Analyzing Production Costs of Organic Hazelnuts in Oregon

Progress report for OW21-367

Project Type: Professional + Producer
Funds awarded in 2021: $73,124.00
Projected End Date: 06/30/2024
Host Institution Award ID: G364-21-W8614
Grant Recipient: Oregon Tilth
Region: Western
State: Oregon
Principal Investigator:
Tanya Murray
Oregon Tilth
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Project Information

Abstract:

A recent market study identified strong potential to grow Oregon’s nascent organic hazelnut industry, advancing the crop as an economically and ecologically rewarding opportunity for more small farmers. This project aims to improve the viability of organic hazelnut enterprises by helping producers better understand their production costs and improve financial decision-making. PI Tanya Murray of Oregon Tilth will work with a group of six to ten producers from the Oregon Organic Hazelnut Cooperative (OOHC) to develop and pilot an approach for determining and analyzing production costs. The team will develop a costing model with input from an agricultural economist with expertise in tree crop enterprise budgeting. Murray will coach and support producers to use the approach to track and calculate costs of production activities on their own farms over two seasons; and then evaluate how various changes to practices, labor, equipment, scale, etc., can increase profitability. The pilot will inform refinement of the approach and development of a sharable model and user guide. Resources will be electronically published and the project will be shared with producers at Nut Growers’ Society Annual winter meetings and OOHC summer orchard tours. An educational webinar will be developed for Extension and other service providers to learn how to support organic nut producers using the approach. The project will help increase the viability of organic hazelnut enterprises, build interest in transition, and grow the industry’s role in Oregon’s farming future.

Project Objectives:

1. Develop a production costing model, time study protocols, and data collection requirements for organic hazelnut enterprises.

2. Develop and implement on-farm data collection and recordkeeping processes that producers can use with the costing model.

3. Test the feasibility and effectiveness of the costing approach through a pilot on six to ten organic hazelnut farms.

4. Generate results from analysis that producers expect to support improved management and increased profitability of their enterprises.

5. Refine the cost analysis approach and develop user guidance; broadly disseminate resources and lessons learned to other organic hazelnut and other organic nut producers, as well as those interested in transition.

6. Increase Extension agents' and other service providers’ knowledge of and interest in using the resources to support organic hazelnut and other organic nut producers to conduct their own cost analysis.

Timeline:
April-June 2021 
Kickoff meeting.
Costing model and data collection process developed. (Objective 1). PI leads design. Producers and technical advisor provide input.
July-September 2021
Early summer meeting. Discussion/planning re: on-farm recordkeeping systems. (Objective 1,2)
Producers establish recordkeeping systems with guidance from PI. (Objective 2)
Introduce project at Summer Nut Tour. (est. 100 people) (Objective 5)
Late summer meeting. Finalize data collection plans/timeline; recordkeeping details. Agree on coaching/ communications practices. 
October 2021-October 2022
Producers conduct time studies; collect data throughout season. PI provides assistance & support (weekly reminders, monthly check-ins.)(Objective 3)
July 2022
Project update at Summer Nut Tour (est. 100 people) (Objective 5)
October 2022-October 2023
Producers conduct time studies; collect data throughout season 2. PI provides ongoing support (weekly reminders, monthly check-ins.)(Objective 3)
January-March 2023
Producers conduct calculations/analysis of Season 1 data. PI provides ongoing support. (Objective 3,4)
PI refines model/process with input from producers. (Objective 1,5)
PI, AR, producers table at winter NGS meeting (est. 500 people)(Objective 5)
July 2023
Project update at Summer Nut Tour. (est. 100 people)(Objective 5)
January-March 2024
Producers conduct calculations/analysis of Season 2 data. PI provides support. (Objective 3,4)
PI finalizes model; develops user guidance; resources published on websites. (Objective 5,6)
Resources publicized through communications channels, partner networks. (Objective 5,6)
PI & AR plan, coordinate, conduct panel presentation at winter NGS meeting, with participation from other producers. (est. 200 people)(Objective 5)
PI develops & leads webinar for service providers. Producers contribute & participate. (est 100-200 people)(Objective 6)
PI leads evaluation and reporting activities.
OOHC continues to share lessons learned with members & other producers, increase knowledge and resources, build support system, identify next steps & needs.

Cooperators

Click linked name(s) to expand/collapse or show everyone's info
  • Margaret Bengry - Producer (Researcher)
  • Sarah Brown - Technical Advisor (Educator)
  • Jasha Karasek - Producer (Researcher)
  • Ben Larson - Producer (Educator and Researcher)
  • Kirk Reinecke - Producer (Researcher)
  • Mary Stehman - Producer (Researcher)
  • Lori Stole - Producer (Researcher)

Research

Materials and methods:

Research will investigate how organic hazelnut producers can analyze their costs of production to increase the profitability of their enterprises. This study is a form of farm management economic analysis; it aims to equip farmers to better understand how their businesses are performing and how performance could be improved. Standardized financial tools can be helpful but limited for small-scale organic farms. For instance, conventional enterprise budgets may not reflect key cost considerations associated with different production techniques, processing requirements, and labor allocation. It's important for producers to look at costs in the unique context and conditions of their operations, using their actual, current costs to produce accurate, meaningful analysis. The research plan will focus on designing and testing an approach that can fill this need.

Once developed, the approach can be used by organic hazelnut growers and other organic tree nut producers as a tool for management and decision-making. It can help them calculate costs, understand how different production activities affect profitability, analyze the impact of potential changes to their systems and scale, and make choices leading to better financial outcomes. Ultimately, our goal is to help these producers grow healthy, sustainable farm businesses, inspire others to transition, and build a thriving sector with long-term economic opportunities and ecological benefits for the region. To accomplish this goal, research objectives and methods will include:

  1. Develop a production costing model, time study protocols, and data collection requirements for organic hazelnut enterprises. The PI will design the model with extensive input from the producer team and the technical advisor. The model will include all relevant fixed and variable cost categories; including labor, machinery, and materials broken into key production activities. WSU agricultural economist Suzette Galinato will provide technical advising to the project. Suzette is the Assistant Director of WSU’s IMPACT Center, where her focus includes cost analysis and enterprise budget development for regional tree and specialty crops. Suzette will be contracted for ten hours of input and review on design and development of the cost analysis model. (Suzette will not be a cooperator but she will receive a contract service fee. A letter of agreement and scope of work are attached in Letters of Support. A CV is attached in CVs.)

    Time studies will be developed as short exercises using stopwatches or cellphones to measure time to complete tasks under standard conditions, e.g., “minutes to mow one acre of orchard floor @ two passes of flail mower per row.” Producers will then track tasks throughout the season, for example, recording the number of times mowing is performed. At season’s end  the data can be extrapolated to calculate total time spent per activity and estimate the cost of that activity. An Excel-based spreadsheet template will be created for data input and calculations.

  2. Develop and implement on-farm data collection and recordkeeping processes that producers can use with the costing model. Each producer will identify existing recordkeeping systems and/or develop systems that can be used to capture the necessary data on their farm. Producers will determine the data to be tracked, how, with what equipment (whiteboards, iPads, voice memos, etc.), where, when, by whom, etc. Our past experience highlighted the importance of establishing data collection and recording systems prior to the start of the season. It’s also critical that these systems are practically integrated into farm operations and employees trained so data can be consistently and accurately captured. The PI will provide guidance and suggestions to help each producer establish efficient systems prior to the start of data collection in fall 2021.  

  3. Test the feasibility and effectiveness of the costing approach through a pilot on six to ten organic hazelnut farms. Producers will collect two seasons of data, beginning with post-harvest mowing and fall fertilization in Fall 2021 and ending with the Fall 2023 harvest. The PI will conduct regular check-ins with participants via phone and email, helping them stay on track, make adjustments, and troubleshoot if necessary. The group will also meet several times (in-person or virtually) to discuss progress and share insights. Producers will calculate and analyze the cost data collected from the 2022 season in the winter of 2023. The PI will help producers calculate costs and incorporate revenue data for a complete picture of profitability. Throughout the pilot we’ll identify key considerations for data collection, challenges that arise, and ideas to improve the process.

  4. Generate results from analysis that producers expect to support improved management and increased profitability of their enterprises. After completing calculations on the first year of data, we expect producers to have a more thorough, detailed understanding of production costs, especially labor costs associated with specific activities, and how these costs are driving profitability. With this analysis they can explore the potential effects of various changes to production methods, scale, equipment, timing, and labor strategies. Some may compare costs between different practices, for example, hand-cutting suckers vs. mowing with a side-cutter, or sweep vs. "catch and shake" harvesting. Producers with more than one variety may compare costs associated with the management requirements of each. Costs of conservation activities such as hedgerows and cover crops can also be incorporated and evaluated. Growers might also examine processing costs, weighing the advantages of investing in their own wash and dry lines or contracting for those services. On the marketing side, they can analyze packaging, delivery, and sales costs in the context of their revenue strategies; for instance, looking at how substituting a portion of retail sales with wholesale accounts may lower costs and increase returns.

    While we don’t expect producers to realize major increases in profitability during the short project time frame, we anticipate they’ll report having thought through the implications of their analysis and identified steps they will take to strengthen their businesses and improve the bottom line. They can begin to implement these as they continue to track data for a second season.

Project location: Participating producers operate diverse organic hazelnut farms in the Willamette Valley. Farms include the oldest organic hazelnut orchard in OR, dating back to 1965, as well as several that will soon harvest their first crops. Many are growing newer varieties designed for resistance to EFB, which devastated Northwest orchards beginning in the 1960s. Producers' farms are described above, in "Agricultural Business/Operation of the Project Members." Other producers have expressed interested in participating; an additional two to four farms may be added before the project begins. 

Participation Summary

Educational & Outreach Activities

6 Consultations

Participation Summary:

8 Farmers
Education/outreach description:

Per our Project Activity and Deliverable Timeline as detailed in the Scope of Work for this project submitted with the Sub-recipient Commitment Form on June 1st 2021, the following education activities have taken place:

Ben Larson, Project Cooperator (Educator and Researcher) gave a short presentation about the project at the Summer Nut Meeting on August 14th 2021.               

Organic Hazelnuts WSARE Project Flier

On Sept 8th we held our Organic Hazelnut Cost of Production Project Kick-Off Meeting. Seven farms were in attendance, with an eighth farm participating in an individualized make-up session. Key agenda topics for this meeting included Project Goals; Participation Requirements; Timeline; and Initial Discussion of Recordkeeping and Costing Approach. Farmers identified initial activities for time study. They focused on experimenting with time studies in Sept-Nov. On Dec 8th we held a second meeting to follow-up and further refine the time study recordkeeping process. Personalized recordkeeping worksheets were created for each farm for tracking time studies on production activities. The PI conducted individual meetings with farmers in the winter of 2022 to go over their specific questions about the recordkeeping process. The PI will be conducting another round of follow-ups with each farm individually in the spring of 2022 to provide on-going accountability and to gather input from the farmers about the design of the costing process. There is interest in measuring some of the non-economic benefits of organic production. This topic and establishment costs will be explored with project advisor this spring as we develop the initial cost calculation tool. A presentation on the project will take place in the summer of 2022 at the OOHC Summer Tour. 

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.