;

User Guide of the

Hazelnut Production
Costing Tool
The Hazelnut Production Costing Tool was developed by Tanya Murray, Farm Viability Specialist at
Oregon Tilth, with assistance from Rich Schwartz, Principal Consultant at Alder Street Consulting.

This material is based upon work that is supported by the National Institute of Food and Agriculture,
U.S. Department of Agriculture, under award number 2020-38640-31523 through the Western
Sustainable Agriculture Research and Education program under project number OW21-367.
USDA is an equal opportunity employer and service provider. 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.
Table of Contents

Table of Contents ...............................................................................................................................2

1. Purpose and Overview of the Costing Tool ......................................................................................3
1.1 Purpose ................................................................................................................................................ 3

1.2 Costing Approach Overview................................................................................................................. 3

2. Instructions for Using the Costing Tool: Single Year Hazelnut Production ..........................................5
2.1 General Instructions: Downloading, Saving, Layout and Rules ........................................................... 5

2.2 Instructions for Using the Activity Rates Worksheet ........................................................................... 6

2.3 Instructions for Using the Machinery Cost Estimator Worksheet ....................................................... 9

2.4 Instructions for Using the Machinery-Implement Costs Worksheet .................................................11

2.5 Instructions for Using the Input Costs Worksheet .............................................................................11

2.6 Instructions for Using the Base Year Cost Analysis Worksheet .........................................................12

2.7 Using Cost and Return Results ...........................................................................................................16

3. Instructions for Using the Costing Tool: Multi-year Analysis ........................................................... 18

4. Other Considerations.................................................................................................................... 22
4.1 Historical (Net) Returns (Establishment Cost) ...................................................................................22

4.2 Depreciation/Replacement Costs ......................................................................................................23

Appendix A: How to Conduct Time Studies ....................................................................................... 26

Time Study Considerations ......................................................................................................................26

Capturing Time Data ................................................................................................................................27

Appendix B: Sample Activities .......................................................................................................... 29

Appendix C: Case Studies ................................................................................................................. 31
Case Study 1: Projecting Future Profitability ...........................................................................................31

Case Study 2: A What-If Scenario ............................................................................................................31

Case Study 3: Considering Transition to Organic Production ..................................................................33

1. Purpose and Overview of the Costing Tool

1.1 Purpose
Hazelnut growers can use this tool to estimate their costs of production. This information can
be used to help growers better understand their cost structure and explore how changes to
production practices, yields and price will impact net returns and long-term viability.

1.2 Costing Approach Overview

This costing tool allows growers to account for costs that are directly related to hazelnut
production. In this costing approach, production includes the cost of the labor required to
produce hazelnuts, the cost of the machinery used in hazelnut production and the cost of other
inputs such as materials and products that are applied to the orchard.

Growers can combine the cost results from this tool with business level costs, including
marketing costs and general business costs, to evaluate the net returns for their business.
Growers can also account for the cost of replacing machinery and infrastructure, establishment
costs, and opportunity costs for a more complete picture of long-term viability.

Labor Costs
Labor costs capture all the work done by people to establish and care for an orchard and
harvest nuts. Labor costs are the product of labor hours and the average cost per hour of labor
for your operation. In this costing process, estimating labor costs starts with identifying the
labor activities involved in producing hazelnuts. Once you’ve identified your labor activities you
will determine a rate for each activity. The labor activity rate is the amount of time (minutes or
hours) the activity takes per orchard unit (such as acre or tree). Activity rates are applied to the
number of acres or trees that the activity impacts and then multiplied by the number of
occurrences of the activity for a single production year to get the labor hours for each labor
activity. The labor hours for each labor activity get multiplied by the average cost of labor to get
the labor cost for the labor activity. Labor costs are added together to get the total labor cost
for the orchard for the production year being analyzed.

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Machinery Costs
If you use machinery to carry out a production activity, you will need to account for the cost of
using that machinery. The first step for estimating machinery costs is to identify what it costs
to use each tractor and implement combination. Next you will need an estimate of the number
of hours that each tractor and implement combination is used for each labor activity. In this
costing process, we assume that all machinery is operated by one person. This means that the
machinery hours for any labor activity that involves machinery will be the same as the labor
hours for that labor activity. Machinery hours get multiplied by the cost per hour of use for the
corresponding machinery to get the machinery cost for the labor activity. Machinery costs are
added together to get the total machinery cost for the orchard for the production year being
analyzed.

Input Costs
You will also need to account for the costs of inputs, other than labor and machinery, that are
used in hazelnut production. Typical inputs you will account for will be materials and products
that are applied to the orchard to manage crop nutrition and soil fertility and to prevent and
control weeds, pests, and disease. Estimating input costs starts with identifying the inputs
involved in producing hazelnuts and the application rate for each input. In the same way the
labor activity rate describes the quantity of labor (measured in minutes or hours) relative to an
orchard unit, input application rates describe the quantity of the input you are applying relative
to an orchard unit (acres or trees). The quantity of the input might be measured in pounds,
tons, gallons, etc. and will depend on the input being accounted for.

Once the quantity of the input relative to an orchard unit is identified, the next step will be to
determine the cost of the input per orchard unit. The cost of the input per unit (e.g. price per
pound or gallon) combined with the application rate (e.g. pounds or gallons per tree or acre)
yields the cost of the input per orchard unit. This cost is multiplied by the number of acres or
trees that the input is applied to and multiplied again by the number of applications of the
input for a single production year to get the total cost for each input. Adding up the cost for
each input gives you the total input cost for the orchard for the production year being analyzed.

Total Variable Costs

The sum of the total labor cost, the total machinery cost and the total input cost equals the
total variable cost for the hazelnut orchard for the production year being analyzed. (This value
is also referred to as the “operating cost.”)

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Results
Once you’ve estimated the Total Production Costs for the production year, you can calculate
the Total Revenues for the same production year by using estimates for yield and price.
Comparing the Total Revenues for the production year to the Total Production Costs allows you
to evaluate the returns for that production year. You can then use these results as the starting
point for analyzing the net returns for the business overall and for creating a multi-year
analysis.

2. Instructions for Using the Costing Tool: Single Year

Hazelnut Production

2.1 General Instructions: Downloading, Saving, Layout and Rules

Download the Tool and Sample

The Hazelnut Production Costing Tool is a Google workbook (spreadsheet). You can access the
Costing Tool here. To use the costing tool, you will need to make a copy of the original
workbook (which is Read Only). If you would like to use the costing tool online you can keep it
as a Google workbook by selecting File/Make a Copy from the menu. Or, if you prefer to use the
costing tool in Microsoft Excel you can download it by selecting File/Download/Microsoft Excel
from the menu.

We have also provided a version of the tool that contains sample data, which you can view
here. You can use this version as a model to follow when entering data from your orchard.

Costing Tool Layout and Rules

The Costing Tool workbook is made up of the following seven worksheets:

• Instructions
• Activity Rates
• Activity Reference Rates
• Machinery Cost Estimator
• Machinery-Implement Costs
• Input Costs
• Base Year Cost Analysis

Use the tabs at the bottom of the workbook to access the different worksheets.

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Here are some general rules for using the Costing Tool:

• Only enter information into cells that are white.

• DO NOT ENTER INFORMATION INTO GRAY CELLS.
• DO NOT EDIT FORMULAS IN GRAY CELLS.
• DO NOT INSERT ROWS.
• DO NOT SORT.
• When you see a small arrow in a cell, this means there is a dropdown list. Click on the
arrow to open the menu. Click on an item in the list to select it.

Google Sheets:

Microsoft Excel:

• The first column/s on the following worksheets are frozen to allow for scrolling to the
right without losing track of the record you are entering information about: Activity
Rates, Machinery Cost Estimator, and Base Year Cost Analysis.

The next section has detailed instructions for using each of the worksheets.

2.2 Instructions for Using the Activity Rates Worksheet

Use this worksheet to enter information that will be used to calculate the labor activity rates for
each of the different labor activities that go into producing hazelnuts for your operation. To
complete this worksheet, you will need to estimate the time it takes to complete the various
production activities, either through estimation or by conducting time trials.

Step 1: Determining Labor Activities

Start by thinking about all the things that you and the other people that work in your orchard
will do over the course of the year to produce hazelnuts. It will likely be easiest to think about
these steps in the order that they take place. Each of these steps is a labor activity. Enter the
name of each labor activity in column A (“Labor Activity”). Each labor activity that you enter
must be unique. For example, if you both weed the orchard by hand and weed it mechanically
you will need separate entries for each (e.g. “Hand Weeding” and “Mechanical Weeding”).

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Similarly, if you wish to capture different pruning times for younger vs. more mature trees you
could have separate entries for “Pruning Younger Trees” and “Pruning Mature Trees”, just be
sure they have unique names.

For an idea of what activities you might want to include see Appendix B: Sample Activities

Step 2: Selecting Orchard Units

Next select the orchard unit from the dropdown list in the column called “Orchard Unit” that
corresponds with each labor activity. The orchard units you will choose from are “Tree”, “Acre”
and “Event”. You can use whichever fits best with the corresponding activity, with Tree and
Acre most appropriate for activities whose effort would increase by changing the planting
density of the orchard or changing the size of the orchard, and Event most appropriate for
activities that take the same amount of time regardless of the number of units impacted by the
activity, such as equipment setup and travel to the orchard. So, for example, you might select
the Tree unit for pruning and mulching activities, the Acre unit for mowing and harvesting
activities, and the Event unit for setup and travel activities.

Step 3: Calculating Activity Rates

Once you’ve identified labor activities and orchard units, next you will enter the information
necessary to calculate the activity rates for each labor activity. There are a few options for how
you might approach this.

Option 1: Estimate Based on Experience

It’s possible that you might be able to estimate the amount of time a labor activity takes
relative to some number of trees or acres (or for a single event of the labor activity) based on
your experience with doing these tasks in the past.

For example, you might think back on your experience pruning your orchard and estimate that
it takes you about 4 hours to prune all 216 trees in your orchard. To use this as the estimate for
your activity rate for the labor activity pruning, convert the hours to minutes by multiplying the
total hours by 60. Enter the total minutes you’ve estimated that pruning takes into the column
“Total Minutes”. In this case, you would enter “240”. Next enter the total number of orchard
units you’ve estimated that you prune in that amount of time. In this case, the orchard unit is
Tree, and you’d enter “216” for the “Total Orchard Units”.

Labor Orchard Total Total Orchard Rate

Activity Unit Minutes Units 1
Pruning Tree 240.0 216 1.1
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Alternatively, if it is easier to estimate the time it takes to prune a single tree, you could simply
enter your time estimate (in minutes) and enter “1” for the number of trees pruned.

Labor Orchard Total Total Orchard Rate

Activity Unit Minutes Units 1
Pruning Tree 2.5 1 2.5

Option 2: Estimate Based on Other Growers’ Experience

If you don’t have a good sense of how long an activity takes you based on your own experience,
you can refer to the Activity Reference Rates worksheet in the Costing Tool to look at the
activity rates that we’ve gathered from a few Oregon organic hazelnut growers and hazelnut
enterprise budgets published by agriculture extension researchers. If you use the reference
rates provided, be very careful to select the same orchard unit on the Activity Rate worksheet
as is used for the labor activity on the Reference Rate worksheet.

Option 3: Estimate Based on Time Studies

Although rough estimates are reasonable starting points, using activity rates that are based on
actual measurements of how long different labor activities take YOU will give you better
information about what it costs YOU to produce hazelnuts. Conducting time studies during the
upcoming growing season is a great way to accurately capture this information. See Appendix
A: How to Conduct Time Studies for suggestions on how to get started.

Entering your time study records into the Activity Rates worksheet is the same regardless of
whether your information is coming from personal estimates, reference rates or time trials.
Simply enter the Total Minutes and the Total Orchard Units for the labor activity and the tool
will calculate the activity rate for you.

Note: when you enter time study records, it’s important that you work from left to right across
the spreadsheet, entering the information so that Rate 1 is calculated first, Rate 2 is calculated
second and Rate 3 is calculated third.

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Step 4: Establishing Base Activity Rates
Finally, you need to set the Base Rates (in minutes per orchard unit) for each of the activities in
Column M. These are the values which will be used by the tool as the starting point for
calculating labor costs.

Once you’ve entered at least one estimate or record of the total time and total orchard units
for a labor activity, the tool will calculate an “Average Rate” for the activity. Scroll right to see
the “Average Rate” (Column L). The average rate will update as you add more estimates or time
study records. (Note: the tool will only calculate this value correctly if the rate data is entered
starting with Rate 1 and continuing with Rate 2 and Rate 3 in order.)

Next, review the calculated average rate and consider whether it seems too fast, too slow, or
about right. If the average rate seems just right, simply copy the value from the Average Rate
column to the Base Rate column. If the average rate seems too slow or too fast, you can adjust
it by entering a number that is larger or smaller – simply enter the rate you want to use in the
Base Rate column.

The Base Rate set here will be the initial rate value suggested by the tool when doing labor cost
calculations. However, you will have another opportunity to adjust this rate later in the process
to reflect that rates might change as the orchard matures or conditions change.

2.3 Instructions for Using the Machinery Cost Estimator

Worksheet

Use this worksheet to estimate the costs of operating and maintaining the farm machinery you
use to produce hazelnuts. In preparation for completing this worksheet you will need to know
the PTO horsepower for any machine that has a PTO, and you will need to estimate the repair
and maintenance costs of your machines.

Step 1: Build the Machinery List

Start by entering the name of each tractor, self-propelled machine and implement in column A
“Machinery Name”. Enter each piece of machinery separately here. Later, when you complete
the Machinery-Implement Costs worksheet, you will combine implements with the machinery
that powers them.

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Step 2: Fuel and Lube Estimates
Enter the cost (in dollars) for a gallon of fuel in cell D1. Next, we’ll calculate the estimated fuel
and lube cost per hour of operation based on the PTO horsepower. For any machinery that has
a PTO, enter its PTO Horsepower in column B. From this value the tool will estimate the Fuel
Use per Hour (column C) and generate a Fuel and Lube Cost per Hour (column D) 1.

This value will be multiplied by 0.044 to generate the estimated Fuel Use per Hour (column C)
and multiplied again by the fuel cost, adjusted for lube and oil usage to yield an estimated Fuel
and Lube Cost per Hour (column D).

If machinery does not have a PTO and doesn’t use fuel leave column B blank.

If you would prefer to use an alternative approach for estimating fuel, lube and oil costs you
can enter that value in column E (“Alternate Fuel Cost per Hour”). You can also use this column
to account for the cost of powering equipment with electricity or other energy sources.

Step 3: Repair and Maintenance Costs

In this step you will account for repairs and maintenance of your machinery. If you have good
records on what repair and maintenance has cost you in the past, you might use this
information to predict what your repair and maintenance costs will be in the future.
(Remember, however, that repair and maintenance costs are likely to increase as machinery
ages.) If you don’t have good records, you might refer to machinery owner’s manuals to
estimate maintenance costs based on the suggested maintenance schedule. Consider including
an extra amount for unexpected repairs.

Regardless of the approach, you will need to enter a total repair and maintenance cost for a
given time period into column F. The easiest time periods would be one growing season or one
calendar year. Then in column G you should enter the total number of hours the machine was
in operation during this same time period. Note for machines such as your tractor the total
hours of use might include time on crops or activities other than hazelnut production.

Once you have completed Steps 1-3 above, the total fuel, lube, repair and maintenance costs
will be automatically calculated and shown in Column H. For now, do not complete the
Replacement Cost information on the worksheet. This will be covered later in Section 4.2.

1See Penn State Extension’s publication on Managing Machinery and Equipment for more information on
converting PTO to fuel usage. Lube and oil cost calculations are based on Iowa State Extension’s publication on
Estimating Farm Machinery Costs.
10
2.4 Instructions for Using the Machinery-Implement Costs
Worksheet

Use this worksheet to list the hourly costs of using your tractors, tractor-implement
combinations, and other machinery based on calculations made in the Machinery Cost
Estimator worksheet in section 2.3.

Step 1: Generate Machinery-Implement List

Start by listing all the machines or machine-implement combinations you use for your
production activities in Column A. (Begin listing your machines on line 3; be careful not to
delete the entry “None” on line 2.) This would include your tractors, tractor/implement
combinations, self-propelled machines, and motorized hand-held tools such as weed whackers.
For tractor/implement combinations you will want to create an entry name that combines the
two, e.g. “Tractor + 8’ Brush Flail”. Each entry in Column A must be unique. For example, you
can only enter the name “Tractor” once. If you use two different tractors, give them different
names.

Step 2: Set a Cost per Hour

In Column B enter the estimated “Operating Cost per Hour of Use” value that was calculated in
Column H of the Machinery Cost Estimator. For tractor/implement combinations (such as a
Tractor + Flail Mower) you will need to add together the Operating Costs per Hour of Use for
the tractor and the implement. For example, if the Tractor cost was calculated at $15.00/hr and
the Flail Mower cost was calculated at $5.00/hr you would enter $20.00 in column B for the
Tractor + Flail Mower entry.

2.5 Instructions for Using the Input Costs Worksheet

Use this worksheet to enter the cost of inputs other than labor and machinery that are used in
hazelnut production. In preparation for completing this worksheet you will need to know your
expenditure for each of your inputs.

Step 1: Generate List of Inputs

Start by thinking about all the materials and products that you apply to the orchard over the
course of the year. Enter the name of each input in Column A. The name of each input that you
enter must be unique. For example, you can only enter the input “Fertilizer” once; if you apply
different types of fertilizers (that cost different amounts) you will need to specify the names of
those fertilizers here.
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Step 2: Set the Orchard Units
For each input listed you need to set a Unit value, either Tree or Acre, by selecting the value
from the dropdown list in Column B. You can use whichever fits best with the corresponding
input. For example, for the input “Pheromone Disruptors” you might be more likely to select
“Tree” because you apply these per tree. On the other hand, for the input “Fertilizer” you might
be more likely to choose “Acre” because you apply fertilizer by the acre.

Step 3: Set the Input Costs

Finally, in column C you will enter the cost to apply each input to each input unit. So, if you
have selected Acre as the application unit for Fertilizer you will want to use the cost per acre for
a single application of fertilizer. (Later you will learn how to account for inputs that are applied
multiple times in a typical production year.) The cost value can be determined in a variety of
ways. If you know your application rate (pounds you apply per acre) and price per pound you
can multiply them to get the cost per acre. If you know the total purchase price and the number
of acres to which it was applied then you can divide price by acres. If you don’t have past
season records you can also look up costs on input suppliers’ websites.

2.6 Instructions for Using the Base Year Cost Analysis Worksheet

Use this worksheet to apply activity rates, machinery costs and input costs to estimate your
variable production costs for your base year. Your “base year” can be any year you want to use
as the starting point for your cost analysis. Your base year will likely be this production year.
Later you will learn how to use this tool to look at your costs for future years. You will also have
the option to account for the costs of production for prior years.

Step 1: Set an Average Hourly Labor Cost

To calculate the total labor cost the Hazelnut Production Costing Tool uses a single hourly labor
rate, which you will enter into cell B1. The tool requires this value even if all labor is performed
by you and your family members and thus is unpaid.

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If you have employees, the value used here should be the average “fully loaded” rate which
includes all payroll taxes and any benefits you pay in addition to the base wage rate. If you have
multiple employees at variable wage rates you will need to calculate an average value to use.
The easiest way to calculate this average value is with a “weighted average”. Estimate the
percentage of total time labor is performed at each of the wage rates, with the total
percentages equal to 100%. Then multiple the wage rates by the percentages, adding up the
results.

Here’s an example: imagine you have two employees working in the orchard. One of them has
a fully loaded rate of $25/hour and that employee performs 80% (by time) of the labor in the
orchard. The remainder of the work is performed by a second employee who only helps with
tasks that require two people, and their fully loaded rate is $18/hour. The calculation for the
weighted average is:

$25.00 * 80% + $18.00 * 20% = $20.00 + $3.60 = $23.60

If you are an owner/operator and don’t pay yourself a wage it is still important to account for
the cost of your labor when calculating your production costs, and you are required to enter an
hourly wage value into cell B1. There are a few different ways to come up with this value. One
option is to estimate the amount that you would pay if you were to hire someone to supervise
your farm operations. Another option is to estimate the amount you would charge your
business for your labor if you were to get paid by the business. Finally, you can consider the
“opportunity cost” of working in your orchard and set the value to what you would earn if you
worked another job during the hours you currently spend in the orchard.

Step 2: Enter Total Trees and Total Acres

In cell B2 enter the total number of trees in your orchard. In cell B3 enter the total number
of acres.

Step 3: Select Labor Activities

Beginning in cell A6 and working down, select the labor activities that are involved in producing
hazelnuts from the drop-down list. This list should look familiar: it is the same list you created
on the Activity Rates worksheet. When you do this for your base year, you will likely select all
the labor activities from the list that you entered on the Activity Rates worksheet. Later, when
you determine costs for future production years, it is possible you might omit certain labor
activities if they don’t continue to be part of your production system.

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Note: the values in column A must match those from the Activity Rates worksheet. To ensure
that is the case select the values from the dropdown list, rather than typing them in here. If you
want to include activities that are not already listed on the Activity Rate worksheet then first
add those entries to the Activity Rates worksheet and then select them here.

If you have selected the Labor Activities correctly then the Orchard Unit and Base Rate values
will appear in columns C and D.

Step 4: Assign Machinery to Activities

For each labor activity you include in this table go to Column B and select the machinery that is
used to perform that activity from the dropdown list. Select “None” if a labor activity doesn’t
involve machinery. Keep in mind that if you select machinery for a labor activity, every minute
of that labor activity will be charged at the cost of using machinery that you entered on the
Machinery-Implement Costs worksheet. Also, if you use different pieces of machinery for the
same labor activity, you will need to return to the Activity Rates worksheet and create two
different labor activities. For example, if you have two different mowers, you will have to create
two different labor activities for mowing (e.g. “Mow with Mower 1” and “Mow with Mower 2”)
to be able to account for mowing that is done with mower 1 versus mower 2.

Note: the values in column B must match those from the Machinery-Implements Cost
worksheet. As with the Activity values, use the dropdown list to ensure that the values match
correctly.

Step 5: Establish Activity Rates to Use

The next step is to indicate in column E the activity rates you would like to include in the cost
calculations. In most cases, especially for your base year, this value will be the one calculated
on the Activity Rates tab and appearing on this worksheet in column D (“Base Rate”) – simply
enter that value here in column E. However, when calculating costs for future years you may
expect certain labor activities to take more or less time. You can account for that fact by
increasing or decreasing the value from the calculated base rate.

Step 6: Set the Precent of Orchard Units

Column F enables you to account for the fact that not all activities are performed on all activity
units. For example, you may prune your trees every third year, meaning that the pruning
activity in any given year is only done on 33% of the orchard. Enter the percent of the total
trees or total acres that each labor activity applies to in column F. For Event type activities use
100%.

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Step 7: Set the Number of Occurrences
Enter the number of times the labor activity happens in a single production year in column G
“Occurrences of Labor Activity”. For example, if you flail mow 6 times during the season you
would enter “6” in column G.

Once you have completed Steps 1-7 the tool will calculate machinery and labor costs. The
calculated values will appear in columns H through K and are calculated as follows:

• Labor Minutes: The Rate to Use (minutes per orchard unit) is multiplied by the
Percentage of the Total Orchard Units that the labor activity impacts and then by either
the Total Trees or the Total Acres (depending on the orchard unit; Events use the value 1)
and by the Occurrences of the Labor Activity in a single production year.
• Labor Hours: Labor minutes are divided by 60 minutes to convert minutes to hours.
• Labor Cost: Labor Hours for the labor activity are multiplied by your Cost of Labor per
Hour.
• Machinery Cost: Labor Hours for the labor activity are multiplied by the Cost per Hour of
Use (on the Machinery-Implement Costs worksheet) for the machinery you designated as
being used for this labor activity.

Scroll the window down to see the Total costs calculated for Labor and Machinery.

Step 8: List Inputs

Below the table that calculates labor and machinery costs is a second table for calculating input
costs. Start by selecting in column A each input you use to produce hazelnuts, using the
dropdown list. These values must match the ones you entered on the Input Costs worksheet, so
make sure you select from the dropdown list rather than type the value names directly. When
you do this for your base year, you will likely be selecting each of the inputs you entered on the
Input Costs worksheet. Later, when you account for future production years, it is possible that
you might add new inputs to your Input Costs worksheet to include here or omit certain inputs
if they don’t continue to be part of your production system.

Notice the orchard unit and the input cost that you entered earlier on the Input Costs
worksheet will be automatically entered in columns B and C.

15
Step 9: Set Costs to Use
The next step is to indicate in column D the cost per orchard unit you would like to use in the
cost calculations. For your base year it is likely that you will use the values you entered on the
Input Costs worksheet, so simply copy the value from Column C. However, if you have reason to
adjust the value up or down – such as for future years’ calculations – you can do so.

Step 10: Set Percent of Orchard Units and Number of Occurrences

The last step for input cost calculations is to enter the percentage of trees or acres that the
input applies to in Column E, and to indicate the number of times each input is applied to the
orchard in Column F. So, for example, if you use pheromone disruptors on half of your trees you
would set the value in Column E to 50%, and if you apply mulch to your trees twice during the
season then you would put a 2 in Column F.

Once you have completed Step 10 the tool will calculate the input cost for each of the inputs
using this formula:

The Cost to Use (per Application) is multiplied by the Percentage of the Total Orchard
Units that the input is applied to and then by either the Total Trees or the Total Acres
(depending on the orchard unit) and by the Occurrences of (the) Input Application in a
single production year.

The total input cost is also calculated: scroll to the bottom of the table to see the total value.

2.7 Using Cost and Return Results

Once you have entered the information in section 2.6 above, the table and pie chart in the
Results section of the worksheet (located below the Input Costs table) will show your Total
Labor Costs, Total Machinery Costs and Total Input Costs for the production year you are
analyzing. The sum of these values is your Total Variable Costs (TVC) of production.

To calculate the Returns for the production year, enter a Price per Pound and the Crop Yield
(Pounds) for the production year being analyzed in cells C68 and C69. The tool will multiply
these values to determine Total Revenues, shown in cell C70.

Finally, the tool will calculate your Returns over Total Variable Costs by subtracting the Total
Variable Costs (TVC) from the Revenues. This amount represents the money that is available to
cover other costs that you have not included yet.
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Accounting for Other Non-Production Costs
At this point the tool has helped you calculate your variable production costs associated with
labor, machinery and inputs. These, of course, are not the only costs your business incurs when
growing and selling hazelnuts. Other categories of costs that might be factored in include other
cash costs like land lease, interest on operating expenses, property insurance, property taxes,
organic certification, costs associated with marketing and selling your nuts, miscellaneous
supplies, etc., and non-cash costs, like interest paid on borrowed funds to purchase machinery,
and depreciation cost. Because these cost categories and timelines (years to maturity) differ for
each orchard business, a standard template for doing this analysis isn’t available as part of this
tool. But you can take the results from your Base Year Cost Analysis and create your own
spreadsheet for analyzing these additional costs.

The example below shows how the cost of production results from the Hazelnut Cost Tool can
be combined with other cash costs to evaluate the returns from a single year of production.

Table 1. Estimates of Costs and Returns – Single Year Analysis

Results
Variable Costs of Production
Total Labor Costs $3,678.83
Total Machinery Costs $1,908.95
Total Input Costs $1,560.78
z
Total Variable Costs (TVC) $7,148.56 Returns over TVC = Total returns minus
total variable costs
Revenues
yTotal Cash Cost = Sum of total variable
Price per Pound $1.60 costs and other cash costs.
Crop Yield (Total Pounds) 7,200.00 xReturns Net of TCC = Total returns minus
Total Revenues $11,520.00 total cash costs.
Returns
Returns over TVCz $4,371.44 The information in this table is presented
for demonstration purposes only and
Other Cash Costs does not reflect actual costs for hazelnut
Organic Certification $231.00 production.
production.
Property Insurance $1,300.00
Property Taxes $2,437.00
y
Total Cash Costs (TCC) $11,116.56

Returns Net of TCCx $403.44

17
3. Instructions for Using the Costing Tool: Multi-year
Analysis
If your orchard has already reached full maturity, looking at one year of production might give
you a reasonable estimate of your annual returns into the future. If your orchard hasn’t
reached full production, you will likely want to do a multi-year analysis to look at how revenues
and costs will change as your orchard matures.

Step 1: Create a Duplicate Worksheet

To use this costing tool to conduct a multi-year analysis, open the Base Year Cost Analysis
worksheet and create a duplicate of the worksheet. (To do this select the Base Year Cost
Analysis tab with a right mouse click or with two fingers and select “Duplicate” if using Google
Sheets or select “Move or Copy…” if using Excel.) When you do this, the new worksheet will be
named, “Copy of Base Year Cost Analysis”. Rename the new worksheet so that the name
signifies that it contains the cost analysis for the year after your base year. (To rename the
worksheet select the Copy of Base Year Cost Analysis tab as above, pick the Rename option from
the popup menu, and enter the new worksheet name.)

Let’s call the duplicated worksheet “Base Year Plus 1”.

Step 2: Consider Changes from Base Year

In the worksheet called “Base Year Plus 1” you can update any of the information you’ve
entered for your base year analysis to reflect how revenues and costs change for the year that
follows. Here are some of the changes you may want to consider:

Cost per Labor Hour

To account for the fact that the cost of labor tends to increase over time you can update the
value you use for the cost per labor hour (cell B1)

Total Trees or Total Acres

Do you expect to plant any additional trees or remove trees that are included in your base
year? Are you planning to plant any additional acreage or take acreage out of production?
Update the Total Trees (B2) and Total Acres (B3) accordingly to reflect these changes.

18
Labor Activity
Are there any new labor activities that you will include as part of your production practices in
the year after your base year? If so, you will need to add each new labor activity to the Activity
Rates worksheet, entering the required information to calculate its base rate as described in
section 2.2 above. Then select the new activities from the drop-down list on the Base Year Plus
1 worksheet, entering all the required information for the new labor activity as described in
section 2.6, steps 3-7.

Similarly, consider if there are any labor activities you plan to discontinue. If so, simply delete
the labor activity and all the information that was entered with it. (Note: you should not delete
labor activities from the Activity Rates worksheet, as that will impact the base year cost
analysis.)

Machinery Used for Labor Activity

Do you plan to start using any new (or new to you) machinery in the year after your base year?
If so you can add an entry for the machinery in the Machinery Costs Estimator worksheet as
described in Section 2.3, and then add an entry for the machinery (in combination with a
tractor if adding an implement) in the Machinery-Implement Cost worksheet as described in
section 2.4. Once this is set up you can associate the machinery/implement with the labor
activity that uses it as described in step 4 of section 2.6. (Make sure you select the machinery
from the drop-down list, rather than typing it by hand.)

You can also change the machinery associated with an activity by selecting a different value
from the drop-down menu, including selecting “None” if the activity no longer requires
machinery.

Rate to Use
Do you anticipate that a Labor Activity will take more time or less time as the orchard matures?
If so, update the Rate to Use for the activity (column E).

% of Orchard Units
Will the activity impact more or less of the total trees or total acres than in the past? If so, you
can adjust the value in column F.

Occurrences of Labor Activity

Will the activity occur more or less often? Adjust the number in column G.

19
Inputs
Are there any new inputs that you will include as part of your production practices in the year
after your base year? If so, you will need to add an entry for each new input to the Input Costs
worksheet as described in section 2.5. For each new input you will set its Orchard Unit and
enter the Input Cost per Orchard Unit. Once this setup step is complete you can add the input
to the analysis by selecting it from the drop-down list on the Base Year Plus 1 worksheet and
entering all the required information in columns D-F.

Similarly, if there are any inputs you plan to discontinue you can delete their entries from the
Inputs table on the Base Year Plus 1 worksheet. Alternatively, you can set the Occurrences
value in column F to zero. (You should not delete inputs from the Input Costs worksheet.)

Input Cost to Use

Do you anticipate that the cost of an Input you were already using will change in the future? If
so, update the Cost to Use for the input.

Input % of Orchard Units

Will the input be applied to more/less of the total trees or total acres than in the past?

Occurrences of Input Application

Will the applications of the input occur more/less often?

Price
If you expect the price per pound to change you can update the value in cell C67.

Total Pounds
Of all the values to change in the multi-year analysis for a maturing orchard, the yield per tree
or acre will likely change most dramatically. To account for this, you will need to update the
Crop Yield value you use in cell C69.

Step 3: Add More Years

Once you’ve made the changes you want to make for the Base Year + 1, continue creating
duplicate worksheets, naming them to signify the next year in the timeline you want to analyze,
and making changes to each worksheet to reflect how you think costs and revenues will change
over time. Do this for every future year up to (and including) the first year that you think your
orchard will be in full production.

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Step 4: Consolidate Results
When you’ve created worksheets for all the years in the time horizon that you want to analyze,
use the results from each year to perform your multi-year analysis. One way to do this is to
copy the values in the results section from each of the single year worksheets, and then add a
row at the bottom which shows the cumulative cash flows for each year. Table 2 below is an
example of this type of analysis. In the example we look at four production years, with Base
Year + 3 being the year that the orchard reaches full production.

Table 2. Estimates of Costs and Returns – Multi-Year Analysis

Base Year Base Year Base Year
Base Year +1 +2 +3
Variable Costs of Production
Total Labor Costs $3,679 $3,863 $4,047 $4,231
Total Machinery Costs $1,909 $1,966 $2,004 $2,100
Total Input Costs $1,561 $1,639 $1,717 $1,795
Total Variable Costs (TVC) $7,149 $7,468 $7,768 $8,125
Revenues
Price per Pound $1.60 $1.60 $1.60 $1.60
Crop Yield (Total Pounds) 9,750 11,700 14,625 16,575
Total Revenues $15,600 $18,720 $23,400 $26,520
Returns

Returns over TVC $8,451 $11,252 $15,632 $18,395

Other Cash Costs

Organic Certification $231 $243 $255 $267
Property Insurance $1,300 $1,300 $1,300 $1,300
Property Taxes $2,437 $2,583 $2,738 $2,903
Total Cash Costs (TCC) $11,117 $11,594 $12,061 $12,595

Returns Net of TCC $4,483 $7,126 $11,339 $13,925

Cumulative Cash Flows $4,483 $11,610 $22,949 $36,874

For the Cumulative Cash Flows row, the value in the first column is equal to the Returns Net of
TCC in the cell above. For each of the other columns you can enter a formula that adds together
the values in the cell above (the Returns Net of TCC for that year) and the cell immediately to
the left (the cumulative value up to the previous year).

21
4. Other Considerations
In addition to the costs that have already been included in the analyses above, you may want to
include Historical (Net) Returns and/or Replacement Costs in your analysis.

4.1 Historical (Net) Returns (Establishment Cost)

The Cumulative Cash Flows in Table 2 show how the returns (after accounting for total cash
costs) accumulate over the period being forecasted. In other words, the returns from the Base
Year are added to the returns from the Base Year +1; the returns from the Base Year +2 are
added to that and so on. The Cumulative Returns at the end of Base Year +3 are the total
returns for the whole 4-year period that is projected in the analysis. But what about the returns
(gains or losses) from the years prior to the Base Year?

Unless your Base Year is the year you planted your orchard, you will have accumulated returns
in prior years. Adding up the net return for each year of production between the time you
planted your orchard, and your base year will give you your Historical (Net) Return. Because it
takes several years for hazelnuts to produce a significant yield, it is likely that you will have
many years where your costs were greater than the revenues you brought in. This means it is
likely that your Historical (Net) Return will be negative. You can think of this negative Historical
(Net) Return as the “Establishment Cost” for your orchard.

You may want to divide this establishment cost over future years of production to assess if your
orchard business is profitable in the long term. One simple (but rough) way to do this is to
divide your total Historical (Net) Return by the number of years you expect your orchard to be
productive beyond the point that it reaches maturity. Then, subtract the resulting value from
the net returns in your final year (full production year) of your multi-year analysis to evaluate
your returns after accounting for the losses you incurred during establishment.

Let’s look at a (fictitious) example. Assume that you’ve done a multi-year analysis for five years
as shown in Table 3 below, and in the fifth year (Base+4) your orchard reaches maturity. The
Returns Net of Total Cash Costs is $10,855. Also assume that in the years prior to your analysis
your total cash costs were $60,000 and your total revenues were $10,000, for a net loss of
$50,000. This is your establishment cost. Finally, assume that your orchard will be in production
for 20 years post maturity. To factor the establishment cost into your analysis, divide the total
loss to that point ($50,000) by 20 years to get $2,500 per year. Your annual return net of Total
Cash Costs and net of Establishment Costs would be $10,855 - $2,500 = $8,355.

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Table 3: Accounting for Historical Net Returns
Base Base+1 Base+2 Base+3 Base+4
Variable Costs of Production $ 6,083 $ 6,327 $ 6,580 $ 6,843 $ 7,117
Other Cash Costs $ 1,689 $ 1,723 $ 1,757 $ 1,793 $ 1,828
Total Cash Costs $ 7,773 $ 8,050 $ 8,337 $ 8,635 $ 8,945
Total Revenues $ 8,100 $ 11,700 $ 15,300 $ 18,000 $ 19,800
Returns Net of TCC $ 327 $ 3,650 $ 6,963 $ 9,365 $ 10,855
Cumulative Cash Flows $ 327 $ 3,978 $ 10,941 $ 20,305 $ 31,160

Keep in mind that as long as your orchard is already planted and getting established for a few
years it is unlikely that you will take your orchard out even if these initial losses aren’t covered
in a desirable time period. They are sunk costs after all. However, including these historical
(net) returns in your analysis may still inform how you set prices if you are in a market where
you have pricing power.

4.2 Depreciation/Replacement Costs

When you buy machinery and other equipment and infrastructure, the money you spend
(whether it’s yours or borrowed from the bank) is not considered a cash outlay to your
business. However, the decline in value due to use and/or the passage of time is. The process
for accounting for the declining value of assets is commonly referred to as depreciation. In this
tool, the term “Replacement Costs” is used to differentiate the process of accounting for these
costs from how you might depreciate assets for tax purposes. Here the goal is to account for
the decline in utility value of machinery and other equipment and infrastructure. The idea is
that at some point, due to use or due to the passage of time, machinery and other equipment
and infrastructure will no longer be able to be utilized and will need to be replaced. By
accounting for the amount that each tractor, implement or other piece of equipment or
infrastructure declines in utility value due to use or due to the passage of time, you are
essentially budgeting for replacing these assets.

In this costing process, there are two ways to account for replacement cost. Tractors and
implement replacement costs are accounted for based on the number of hours they are used.
Other equipment and infrastructure are accounted for based simply on the passage of time.

Use-Based Replacement Costs

The Hazelnut Production Costing Tool has the capacity to help you estimate use-based
replacement costs for your tractors, implements, and other machinery for which you can
reasonably guess the number of hours the machinery provides utility. Recall that in the
Machinery Cost Estimator worksheet you calculated a Machine Operating Cost for each hour of
use. You can use the same worksheet to similarly calculate a Replacement Cost per Hour of Use.

23
Step 1: Estimate the Replacement Cost
Start by estimating what it will cost you to replace the machinery that you are currently using.
This value would be the cost to purchase the replacement machinery minus any anticipated
salvage value you would receive by selling the machinery you currently have. So, for example, if
it would cost you $6,000 to replace your 8’ flail, and you believe you could sell the old flail for
$500 then you would enter $5,500 for the 8’ flail into column I.

Step 2: Estimate the Lifetime Hours of Use

Next, estimate the total number of hours you expect the machinery to run over its useful life
and enter the value in column J. For new machinery, you can refer to Table 3 in the publication
Costs of Owning and Operating Farm Machinery in the Pacific Northwest: 2011 for the hours of
estimated life for different agricultural machinery. You might use this as a starting point and
adjust as this makes sense for your operation. If the Replacement Cost you come up with is for
used equipment, be sure to adjust the Hours of Use to take into account that the machinery
was used when you bought it.

Once you have entered the replacement cost and lifetime hours of use the tool will calculate
the Replacement Cost per Hour and Total Cost per Hour, where the total cost is the sum of the
operating and replacement costs.

Step 3: Integrate Replacement Costs into Analysis

To factor replacement costs for tractors and implements into your cost analysis, substitute the
Total Cost per Hour of Use for each tractor/implement to the corresponding tractor/implement
entry on the Machinery-Implement Costs worksheet. Remember to add together the costs of
the tractor and implement where appropriate, as described in Step 2 of section 2.4.

Once you have updated the values in the Machinery-Implement Costs worksheet they will be
used for the calculations in the Base Year Analysis worksheet (as well as any extended year
analysis worksheets you may have created). The total machinery cost for the production year(s)
will now include the replacement costs.

By doing this, the total machinery cost calculated by the tool will include both the operating
cost and the replacement cost of the machinery, based on the hours the machinery is in use for
the labor activities you specify for the production year.

24
Time-Based Replacement Costs
In contrast to machinery that declines in utility value based on use, some equipment and
infrastructure decline in utility value simply due to the passage of time. To account for the
replacement costs for this type of equipment and infrastructure, first make a list of any items
you want to include. Next, estimate what it will cost you to replace each item on your list. If you
expect to be able sell any of the items on your list when they are retired from use, subtract any
anticipated salvage value from the purchase price. Then estimate the number of years each
item on your list will be able to be utilized. Divide the replacement cost (minus the salvage
value) by the estimated years of use to get the annual replacement cost for each item on your
list. Once you’ve calculated the annual replacement costs for equipment and infrastructure you
can include these as fixed or non-cash costs for each year of your multi-year analysis.

In the near term, it’s unlikely that you will take your orchard out of production if you can’t
cover the replacement costs for machinery, equipment, and infrastructure that you already
own. But if you can’t cover these replacement costs in the longer term, when it does come time
to replace machinery, equipment, and infrastructure, it will be a challenge to continue
production and remain profitable.

25
Appendix A: How to Conduct Time Studies
Time studies are a sampling technique that you can use to come up with activity rates for your
operation. Conducting time studies is as simple as measuring the total time (minutes) you
spend doing a labor activity and the total number of orchard units (trees or acres) impacted by
the activity in that amount of time.

When you conduct time studies, you will likely notice that there are a lot of factors that affect
the time it takes to do an activity - people work at different paces; weather conditions can slow
down your work; your orchard is likely not perfectly uniform. It’s not going to be possible to
predict future costs with 100% accuracy. The idea here is to get ballpark samples of how long
activities take and use these sample measurements to calculate average activity rates that can
help you estimate costs that will inform your decision making.

Time Study Considerations

Below are some things to keep in mind when you are conducting time studies:

• The total time should account for everyone’s time spent working on the labor activity.
For example, if you are working with one other person on pruning for 60 minutes, the
total time for the activity would be 120 minutes (60 minutes per person x 2 people).

• Because time studies are a sampling approach, you don’t have to prune every tree or
mow every acre of your orchard to record a time study. Simply record the total trees
pruned or total acres mowed relative to the amount of time that you record. Later you
can apply the rate to every tree or acre in your orchard.

• When you’re timing a labor activity, consider whether it makes sense to include the
time it takes you to travel to and from the orchard or set up machinery. Generally, travel
and machinery set-up will take the same amount of time regardless of the number of
trees or acres impacted by a labor activity. If this is the case, keeping the time you spend
on travel or set-up separate from the time you spend actually doing the labor activity
will give you a more accurate measurement of the labor that varies with the number of
trees or acres.

26
 • You can still capture the time you spend travelling to the orchard or setting up
machinery. To do this, measure the time these activities take per travel event or per set-
up event. In the Costing Tool, enter Travel to Orchard and Flail-Mower Set-up (for
example) as labor activities. Enter the total minutes per travel event and per set-up
event and select the orchard unit “Event”.

• The Activity Rates worksheet has room for up to three-time study records for each labor
activity and calculates an “Average Rate” for each activity based on the time study
records you enter. To get the best estimate you may want to perform the activity in
different circumstances. For example, you may want to record flail mowing times in
both spring and summer, and you may want to record pruning times for everyone who
prunes.

• If you have different methods for doing a labor activity and this results in very different
activity rates you might consider defining your different methods as two completely
different labor activities. For example, if some people on your orchard crew remove
suckers with manual pruners and others use electric pruners, you could define two
different labor activities: “Removing Suckers, Manual” and “Removing Suckers, Electric”.
These labor activities would have a different activity rate. You can then apply each rate
to the percentage of trees that had suckers removed with manual pruners versus
electric pruners (see Section 2.6, Step 6).

Capturing Time Data

Before you start your time studies you will need to think about how you will capture your time
study records when you are working out in the orchard. This includes both the process that you
will use for keeping track of time as well as the way you record the data. The process is
important, as participants will need to record the start and end times (or note the total elapsed
time) and track the total number of units affected. There’s not one “right” way to do it – choose
whatever tools and processes will make it easy for you and your crew to collect data as
accurately as you can.

27
One grower carried around a pocket planner with a page dedicated to recording time study
data. Whenever he took a time measurement – by starting and stopping a timer on his
cellphone – he wrote down the labor activity, the total minutes to complete the activity, and
the number of orchard units completed. If he measured a second set of data for the same labor
activity, he added extra columns (total time and units completed) to the right for the
subsequent measurements. At the end of the season, he transferred all the data into the
production costing tool.

Another grower had someone in the farm office in charge of overseeing the time trials. Workers
in the fields texted the office when they started and ended the time trial, indicating how many
units they had covered in that time. Back at the office the data was entered into a computer
spreadsheet, and from there the data was ultimately transferred to the production costing tool.

A third grower set up a whiteboard in the barn that listed the activities being measured. Prior to
starting an activity, they noted the start time, and when they were done, they wrote down the
end time and the total units completed. The data was then transferred to the computer.

28
Appendix B: Sample Activities
Here are some sample activities that you might include when doing your production cost
analysis. Select the ones that are relevant to your operations, making any modifications to
activity names as appropriate.

Pruning
Pruning
Pruning, 2-year-old trees
Pruning, 5-year-old-trees
Pruning, mature trees

Suckering and Weeding

Weeding
Suckering
Weed and sucker control – Mechanical
Weed and sucker control – Chemical
Weed and sucker control – Hand
Weeding, young trees
Brush stacking
Brush pushing

Amendments
Fertilizer, spray
Fertilizer, pellets
Cover crop seeding
Manure spreading
Mulching

Mowing
Flail mowing
Brush hog mowing
1st mow
Subsequent mow
Spring mowing
Summer mowing

29
Pest Management
Filbert worm – monitoring
Filbert worm – spraying
Lure placement
Lure collection
Tree painting
Gopher control

Harvest
Harvest – blowing
Harvest – sweeping
Harvest – picker
Hand Harvest

Events
Mower Setup
Flail Setup
Sprayer Setup
Irrigation Setup
Hauling
Travel Time
Equipment Repair
Equipment Maintenance

30
Appendix C: Case Studies
Case Study 1: Projecting Future Profitability
The farm at Steenson Hazelnut Orchards outside of Salem Oregon has been in production since
the late 1960s. The orchard has historically been a conventional operation, but recently the
farm converted just under 10 acres of young trees to organic production. In 2023, Steenson
used the Hazelnut Costing Tool to analyze the production costs for its organic operation, when
the trees were in leaf year 5. During the production year, Steenson recorded time trial data.
Workers in the orchards texted the farm office when they started and completed activities,
indicating what task they were working on and how many trees or acres were impacted. The
data was then entered into a spreadsheet on the computer.

In the fall Steenson entered their data into the Hazelnut Costing Tool. In its base year analysis,
Steenson saw that while its cash flow was positive, when the cost of the unpaid family labor
was factored in, the tool showed them operating at a loss. Steenson was curious to project at
what point they would be operating at a profit when all costs, including owner labor, were
factored in. Following the guidance in the User’s Guide, Steenson used the Hazelnut Costing
Tool to project costs for 5 more years, when they anticipate the orchard will reach full maturity.
Using these assumptions, they projected that profits from the orchard would cover their total
cash costs in Base Year + 3, and that the cumulative cash flows would turn positive in Base Year
+ 5.

In addition to future profitability projections, Steenson used the tool to suggest possible
changes to their orchard practices. Steenson recognized that they can be somewhat fastidious
about pruning and weeding the orchard. Since this work is done by family members and thus is
not directly connected to cash flow they had not thought much about the “cost” associated
with this time. However, the Hazelnut Costing Tool showed that the labor associated with
pruning and weeding accounts for nearly 50% of their total variable production costs. Given this
finding, Steenson will be rethinking the tradeoff between completeness and efficiency when it
comes to tasks like pruning and weeding.

Case Study 2: A What-If Scenario

Skydance Farm west of Sherwood Oregon included an old cherry orchard and a conventional
hazelnut operation. In 2018 and 2019 the farm planted 6 acres of organic hazelnut trees, and
since that time they have been growing the trees using organic methods, though they have yet
to file their organic certification paperwork. In 2023, Skydance Farm used the Hazelnut Costing
Tool to understand their production costs with hopes of getting insights into profitability.

31
Skydance collected time trial data throughout the growing season using a whiteboard set up in
the barn, with the data periodically transferred to the computer.

At the end of the season, the time trial data was entered into the Hazelnut Costing Tool.
Unfortunately, the relative immaturity of the orchard combined with a poor production year
led to a very small harvest, and Skydance Farm decided not to process their nuts for
commercial sales. As a result, Skydance Farm was able to generate cost information but not
profitability information for their base year.

However, Skydance Farm was interested to know what revenues would be required for them to
be profitable given the total variable production costs calculated by the tool. To answer this
question, Skydance Farm performed a simple Price/Yield analysis. They built a spreadsheet that
included the yield in pounds per acre across the columns and the price per pound going down
the rows. In each cell of the spreadsheet, they entered this formula:

Returns = (6 acres * pounds per acre * price per pound) – Total Variable Costs

The data is summarized in Table 4 below. Skydance Farm used this information to help set
expectations about the ultimate profitability of the farm. According to the Skydance owners,
“Putting in some numbers to see what might be possible when the orchard reaches maturity
was heartening! The cost of operations even after paying ourselves for our labor was less than
we thought.”

Table 4: Looking at net returns under varying price and yield assumptions.

32
Case Study 3: Considering Transition to Organic Production
Nut House Farms near Silverton Oregon is a 55-acre conventional hazelnut farm that was
planted in 2016. Nut House Farms owners have considered transitioning some or all of the
orchard to organic production and decided to use the Hazelnut Costing Tool to help with their
decision-making process.

As a first step Nut House Farms entered data from their current conventional operations. As the
farm did not have time-trial data they instead estimated labor hours based on prior years’
experience. The original analysis showed that 22% of the total variable production costs were
attributed to labor, 17% were attributed to machinery, and 61% were attributed to inputs that
were predominantly made up of fungicide, herbicide, pesticide, and chemical fertilizer.

As a second step Nut House Farms considered what changes would be required to transition
the orchard to organic production. These changes included switching from a bare-earth orchard
to a perennial cover crop; adding activities such as flail mowing and weeding; and adding
alternative methods for fertilization and pest control. They also considered the changes in
inputs, removing the chemicals that are not allowed for organic production and replacing them
with substitutes that are allowed, and new equipment that would be required (e.g. flail
mower). With these assumptions in place Nut House Farms created a second copy of the tool,
using reference data to estimate the time associated with the new activities. This analysis
showed a very different composition of total production costs, with more than 60% of the costs
attributed to labor and less than 15% attributed to input costs.

With the new costs projected, Nut House Farms looked at profitability. Revenues to the farm
would be impacted by both a decrease in yield (organic trees typically produce fewer pounds of
nuts than conventional) and an increase in price per pound (with organic nuts fetching a price
premium over conventional). They were able to play with these numbers to generate a range of
outcomes. But perhaps the biggest insight came from seeing the large increase in labor hours
required during the production cycle. As the farm further explores organic transition it will need
to consider how much capacity the family members have for completing the extra work and
what the process might look like for hiring workers to do the work the family cannot perform
themselves.

33
 WE BELIEVE FOOD AND
AGRICULTURE SHOULD BE
BIOLOGICALLY SOUND
AND SOCIALLY EQUITABLE.
THIS BELIEF HAS GUIDED
OREGON TILTH FOR
NEARLY FIVE DECADES.

TILTH.ORG
and promote biologically Support sound and socially equitable agriculture.
OUR VISION
OUR MISSION
Community-led food systems that enrich people and planet, together.
Support and promote biologically sound and
socially equitable agriculture.

OUR VISION
Community-led food systems that enrich
people and planet, together.

OUR VALUES
• Integrity
• Transparency
• Compassion
• Harmony
• Teamwork
• Knowledge
• Courage

34