SOLUTION: UG Tis the Season for Planting and The Christmas Tree Operation Case Study

Tis the Season for Planting
Nicole sat at the kitchen table contemplating the offer that her parents had extended to her.
Graduation was coming in June, six months away. Like the rest of her class in Agricultural
Management, there were many job opportunities available working in the agriculture industry
extending from equipment manufacturers, seed suppliers, other input suppliers primarily in marketing
but also in the finance field with the banks and leasing companies. Wages ranged from $45 thousand
to $60 thousand to start in the Agriculture industry. But like many of her class there was also the
opportunity to return home to the family business. In Nicole’s case her family farm located
approximately 45 minutes north-east of Toronto was a mixed vegetable and fruit producer
complimented by the market that the family ran selling not only their fresh produce but also organic
meat from neighbours who also rented a pasture from them, and some locally sourced crafts, canned
produce and baked goods.
The Ball family farm had been in the family for over 3 generations and Nicole and her older sister
would be the next generation. But her parents were not about to retire just yet. At 55 and 54, Nicole’s
parents planned to work for another 5 to 10 years and required a continuing income from the farm
and market. Nicole’s older sister was managing the market and distributing some produce to other
local farmers’ markets closer to Toronto generating a reasonable income for herself. Currently, her
income was complimented by her husband’s income from working at a local farm supply firm.
The farm and market currently faced a complete shutdown from Hallowe’en until the Summer
Agricultural workers arrived in April from Mexico. At that time about $50,000 was spent on the travel
arrangements, accommodations and wages for the staff and for new plants such as strawberries,
tomatoes and peppers. The market would commence limited sales usually around the middle of May
and preferably before the May long weekend. Full sales would start to occur in early June with
produce such as radishes and peas and the baking and meat products. Other farm expenses and
family living expenses had to funded from the cash that had been realized from the sales during the
previous year. The Family was reluctant to borrow any money except for large ticket items such as
buildings, land or equipment.
The opportunity for Nicole was a new venture for the family. The pasture at the back of the farm,
considered poor land for crops, generated revenue of $250 per year per acre on 10 acres. But there
was another possibility. Recently it had become apparent that the farmers market was in a good
location to sell Christmas trees. Customers would face a nice drive from Toronto and its environs, to
come and cut a tree each year or buy a tree precut by the farm staff (Nicole). And in the past few
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years prices had been climbing to over 40 dollars per tree. Nicole wondered if the Christmas tree
market would do more than just sell trees but also extend the season for the farmer’s market beyond
the Hallowe’en season. Crafts, canned goods, meat and other products could be continued to be
offered and provide income for Emily her sister, the market assistant and their local suppliers.
Nicole looked at her parents’ financial statements and realized that her skills from her degree would
help her assess the potential for the opportunity. But she would also have to consider other issues
such as the cost of planting the trees, purchasing the trees, the opportunity costs of the lost revenue,
other costs such as annual management of the field of trees all while recognizing that the first tree to
reach the market from seedling plantings would not occur for at least 5 and more likely 6 or 7 years.
Trees if one was lucky would grow upwards of 30 cm per year and the seedlings started between 20
and 30 cm in height. The seedlings were priced at $1 each but if the costs were in line with most tree
plantings in commercial settings the total cost would be $10 per tree including labour. It had been
estimated by the local nursery that they could plant upwards of 2000 trees per acre. Three to four
times a year the plantings would require shaping with a trimmer and that process would take an
experienced individual 5 – 10 minutes per tree. Some trees would die each year and when a tree was
cut another would need to be planted to replace the sold or dead tree to ensure a sustainable
venture. Other costs would also apply such as pesticides, fertilizer and eventually equipment to wrap
trees and the use of the farm tractor and trailer for weekly watering in the first year of planting.
Maintenance would be necessary to keep the weeds cut and that would take at least one day a week
during the growing season from late April to late September, again using the farm tractor with the
PTO weed cutter.
Over the past few summers and when home from school at Christmas and reading week, Nicole had
earned income at a local goat farm that milked 800 does a day and had another 200 to 250 kids and
bucks for breeding requiring caring. But like most farms in her county, Hillside Farms was a family
business and Floyd the owner was honest in expressing there would only be hourly wages available
as his daughters also wanted to return home to manage their family business. Still, Floyd had said
that Nicole could work there anytime she wanted as labour was scarce in the rural market and Nicole
was not afraid to do the work that was needed. Her current wages were $17 per hour but Floyd
offered $18 per hour if she would work full-time year-round.
It was time to make sense of the numbers.
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Ball Farms Financial Statements, December 31, 2020
Balance Sheet
Accounts Receivable
Other Current Assets
Current Assets
Accrued Depreciation
Fixed Assets
Total Assets
Accounts Payable
Wages Payable
Other Payables
Current Liabilities
Long Term Debt
Net Worth
Total Liabilites and Equity
Income Statement
Cost of Goods Sold
Gross Profit
Sales and Admin Expenses
Operating Profit
Net Income
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