Many people are attracted to the idea of Christmas tree production because they perceive it to be a sound economic investment. This is probably true for both large and small scale levels of production. The following information should help you determine whether the investment in time, equipment, labor and money will bring the desired returns in any particular situation.
Initially, assuming you own the land necessary for the proposed operation, the most important questions are:

•What equipment is needed to plant, manage, harvest and market this product?
•What materials are needed for these operations?
•How much money must be invested before the start of return on investment?
•At what price do the trees have to be sold to break even, or how many trees have to be sold to break even economically?

This publication helps to budget for an initial 7-year period, (assumed to be a complete production cycle). By planning and figuring out probable costs and returns over this period, prospective and novice growers can assess whether Christmas tree production is a good investment.

Expenses
Cultural Practices
Site Preparation. Most of Kentucky's farm land or pastureland is covered with fescue grass. This highly competitive vegetation is not recommended as a ground cover for a Christmas tree plantation. Therefore, you must remove the fescue, either by plowing, herbicide treatment, or a combination of the two, and establish a different ground cover (e.g. legumes such as red or white clover, birdsfoot trefoil or dwarf lespedeza). Depending on which option you choose, you will have expenses for labor, heavy equipment (tractor, plow), light equipment (sprayer) and materials (seed). See Extension publications FOR-18 and FOR-19 before planting Christmas tree seedlings.
Planting. Seedlings can be planted by hand or by machine, depending on the particular terrain. Determine spacing and layout by the size of your available equipment (mower, tractor, etc.). The seedlings themselves will have a cost, whether you purchase or raise them (see Extension publications FOR-20,-21, and -22). Planting equipment will also have a cost, either for purchase, lease or to custom build. Mechanizing the operation (machine planting) may reduce labor costs, but may be less effective (lower survival rates). Beware of,such labor/equipment trade-offs.
Corrective Pruning/Splinting. In the first few growing seasons, constant monitoring of the seedlings on a year round basis is recommended, both to observe any problems in their earliest stages, and to remove double leaders, excess branches and double stems on the small trees. Seedlings which grow crooked in their first year or two can also be splinted to straighten them while they are still young and flexible. Broken leaders can be replaced by forcing a side branch to a vertical position and splinting it there for one growing season. Monitoring requires only hand pruners and perhaps dowels or tape or twist ties for equipment, but, if done regularly (e.g. once a week), it does take time that counts as a labor cost.
Vegetation Control. Probably the single most important cultural practice over the whole cycle of Christmas tree production is adequate vegetation control. Such control can be either mechanical (mowing) or chemical (herbicide treatment) or can be a combination of the two (see FOR-23). Reducing competition from surrounding vegetation simply means more water, nutrients and sunlight for your tree crop. Frequency of control measures varies with climate and rainfall and may be quite different from one part of the state to another. Probably a good rule of thumb is not to allow the vegetation to grow any higher than you would allow a lawn to grow before cutting it. In most years this may mean mowing once a week; in dry years, once a month or every 6 weeks; chemicals are applied as needed. Costs involve equipment, materials and labor.
Insect and Disease Control. As of 1989, few insect or disease problems affected Christmas tree plantations in Kentucky. There have been reports of bagworm, Nantucket pine tip moth, red-headed pine sawfly, needlecast diseases, scale insects and aphids on trees in various parts of the state. Constant monitoring of the plantation enables you to control whatever problems arise in their early stages. Consult the Christmas Tree Pest Manual (see Extension publications FOR-27 and FOR-34), which gives details of appropriate chemicals for each pest and correct times of application for control. Again, costs involve spray equipment and chemicals, but primarily time (labor).
Pruning and Shearing. Corrective pruning, using a hand clipper or hedge shears, should be done from the time the seedlings are planted and continued on the leader and top whorl until harvest. Shearing the trees to the appropriate cone-shape is started usually in the third growing season, or when the trees are about 2 ft tall (see FOR-26). In the early years, two-handled hedge shears may be the easiest way to shear; larger trees may be sheared more easily with shearing knives or a variety of electric or gas-powered machines. All pines except Virginia pine require shearing once, during the growing season; Virginia pine probably will require two shearings. Spruces and firs can be sheared at any time of year. Knives and clippers are far cheaper than shearing machinery, but are far more labor intensive. This is another labor/equipment trade off that you should investigate thoroughly to see what is most economical and sensible in your situation.

Harvesting and Marketing
Costs incurred at harvest time depend on the marketing method. Choose-and-cut operations bring the owners the highest dollar value on their trees, but the labor costs may be high. Wholesaling brings the lowest return, but the labor costs may be minimal. There are trade-offs in every situation (see FOR-28 and -29). Marketing costs can be minimal if you use free media attention. However, paid advertising, especially in electronic media, can be very expensive and may not produce enough response to justify the cost.

Miscellaneous
If a small proportion of the trees (say, 10% or less) are sold as live trees, and if you use greens from the bases of salable trees and from all unsalable trees for wreath-making, you may obtain income from the trees earlier in the production cycle (see FOR-30). Income from these secondary products can off-set costs in the early years and supplement major income from sale of trees in later years.
Constant surveillance of the plantation and regular recordkeeping of financial information and growing conditions, problems and peculiarities of the plantation, and labor costs should be considered in overall planning and operations budgeting.
As with any crop, information on how to grow most efficiently and economically and new ways of marketing are always changing. Contact the county Extension agent, the Extension specialist in Forestry at the University of Kentucky, and the Kentucky Christmas Tree Grower's Association for the most up-to-date information on Christmas tree production.

Budgets and Budgeting
What is an enterprise budget? It is a systematic listing of income and expenses for a production period of a commodity. The budget is used in financial control, forward planning, management control and marketing strategies. For Christmas trees, the production period is assumed to be 7 years. Although you cannot expect income until the last three years, the expenses are incurred monthly throughout the 7 years. Consequently, the budget not only looks at total outlays and revenues, but the timing of the receipts and expenses.
The projected income shows an expected yield (harvested trees) multiplied times an anticipated price per tree. Neither yield nor price are known for sure because the grower must look 7 years into the future.
Projected expenses are both variable (vary with the level of output, or per tree) and fixed (do not vary with level of output). Budgets are assembled based on prescribed production practices of top producers and research results plus grower records. Often the variable costs are calculated from prescribed practices whereas the fixed costs (taxes, insurance, depreciation, etc.) are determined from farm records.
What decisions can be made from budgets? Basically, a budget indicates if a farmer should grow or produce a commodity. A budget also helps allocate the use of production inputs (i.e., labor, equipment) among farm enterprises such as tobacco, cow-calf and vegetable farming, as well as within an enterprise such as Christmas trees. A word to the wise: be sure what costs have been included in a budget and do not compare returns from different sources--the budgets may not be comparable.
A budget is a guideline with extreme flexibility, not rigid dollars and cents figures. You should put your own costs for your Christmas tree plantation in the column labeled "your value" on the following budget. No two farms are alike and no two growers manage and make decisions alike.

Economics of an Example Kentucky Christmas Tree Farm
The following information is designed to be representative of the small scale, well-managed Christmas tree enterprise, planted in one acre blocks. The trees (seedlings) are manually planted on a 6' x 6' spacing, or 1,200 trees/acre. Of the planted trees, 1,020 trees/acre or 85%, are assumed to be harvested in equal amounts during the 5th, 6th, and 7th years on the farm. The cultural practices and general production assumptions follow the guidelines in other parts of the Kentucky Christmas Tree Production Workbook.
Christmas tree growers need specific machinery and equipment to grow and merchandise quality trees. The needs vary greatly with size of operation. The costs of such machinery and equipment will vary not only with scale, but also with newness, brand name and sophistication. The needs for a small scale operation are basically the same as for larger commercial plantations. Table 1 gives a representative list of machinery and equipment complements, including purchase price (in 1989 dollars). If you already own appropriate machinery or tobacco equipment that can be modified for use with Christmas trees, the start-up costs for equipment/ machinery will be lower.

Table 1. --Machinery & Equipment Complement for a 1 to 10 Acre Christmas Tree Enterprise

Machinery	List Price	Purchase Price	Years Owned	Hours Used Annually
20 H.P. Tractor with Hydraulic Front Loader	$9,000	$7,830	10	400
3.5' Rotary Mower	800	695	10	50
2-14" Moldboard Plow	1,100	960	10	20
4' Disk Harrow	800	695	10	50
50 gal. Mounted P.T.O. Sprayer with Boom	1,050	910	10	100
Mounted P.T.O. Granular Spreader	1,025	890	10	20
Pull-type P.T.O. Broadcast Seeder	275	240	10	20
Dump Trailer	535	430	10	50
Total Machinery	$12,650

 
 

Equipment	Purchase Price
15-I. Backpack Sprayer	$100
Shears (2)	50
Gas-powered Weed Trimmer with Blade	150
Pruners (2)	40
Knives (2)	35
Chain Saw	250
Bow Saw	10
Tree Baler	250
Leg Guards (pr)	40
Planting Bars (2)	50
Total Equipment	$975

The amount of labor and machine time required for necessary cultural practices is an important consideration, especially if you cannot use family labor but must hire labor. The machinery and labor requirements presented in Table 2, by month and activity within each year, are representative of well-managed Christmas tree farms using the machinery and equipment complements cited earlier.

Table 2.--Scots & White Pine: Labor & Power Inputs/Acre for Establishment & Growing Years*

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Site Preparation:
August	Clearing land	Custom hired	--	--
	Plow land	Moldboard plow	00.93	00.83
	Disk harrow (2x)	Disk harrow	01.48	01.33
	Test soil	Hand	01.00	--
September	Apply soil amendments	Rotary spreader, PTO	00.23	00.21
	Apply pre-emergence	Sprayer, PTO,
	herbicide	50 gal.	00.23	00.21
October	Disk harrow land	Disk harrow	00.74	00.67
	Seeding ground cover	Broadcast seeder pull-type	00.23	00.21
Total Site Preparation Labor Hours			04.84

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
First Year:
February	Apply pre-emergence  herbicide	Sprayer, PTO, 50 gal.	00.23	00.21
March	Grade, prune, planting, mulching	Tractor w/loader, dump trailer, misc. hand equip.	35.40	06.00
April	Monitor for pests & vegetation control	Hand	01.00	--
	Apply herbicide	Sprayer, PTO, 50 gal.	00.92	00.84
May	Vegetation control  & pest monitoring	Hand	01.00	--
June	Corrective pruning	Hand	03.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
September	Apply herbicide	Sprayer, B/P 4 gal.	04.00	--
Total First Year Labor Hours			48.22

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Second Year
January	Monitor animal damage	Hand	01.00	--
February	Survey frost heaving	Hand	01.00	--
	Survey winter damage	Hand	01.00	--
	Apply pre-emergence herbicide	Sprayer, 50gal. PTO	00.92	00.84
March	Corrective pruning	Hand	03.00
	Grading, pruning, replanting, mulching	Tractor w/loader, dump trailer, misc. equipment	05.10	02.00
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, PTO,  50 gal.	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Corrective pruning	Hand	03.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
September	Apply herbicide	Sprayer. B/P, 4 gal.	04.00	--
Total Second Year Labor Hours			25.61

*Power is given in %. For example, .83 hours equals 50 minutes. Labor is power plus 12%, assuming that a body always has to be with machinery or equipment and extra time may be needed for fueling, sharpening and moving equipment.

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Third Year:
January	Monitor animal damage	Hand	01.00	--
February	Survey frost heaving	Hand	01.00	--
	Survey winter damage	Hand	01.00	--
	Apply pre-emergence  herbicide	Sprayer, 50 gal.  PTO	00.92	00.84
March	Corrective pruning	Hand	05.00	--
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, PTO, 50 gal.	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Pruning & shearing	Hand	06.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
September	Apply herbicide	Sprayer, B/P, 4 gal.	04.00	--
Total Third Year Labor Hours			25.51

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Fourth Year:
February	Monitor animal & winter damage	Hand	01.00	--
	Apply pre-emergence herbicide	Sprayer, B/P, 4 gal.	06.00	--
	Test soil	Hand	01.00	--
March	Apply soil amendments	Hand	07.40	02.00
	Corrective pruning	Hand	05.00	--
	Basal pruning	Hand	06.00	--
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, PTO, 50 gal.	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Corrective pruning & shearing	Hand	11.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
September	Apply herbicide	Sprayer, B/P, 4 gal.	04.00	--
Total Fourth Year Labor Hours			47.99

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Fifth Year:
February	Monitor animal & winter damage	Hand	01.00	--
	Apply pre-emergence herbicide	Sprayer, B/P, 4 gal.	06.00	--
March	Corrective pruning	Hand	05.00	--
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, 50 gal. PTO	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Shearing & corrective pruning	Hand	16.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Tagging salable trees	Hand	02.00	--
September	Apply herbicide	Sprayer, B/P, 4 gal.	04.00	--
	Apply coloring material	Sprayer, B/P, 4 gal.	04.00	--
October	Apply insecticide	Sprayer, B/P, 4 gal.	06.00	--
November	Harvesting salable trees, (cutting, skidding, baling, loading, hauling)	Chainsaw, bagger, tractor & trailer	34.00	09.00
Total Fifth Year Labor Hours			84.59

 

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Sixth Year:
February	Monitor winter damage	Hand	01.00	--
	Apply pre-emergence herbicide	Sprayer, B/P, 4 gal.	06.00	--
March	Corrective pruning	Hand	05.00	--
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, PTO, 50 gal.	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Shearing & corrective  pruning	Hand	24.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Tag salable trees	Hand	02.00	--
September	Apply herbicide	Sprayer, B/P, 4 gal.	04.00	--
	Apply coloring material	Sprayer, B/P, 4 gal.	04.00	--
October	Apply insecticide	Sprayer, B/P, 4 gal.	06.00	--
November	Harvest salable trees (cutting, skidding, baling, loading,hauling)	Chainsaw, bagger, tractor & trailer	34.00	09.00
Total Sixth Year Labor Hours			92.59

Table 2. continued

Month	Type of Operation	Equipment Used	Hours Per Acre
			Labor	Power
Seventh Year:
February	Monitor winter damage	Hand	01.00	--
	Apply pre-emergence herbicide	Sprayer, B/P, 4 gal.	06.00	--
March	Corrective pruning	Hand	05.00	--
April	Vegetation control & pest monitoring	Hand	01.00	--
	Apply herbicide	Sprayer, PTO, 50 gal.	00.92	00.84
May	Vegetation control & pest monitoring	Hand	01.00	--
June	Shearing & pruning	Hand	30.00	--
	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
July	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Pest monitoring	Hand	01.00	--
August	Mowing	Rotary mower, PTO, 3.5'	00.89	00.79
	Tag salable trees	Hand	02.00	--
September	Apply herbicide	Sprayer, B/P, 4 gal.	04.00	--
	Apply coloring materials	Sprayer, B/P, 4 gal.	04.00	--
October	Apply insecticide	Sprayer, B/P, 4 gal.	06.00	--
November	Harvest salable trees (cutting, skidding, baling, loading, hauling)	Chainsaw, bagger tractor & trailer	34.00	12.00
Total Seventh Year Labor Hours			98.59

Successful production depends on pest and vegetation control and possibly on use of fertilizers or irrigation. Rates, number of applications, appropriate herbicides and insecticides, and chemical costs for these activities are based on other sections of the workbook, plus current over-the-counter prices of the materials. A general purpose fertilizer and appropriate soil amendments are assumed to be needed. Of course, you should take soil samples before establishing your Christmas tree plantation to determine what, if any, soil amendments are necessary.
The budgeted annual costs for the Christmas tree farm are shown in Table 3 on a per acre basis. Both operating and ownership costs are included for the machinery, equipment and tractor. The total cost of producing an acre of Christmas trees, including all the costs of establishing and growing costs over the 7-year planning horizon, is $6720.87. Labor costs account for 31% of the total cost.

Table 3.--Scots & White Pine: Estimated Establishment & Growing Costs/Acre, 0-7th Years

Item	Unit	Price	Quantity	Value	Your Value
Site Preparation:
Land clearing	acre	$0500.00	0001.00	$0500.00
Soil amendments	cwt	0010.25	0006.50	0066.63
Clover seeds	bu	0009.59	0001.00	0009.59
Herbicide	acre			0085.97
Tractor	acre			0010.91
Machinery	acre			0007.75
Labor:
Machinery	hour	0004.85	0003.84	0018.62
Hand	hour	0004.85	0001.00	0004.85
Annual operating capital	$	0000.10	0162.19	0016.22
Total Site Preparation Costs				0720.54

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
First Year:
Seedlings (2-0)	each	$0000.05	1200.00	$0060.00
Herbicide	acre			0075.75
Tractor	acre			0027.72
Machinery	acre			0019.18
Equipment	acre			0007.84
Labor:
Machinery	hour	0004.85	0009.82	0047.63
Hand	hour	0004.85	0038.40	0186.24
Annual operating capital	$	0000.10	0135.75	0013.58
Net accumulated establishment cost	$	0000.10	0720.54	0072.05
Total First Year Expenses				0509.99

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Second Year:
Seedlings (2-0)	each	$0000.05	0180.00	$0009.00
Herbicide	acre			0075.75
Tractor	acre			0025.38
Machinery	acre			0021.23
Equipment	acre			0007.84
Labor:
Machinery	hour	0004.85	0007.51	0036.42
Hand	hour	0004.85	0018.10	0087.79
Annual operating capital	$	0000.10	0084.75	0008.48
Net accumulated establishment cost	$	0000.10	1230.53	0123.05
Total Second Year Expenses				0394.94

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Third Year:
Herbicide	acre			$0075.75
Tractor	acre			0022.50
Machinery	acre			0020.65
Equipment	acre			0007.84
Labor:
Machinery	hour	0004.85	0004.51	0021.87
Hand	hour	0004.85	0021.00	0101.85
Annual operating capital	$	0000.10	0075.75	0007.58
Net accumulated  establishment cost	$	0000.10	1625.47	0162.55
Total Third Year Expenses				420.59

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Fourth Year:
Herbicide	acre			$0075.75
Tractor	acre			0020.82
Machinery.	acre			0016.95
Equipment	acre			0019.60
Labor:
Machinery	hour	0004.85	0005.59	0027.11
Hand	hour	0004.85	0042.40	0205.64
Annual operating capital	$	0000.10	0075.75	0007.58
Net accumulated establishment cost	$	0000.10	2046.06	0204.61
Total Fourth Year Expenses				0578.06

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Fifth Year:
Herbicide	acre			$0075.75
Insecticide	acre			0056.95
Coloring material	acre	0050.00	0001.00	0050.00
Baling & tags	each	0000.45	0400.00	0180.00
Advertising	acre	0050.00	0001.00	0050.00
Tractor	acre			0030.90
Machinery	acre			0018.98
Equipment	acre			0021.52
Labor:
Machinery	hour	0004.85	0012.59	0061.06
Hand	hour	0004.85	0072.00	0349.20
Annual operating capital	$	0000.10	0412.70	0041.27
Net accumulated establishment & growing costs	$	0000.10	2624.12	0262.41
Total Fifth Year Expenses				1198.04

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Sixth Year:
Herbicide	acre			0075.75
Insecticide	acre			0056.95
Color material	acre	0050.00	0001.00	0050.00
Baling & tags	each	0000.45	0400.00	0180.00
Advertising	acre	0050.00	0001.00	0050.00
Tractor	acre			0030.90
Machinery	acre			0018.98
Equipment	acre			0021.52
Labor:
Machinery	hour	0004.85	0012.59	0061.06
Hand	hour	0004.85	0080.00	0388.00
Annual operating capital	$	0000.10	0412.70	0041.27
Net accumulated establishment  & growing costs	$	0000.10	3822.16	0382.22
Total Sixth Year Expenses				1356.65

Table 3. continued

Item	Unit	Price	Quantity	Value	Your Value
Seventh Year:
Herbicide	acre			0075.75
Insecticide	acre			0065.95
Coloring material	acre	0050.00	0001.00	0050.00
Baling & tags	each	0000.45	0400.00	0180.00
Advertising	acre	0050.00	0001.00	0050.00
Tractor	acre			0035.22
Machinery	acre			0019.85
Equipment	acre			0027.98
Labor:
Machinery	hour	0004.85	0015.59	0075.61
Hand	hour	0004.85	0083.00	0402.55
Annual operating capital	$	0000.10	0412.70	0041.27
Net accumulated establishment & growing costs	$	0000.10	5178.81	0517.88
Total Seventh Year Expenses				1542.06
Total Establishment and Growing Costs				6720.87

If family labor is available so that only 50% of the labor hours are hired. total costs decrease 16%. Some hired labor is usually required, but hiring only 25% of the labor lowers total production costs per acre by nearly 25%.
Cash flow (net and accumulated) over 7 years for the one-acre block is presented in Table 4. Net annual return or cash flow is the difference between revenue received and total expenses paid within a 12 month period. Accumulated net returns are the sum of the annual net returns to date for the production period. Both net annual return and accumulated net returns to tree sales are positive at the end of the fifth year, according to the underlying assumptions of this budget. Only tree sales were assumed; wreath sales and live tree sales in years 3 and 4 could push toward positive cash flow in those earlier years.

Table 4. --Scots & White Pine: Estimated Revenue and Returns to Land, Overhead, and Management, 0-7th Years (dollars/acre)*

Year	0	1	2	3	4	5	6	7
Receipts	--	--	--	--	--	4640	4640	4640
Costs	721	510	395	421	578	1198	1357	1542
Net annual return to tree sales	(721)	(510)	(395)	(421)	(578)	3442	3283	3098
Accumulated net returns to tree sales	(721)	(1231)	(1626)	(2047)	(2625)	817	4100	7198

* Assumes: Total salable production of 1020 trees, or 340 trees per year, marketed annually as:
140-5' trees @ $12 each = $1680
120-6' trees @ $14 each = $1680
80-7' trees @ $16 each = $1280
Total tree receipts = $4640/year
(harvestable trees)

Considering various amounts of hired labor and various numbers of trees being sold at alternative selling prices, Table 5 shows what effect these various combinations of variables have on the net returns to the one-acre block. The calculated market rate of return is 12.89% for the Christmas tree farm in this publication (Tables 4 and 5). Few investments are available to small scale farmers which yield a comparable rate of return to land, overhead and management.

Table 5. --Net Returns on Land, Overhead and Management for Various Combinations of Trees Sold and Amount of Hired Labor Used on 1 Acre of Scots and White Pines

Number of Trees Sold	Selling Price/Tree
	$8	$11	$14
All Hired Labor
1000	$1279	$4279	$7279
750	(721)	1529	3779
500	(2721)	(1221)	279
50% Hired Labor
1000	2317	5317	8317
750	317	2567	4827
500	(1683)	(183)	1317
25% Hired Labor
1000	2836	5836	8836
750	836	3086	5336
500	(1164)	336	1836

*Parentheses ( ) indicate a negative net return. Money is coming, but expenses still exceed assets.

To recover all expenses, at what selling price does each tree need to be sold, or how many trees need to be sold to repay all expenses from the one-acre block? The answers indicate the breakeven points at which a profit can be realized. Breakeven selling prices (per tree) and the breakeven number of trees to be harvested and marketed from the one-acre block are provided in Table 6 with various assumptions about how much hired labor you use. Land purchase or lease is not included in any of the calculations for the budgets; neither is a management cost for the owner-operator nor family living expenses.

Table 6.--Breakeven Sales Quantifies and Breakeven Selling Prices for Various Combinations of Trees Sold, Selling Prices and Amounts of Hired Labor for 1 Acre of Scots and White Pines

Number of  Trees Sold	All Hired  Labor	50% Hired Labor	25% Hired  Labor	Per Tree  Selling Price
Breakeven Selling Price (S/tree)
1000	$ 6.71	$ 5.68	$ 5.16
750	$ 8.95	$ 7.57	$ 6.88
500	$13.42	$11.35	$10.31
Breakeven Sales Quantity (trees/A)
	480	406	369	$14
	610	516	469	$11
	839	710	645	$ 8

Assumptions and Observations
•Prices for machinery complements (Table 1) and inputs (Table 3) are 1989 budgeted costs.
•Application rates and frequency of application of consumable inputs are recommendations for the growing conditions in North Central Kentucky.
•Figures in Table 3 are from a standard agricultural economic budget generator, which should be available from the Agricultural Economics Department of any land-grant university. It is based on the growing conditions, soils, etc. for that state.

Summary Remarks
Returns from an investment in Christmas tree production may appear high and, as a result, look attractive and tempting. Remember you must make substantial investments for both labor and capital for several years before you realize any positive net returns. A well-planned marketing program is also essential for a successful Christmas tree enterprise. As more Christmas trees are grown, the market becomes more uncertain. Closely evaluate the market potential and develop market plans and strategies before investing.
Six rules of decision making for probable success in Christmas tree production are (1) analyze the markets, (2) determine resource limits and management capabilities, (3) estimate enterprise costs, (4) set profit objectives, (5) analyze alternatives to meet objectives, including risk-bearing capabilities, and (6) take action, including reaction to correct or update strategies and budgets.