 72 percent of growers produce avocados
on farms less than 5 acres, total net return for the majority
of growers is less than $19,870 per annum. It should be
pointed out that many of the growers who own their land
tend to ignore the xed costs and instead focus on the gross
margin as their prot (i.e., the dierence between total
revenue and operating and marketing costs). Following
such an approach implies a return of about $0.15 per pound
($0.31 – $0.10 – $0.06 = $0.15), or $2,470 per acre. While
such a return appears more favorable, it still may be insuf-
cient for a 10-acre family farm. It can be assumed that
some growers remain in the industry for land speculation
and have other sources of income.
Figure 1. Proportion of costs
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Sample Avocado Production Costs and Protability Analysis for Florida
Sensitivity Analysis
Table 2 presents a sensitivity analysis of net returns to a
grower on a per-acre basis, while Table 3 presents a similar
analysis conducted on the basis of gross margin (gross
prot). In the best-case scenario where both price and yield
are assumed to increase by 10 percent, net return per acre
would increase from $1,325 to $2,068. In the worst-case
scenario where both price and yield decline by 10 percent,
net return per acre would decrease from $1,325 to $467 per
acre. Other combinations of changes of prices and yields
and their impact on net return per acre are shown in Table
2 as well. However, it should be noted that at the industry
level, a sizeable increase in production usually results in a
decreased in the price received by the growers. In general,
it can be assumed than a 10-percent increase in output by
the industry (aggregate) is likely to result in a 4.3 percent
price reduction, other factors remaining constant. In
addition, promotion of the health benets associated with
the consumption of avocados is increasing the demand for
avocados and could serve to lessen the price impact result-
ing from increased supply of avocados. e information
presented in Table 3 can be interpreted in a similar manner
to that presented in Table 2, noting that this is with respect
to gross prot which ignores the xed cost estimates.
Concluding Remarks
Our estimate of total annual production cost (including
harvesting) for avocados in South Florida is $3,797 per acre,
or about $12.66 per bushel. With a gross revenue of $5,122
per acre ($17.07 per bushel), this implies a net return to
the grower of about $1.325 per acre, or $4.42 per bushel.
Since most growers sell their crop to packing houses, they
are somewhat restricted in their ability to inuence the
price they receive; however, they can adopt practices that
will increase their pack-out rates and, consequently, the
protability of their operations. e recent threat from the
discovery of the Red Ambrosia Beetle and Laurel Wilt Dis-
ease within the major avocado production areas is already
having a negative impact on the cost of production. e
continued spread of this dealy disease is of grave concern
since any major addition to production costs associated
with the management of this pest and disease could easily
cause many of these operations to become unprotable.
References
De Oleo, B., E.A. Evans, and J.H. Crane. 2014. Establish-
ment cost of avocados in South Florida. EDIS #FE956. UF/
IFAS Extension, Gainesville, FL.
NASS/USDA. 2008. Noncitrus Fruits and Nuts: 2008
Preliminary Summary, FrNt1-3(09)a. National Agricultural
Statistic Service, United States Department of Agriculture,
Washington, D.C. http://usda.mannlib.cornell.edu/usda/
nass/NoncFruiNu//2000s/2009/NoncFruiNu-01-23-2009_
revision.pdf
NASS/USDA. 2009. 2007 Census of Agriculture, Florida―
State and County Data, Volume 1: Graphic Area Series, Part
9. National Agricultural Statistic Service, United States
Department of Agriculture, Washington, D.C. http://
www.agcensus.usda.gov/Publications/2007/Full_Report/
Volume_1,_Chapter_1_State_Level/Florida/v1.pdf
NASS/USDA. 2013. Noncitrus Fruits and Nuts: 2013
Summary, 1948–2698. July 2014. National Agricultural
Statistic Service, United States Department of Agriculture,
Washington, D.C. http://usda.mannlib.cornell.edu/usda/
current/NoncFruiNu/NoncFruiNu-07-17-2014_revision.
pdf
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Sample Avocado Production Costs and Protability Analysis for Florida
Table 1. Sample budget for avocado production
Item Quantity Value per Acre Value per Pound
(pound) ($/acre/year) ($/pound)
REVENUE
Marketable yield (pounds/acre) 16,500
Field run price 0.31
Total revenue 5,122
OPERATING COSTS
Fertilizer 352
Fungicide 407
Herbicide 136
Insecticide 125
Pruning 150
Irrigation 96
Mow, vine, miscellaneous 254
Interest on operating capital 5% 76
Total operating cost 1,596 0.10
FIXED COSTS
Cash overhead
Insurance 100
Taxes 100
Non-cash overhead
Land rent 500
Other overhead 445
Total xed cost 1,145 0.07
TOTAL PRE-HARVEST COST 2,741 0.17
HARVEST & MARKETING COSTS
Pick and Haul — $0.064/pound 1,056 0.06
Total harvest and market cost 1,056 0.06
TOTAL COST 3,797 0.23
GROSS MARGIN 2,470 0.15
ESTIMATED NET RETURNS 1,325 0.08
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Sample Avocado Production Costs and Protability Analysis for Florida
Table 2. Sensitivity analysis, net returns per acre
Yield Wholesale Price
(pounds/acre) (dollars/pound)
0.28 0.29 0.31 0.33 0.34
(–10%) (–5%) (base) (+5%) (+10%)
14,850 (–10%) 467 615 918 1,209 1,358
15,675 (–5%) 645 802 1,115 1,429 1,585
16,500 (base) 823 988 1,325 1,648 1,813
17,325 (+5%) 1,001 1,174 1,521 1,867 2,041
18,150 (+10%) 1,179 1,361 1,724 2,087 2,068
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Sample Avocado Production Costs and Protability Analysis for Florida
Table 3. Sensitivity analysis, gross margin per acre
Yield Wholesale Price
(pounds/acre) (dollars/pound)
0.28 0.29 0.31 0.33 0.34
(–10%) (–5%) (base) (+5%) (+10%)
14,850 (–10%) 1,512 1,760 2,057 2,354 2,503
15,675 (–5%) 1,790 1,947 2,260 2,574 2m730
16,500 (base) 1,968 2,133 2,470 2,793 2,958
17,325 (+5%) 2,146 2,319 2,666 3,012 3,186
18,150 (+10%) 2,324 2,506 2,869 3,232 3,413
