An Interactive Economic Decision Support Tool for Risk and Return Analysis of Organic Apple Production

Abstract

Numerous apple (Malus ×domestica) research experiments have shown that organic apples can be both profitable and sustainable, especially in the Pacific northwestern United States. However, there is limited published research on the profitability of organic apple orchards in the southern U.S. region. Surveys of southern U.S. stakeholders have indicated that great opportunities exist for markets of both fresh and processed fruit, but significant challenges still exist. These challenges include a lack of information available on the economic impacts of different organic production practices and the potential returns available from organic production. In response to these challenges, we developed a user-friendly interactive economic decision support tool using spreadsheet software to simulate organic apple production in Arkansas and across the southern United States. The purpose of this interactive economic decision support tool is 2-fold: 1) to assist producers in the evaluation of costs, returns, and risks associated with their organic apple orchard and 2) to assess changes to cost, return, and risk as expected costs, prices, and/or yields change. The production budget components of the interactive economic decision support tool estimate variable and fixed costs, gross revenues, and net returns for 18 years of production. In addition, this interactive economic decision support tool provides economic analyses regarding: 1) the operation’s breakeven (price and yield) points, 2) sensitivity analyses or “what if” scenarios related to changes in costs and returns, and 3) risk assessment by calculating the probability of obtaining a positive net present value (NPV) over the life of the organic apple orchard. This manuscript describes the development of this interactive economic decision support tool and provides an example of how it works.