As the permanent crop industry experiences a large amount of mergers and investments, Jay Graham of Western Farm Advisors joined the Top Producer Podcast to share three of the biggest factors separating permanent crop operations and row crop farms.
Graham highlights how the production of apples, almonds, grapes and more sets up growers to make decisions based on unique considerations.
Labor
Graham shares the biggest difference between row and permanent crop operations is the amount of labor needed and the costs associated with it.
“Especially here in Washington, cherries have the largest need of labor because so much of it is all hand harvested,” he says. “It’s getting much more expensive and harder to find people.”
For example, in Washington state Graham says much of the labor permanent crop producers use comes from the H-2A program – which adds to the cost of the state’s high minimum wage.
“I think H-2A as of 2023 is somewhere around $24 [per hour] and there’s a set schedule for that to go up over time,” he says. “That only looks at part of the picture because you have to supply lodging and pay for permits and travel to get everybody into the country. You’re getting pretty close to $30 [per hour] for H-2A.”
Capital Investment and Returns
The cost of land for a permanent crop operation, such as an orchard, also looks much different than for row crops.
In Graham’s area, he estimates the values for Class A orchard ground could range from $16,000 to $20,000 per acre, whereas row crop ground in the same region is closer to $9,000 to $16,000 per acre.
The increased expenses don’t end there for permanent crops.
“The capital need is just so huge to get started,” Graham says. “Depending on what product you’re talking about – if it’s apples, hopefully you have full production in about four years. If it’s cherries, you’re probably more like five or six years. Pears are even longer.”
Graham estimates the cost to produce an acre of high-density, trellised apples is between $65,000 to $70,000.
With higher production expenses in permanent crops, however, comes higher returns.
“The risk reward normally works out very well. And we’ve typically seen returns in the mid-to-high teens over the last 20 to 25 years,” Graham says. “It’s definitely been great to be in the permanent crop space over the last many years.”
Flexibility
While row crop producers can switch out their crops year-to-year based on market prices and demand, permanent crops are a longer-term decision.
“You can’t change overnight,” Graham says. “You’re putting a ton of capital in and it’s four or five years out until you’re going to have a crop. You’re just hoping that consumer preferences haven’t changed for your variety or even worse, maybe for your entire commodity.”
To hear more from Graham on the permanent crop industry, tune into his episode of the Top Producer podcast.
