2000 CHRISTMAS TREE PRODUCTION BUDGET 1
Single Leaf Conifer - Frasier Fir, Canaan Fir, Douglas Fir, and Blue Spruce
Hand Planted - 10 year Rotation 2
Retail Sales - Ready Cut
  ITEM     YEAR      
YOUR
          1 2 3 4 5 6 7 8 9 10 TOTAL   BUDGET
Christmas Trees (percent  sold) 3 10% 25% 35% 30% 100%  
INCOME
Christmas Trees  2,800  7,000  9,800  8,400       28,000  
800 trees sold over entire rotation
 $  35 per tree 1000 1000 850 775 700 700 700 700 700 699
VARIABLE  COSTS
Seedlings 4 700 105 805  
Fertilizer 50 50  
Herbicides 60 60 60 40 40 40 40 40 40 40 240  
Insecticides 20 30 40 50 50 50 50 50 290  
Shearing 5 106 97 175 175 175 175 175 175 1050  
Hired Labor 6 378 243 81 81 81 81 81 81 81 81 1269  
Fuel, Oil, Grease 13 12 11 11 11 11 11 11 11 11 113  
Machinery Repairs 6 5 5 5 5 5 5 5 5 5 51  
Harvesting 7 120 300 420 360 1200  
Miscellaneous 8 15 15 15 15 15 15 15 15 15 15 150  
Interest on Oper. Cap. 106 37 26 24 32 33 44 60 71 66 457    
TOTAL VARIABLE COSTS 1286 450 315 294 390 401 532 728 859 793 6049  
FIXED COSTS
Operator Labor Charge 6 90 90 54 54 72 72 90 90 72 72 756  
Mach. And Equip. Charge 9 32 32 32 32 32 32 32 32 32 32 320  
Land Charge 85 85 85 85 85 85 85 85 85 85 850  
Liability Insurance 10 75 75 75 75 75 75 75 75 75 75 750  
Management Charge 11 50 50 50 50 50 50 140 350 490 420 1700    
TOTAL FIXED COSTS 332 332 296 296 314 314 422 632 754 684 4376  
TOTAL COSTS 1618 782 611 590 704 715 954 1360 1613 1477 10425  
RETURN ABOVE VARIABLE COSTS -1286 -450 -315 -294 -390 -401 2268 6272 8941 7607 21951  
RETURN OVER TOTAL COSTS -1618 -782 -611 -590 -704 -715 1846 5640 8187 6923 17575  
PRESENT VALUE RETURNS 12 -1618 -711 -505 -443 -481 -444 1042 2894 3819 2936 6489
                                   
1 No charges for marketing are included due to the wide range of marketing situations found in Ohio.  However, marketing costs
should be added to your budget.  These costs should include the labor, advertising, supplies, and facilities used in the marketing of the trees. 
Marketing costs may be minimal up to $5/tree in operations with an extensive marketing program.
2 No costs are included for reclamation of the ground after the final year of the Christmas Tree stand.  Reclamation may be necessary depending
upon the future use of the ground.
3 1000 trees originally planted, 800 harvested, 200 trees died or were not suitable for sale
4 1000 seedlings planted first year, 150 re-planted second year.  Cost per seedling= $0.70.
5 Shearing costs= $0.125/tree year 3 and 4, $0.25/tree following years.
6 Labor Charged at $9/hour.  Does not include harvesting, marketing or shearing. Labor requirements listed below.
7 Harvesting includes cutting, baling, transporting to loading area, and loading on vehicle.  Retail harvesting cost = $1.50/tree. 
Harvesting costs may be $0 if operation is "cut your own".
8 Includes small tools, soil tests, etc…
9 Includes depreciation, interest, and insurance costs.
10 Liability insurance included for retail operations.  Premium estimated at $375/year/site.  Cost spread out over an assumed
five acres of production.  Example:  $375/site ) 5 acres = $75.
11 Years 1-6 management charge = $50.  Years 7-10 management charge= 5% of sales
Required Labor for Christmas Tree Enterprise (hours)
Year
Hourly Charge $9.00 /hr 1 2 3 4 5 6 7 8 9 10 TOTAL
Hired Labor 42 27 9 9 9 9 9 9 9 9 141
Operator Labor Charge (Management) 10 10 6 6 8 8 10 10 8 8 84
                                   
12 Returns Over Life of Stand and Time Value of Money
Since a Christmas tree operation occurs over as many as ten years, it is important to examine the time value of money associated with the enterprise.  Time value of money is based on the premise that $1 today (present value) is worth more than $1 in the future.  This is basically because the $1 today can be invested and appreciate in value until some time in the future. Therefore in regards to the Christmas tree enterprise, $1 of return in year one would be worth more than $1 of return in year ten.  Returns in future years need to be discounted to reflect the time value of money.  The following table lists the returns and present value of returns from the enterprise.
Return Over Total Costs Present Value Discount Rate  = 10%
Year 1 -$1,618 -$1,618 The discount rate is the degree to which the future values are discounted to reflect current values.  It is generally assumed to be equivalent to the  amount you could earn in alternative investment opportunities.
1 Year 2 -$782 -$711
2 Year 3 -$611 -$505
3 Year 4 -$590 -$443
4 Year 5 -$704 -$481
5 Year 6 -$715 -$444
6 Year 7 $1,846 $1,042
7 Year 8 $5,640 $2,894
8 Year 9 $8,187 $3,819
9 Year 10 $6,923 $2,936
TOTAL $17,575 $6,489
Over the life of the tree stand, the enterprise will generate $17,575 in returns.  However, since much of the return comes in future years, it is not the same as having $17,575 in the operator's pocket today.  The present value column indicates that if the operator was given the equivalent return in one lump sum today (present value), it would be worth $6,489. The difference of the total returns and the present value returns is a result of the time value of money.