Economics of Almond Production Thank you Premier Sponsor Economics of Almond Production Moderator: Bill Harp, ABC Board Director Presenters: Bill Harp, The Fabbri Group/Grower Karen Klonsky, UC Davis Terry Withrow, Ciccarelli & Withrow Rob Geis, A Grower Dan Cummings, A Grower Almond Grower ROA Basics with a Review of 2001-2010 and an Outlook for 2011-2016 Bill Harp, The Fabbri Group/Grower Bill Harp, An Almond Grower Bill Harp, COO of The Fabbri Group • Independent Grower Director – California Almond Board • Arkansas “born, raised, and educated”, but California "enlightened” • Licensed Professional Engineer • Food Plant Designer and Entrepreneur • A California Almond Grower Grower Return by Region for 2010 CY Almond Growing Region Northern Central Southern State Yield Per Acre 1,698 1,853 2,762 2,200 Bearing Acres 130,869 318,129 291,002 740,000 Total Reported Production 222,198,895 586,123,982 819,869,378 1,628,192,255 Inedible %: 0.8% 1.2% 1.2% 1.1% Inedible Lbs: 1,733,151 6,835,378 9,561,317 18,129,846 Total Paid Weight: 220,465,744 579,288,604 810,308,061 1,610,062,409 Total Paid Weight/Acre: 1,685 1,821 2,785 2,176 Grower Return/Lb: (Wtd avg. based on Variety) *1 $1.80 $1.77 $1.79 $1.78 Calculated Paid Grower Return/Acre: $3,030 $3,215 $4,974 $3,874 Growing Costs/Acre SJ Valley: $2,700 $2,700 $2,700 $2,700 (Based on 2010 UC Davis Study excludes land and trees @ $1,106/acre) Discounted Growing Cost per Acre: $400 $200 $0 $157 (Due to Cheaper Water) Net Estimated Grower Cost: $2,300 $2,500 $2,700 $2,543 Net Grower Return/Acre: $730 $715 $2,274 $1,331 *1 - Based on the Grower Returns per pound by Variety as reported by the the States top 5 Processors. Almond Grower ROA Terminology Almond Grower ROA Definition: Almond Grower ROA (Return on Asset) is defined as the yearly percentage of the net average marginal grower return in dollars of one acre of bearing almonds divided by the average asset value of one acre of bearing almonds in dollars. Grower Return (ROA) History Analysis of the most recent past 10 Years: 2001 - 2010 Crop Year Grouping 10 Yr History 2001-2003 2004 - 2007 2008 - 2010 2010 2001 - 2010 Wtd. Avg Yield/Acre 1,810 1,830 2,172 2,200 1,943 Wtd. Avg Net Return/Acre $545 $1,854 $981 $1,331 $1,207 Wtd. Avg Value of 1 Mature Acre *1 $7,500 $14,000 $17,300 $18,000 $13,500 Pre-Tax Return on Asset *2 7.3% 13.2% 5.7% 7.4% 8.9% *1 Value of 1 Mature Acre - Source from the "Trends" in Agricultural Land and Lease Values Annual Report & cross checked with local land appraisers records. *2 ROA = based on weighted average market value of 1 acre of mature almonds for given period. Almond Grower ROA Target Range Almond Grower ROA Target Range ): (A Grower’s Perspective As an independent California Almond Grower and Investor, my opinion of an acceptable (“fair and reasonable”) Almond Grower ROA is the following range: • 10-20% Yearly Return on Asset • Supported by the expectations of other growers knowledgeable of the risks associated with Almonds Orchards based on at least a 20-25 year life. • Use 10% as a minimum target ROA. Return on Asset Analysis vs. Target Analysis of the most recent past 10 Years: 2001 - 2010 Crop Year Grouping 10 Yr History 2001-2003 2004 - 2007 2008 - 2010 2010 2001 - 2010 State-wide average per Acre Target Average Net Return @ 10% pre-tax ROA $750 $1,400 $1,730 $1,800 $1,350 Actual Average Net Return more/(less) than Target: ($205) $454 ($749) ($469) ($143) State-wide total $ more/(less) than Target (in millions) Average Annual Net Revenue vs. Target: ($111) $273 ($472) ($347) ($88) Crop Year Grouping Net Revenue vs. Target: ($334) $1,094 ($1,415) ($347) ($883)