Investment Projections
Variables That Impact Orchard Profits
Profits depend on three major variables: (1) the yield of your acreage, (2) the price of the walnut on international markets, and (3) the cost to maintain the orchard. The formula for walnut profits is simple and takes these three variables into account: yield per acre in pounds, walnut price per pound, cost per acre.
Revenue per acre is calculated by multiplying the yield per acre by the walnut price (yield x price). Once annual costs are subtracted, that leaves us with profit per acre.
Since a walnut orchard is the definition of a long term “buy and hold” investment, it is important to evaluate the investment potential over a decades-long time horizon. This is why we’ve prepared long-term projections for your review.
Investment Projections
Detailed information about the key variables to walnut profits.
Projecting Yields
The most important factor in walnut profits is the annual yield per acre. As growers we have control over the final yields, but never total control. Mother nature, by way of the weather, has the final say over the annual yield per acre. As growers we ensure that the trees stay healthy, are free from pests and disease, pruned properly, irrigated thoroughly, and fertilized according to plan.
Read more about the work we do every year to ensure maximum yields and see our projections about how a walnut orchard should progress over the years.
Projecting Prices
The walnut price has been fairly stable over the last two decades and has been trending upward. Although the price is out of our control and fluctuates from year to year, statistical analysis shows that it is relatively stable and rarely strays more than 25% from the mean.
See our projection for future walnut prices, based on the last 20 years of inflation-adjusted prices for the Southern Cone.
Projecting Costs
Costs are the variable we have the most control over. We focus on running an efficient orchard and keep costs to a minimum. Monthly costs run about $100 per acre ($200 per hectare).
The largest amount of variability comes from the international exchange rate between the Argentine Peso and the U.S. Dollar. Our costs are all paid in pesos, but the walnut is priced in dollars. When the peso weakens against the dollar, this reduces our costs in dollar terms. If the peso strengthens then our costs in dollars terms will rise.
Projecting Profits
We have prepared a detailed investment cash flow projection that allows the investor to simulate different yield and price scenarios.
While we cannot guarantee the performance of the investment in the future, we can make intelligent projections based on historic price averages and typical yields from the Mendoza Central Valley.
