Major Operational Costs
Even though a walnut orchard is not as labor-intensive as other crops, labor still contributes more than any other factor to the final cost, adding up to about ¼ of the total expense. Including the harvest and seasonal work, each hectare requires about 15 days per year of labor (7.5 days per acre plot).
Irrigation is the third major cost, with electricity being the key contributor. During the summer months the pumps are operated non-stop to meet the walnut trees’ irrigation requirements.
Agrochemicals such as herbicides, fungicides, pesticides, etc. contribute about 9% to the annual cost. Fertilizers and micronutrients add another 9%. Farm machinery costs such as diesel fuel, equipment rentals, and repairs all contribute to the annual expenses as well.
Indirect taxes levied by the municipal, provincial, and federal governments contribute about 3% to the costs while other misc supplies such as tools, uniforms, and paint add up to a little more than 1%.
Supervision and management includes salaries of orchard supervisors, agronomists, and other professionals that are responsible for the success of the business. These labor costs are not directly proportional to the amount of acres under cultivation, which is why these salaries are considered overhead and not direct labor cost.
Finally, office expenses such as rent also taken into account. Overall, overhead adds up to about 16% of the cost per acre.
About Our Costs
Factors that influence the costs to maintain the orchard.
A small independent grower with a 40 acre (16 hectares) orchard might spend upwards of $500 per acre with the entire family working dawn-to-dusk to perform all the annual tasks that are required to maintain a walnut orchard.
Over the last decade our monthly cost to operate the orchard has fluctuated in the range of $100 USD per acre ($200 USD per hectare), a savings that is passed on to our owners. We take every measure to run the orchard as efficiently as possible.
We expect that over the long term our cost per acre will fall as we add additional acres to the orchard and achieve larger economies of scale. For example, both a 40 acre and a 5000 acre orchard need a plant pathologist. The 5000 acre orchard will pay more per visit, but it doesn’t pay 125 times more than the 40 acre orchard.
It is important to note that the monthly expenses depend on three main factors that are outside of our control:
- The labor cost in the local market for both skilled (agricultural engineers, plant pathologists, etc.) and unskilled workers (permanent farm hands and seasonal staff).
- The cost of supplies and inputs we use each year such as diesel fuel, fertilizers, herbicides, fungicides, pesticides, Dormex, electricity, etc.
- The international exchange rate between the dollar and the Argentine peso. Since our expenses are paid in pesos, our monthly cost expressed in dollar terms is reduced when the peso weakens and increases when the peso strengthens.