How, When, and Why of Forest Farming

Unit 7 : Marketing Specialty Forest Crops
Section: 4.2

Set-up Costs

What Kind of Set-up Costs Can I Expect?

While start up costs vary by product, there are a few general approaches you can use to determine the costs specific to your enterprise. All costs, one-time and ongoing, should be considered. One-time costs may include equipment, licenses, or signs while ongoing costs may include utilities, hourly or seasonal labor, and insurance. More information about set-up costs can be found on the US Small Business Administration website

Understanding the difference between variable and fixed costs when estimating total production costs can also give you a better idea of how your costs will behave with respect to time and rate of production. Variable costs vary with different levels of output such as labor, packaging, and transportation of goods. Conversely, fixed costs remain the same regardless of the level of output such as taxes, salaried labor, and insurance.

Once you have calculated your anticipated total costs and anticipated yield you can then complete a breakeven analysis. Your breakeven price is the price per unit needed in order to pay all your costs of production and can be found by dividing your anticipated total costs by your anticipated yield.

Breakeven price = anticipated total costs / anticipated yield

Enterprise budgets [link section 2 on enterprise budgets] are particularly helpful in identifying both production costs and break-even production costs. Two such budget enterprises can also be found on the Maryland Cooperative Extension website.

Plot size 0.5 acre
Production time frame 9 years
 Price per pound$260 
root yield (lb) gross income
50 $13,000.00
75 $19,500.00
100 $26,000.00
Ginseng seedlb10$80.00$800.00
Planting laborhr160$6.00$960.00
Inspection/troubleshooting laborhr500$6.00$3,000.00
Harvest laborhr270$6.00$1,620.00
Drying laborhr16$6.00$96.00
Gypsum 50lbs16$4.00$64.00
Rock phosphate 50lbs16$8.00$128.00
Fungicide, rodenticide 1$75.00$75.00
Backpack sprayersprayer1$125.00$125.00
Hauling labor (150 mi. each way; 2 trips)hr16$6.00$96.00
Energy ($0.50/lb)  $37.50$37.50
Insulation, drying racks  $400.00$400.00
Miscellaneous (tools, chlorine bleach, heat, phone, etc.) 1 $100.00$100.00
Interest on costs$7501.55%$375.08
Total costs$7,876.58
Net income over costs 
 root yield (lb)$
 50 5,123.43
 75 11,623.43
 100 18,123.43
Budget developed by Andy Hankins, Virginia Experiment Station, 1999.
Income derived from growing 0.5 acre of wild-simulated ginseng depends on yield and future price.

1000-log operation
INCOMEyear 1year 2year 3year 4
Number of logs1,0001,0001,000800
(1) lbs mushrooms produced1002,2001500600
lbs sold (fresh) 20% cull rate801,7601500480
Price per pound$3.50$3.50 $3.50 $3.50
Total revenue$280.00$6,160.00$5,250.00$1,680.00
(2) 5" X 48" green oak logslog1000$0.75 $750.00
Mushroom spawngal2516$400.00
Polyfoam plugsbox312$36.00
High speed drilldrill1250$250.00
Drill bitsbit106$60.00
Water tanktank1100$100.00
Used refrigeratorsunit2100$200.00
Misc. (sprinklers/hose) 1100$100.00
Labor-drill, plant, cut plugs, plug, rackhr706$420.00
Labor-inspect & waterhr156$90.00
(3) Total establishment costs $2,406.00
FIXED COSTSyear 1year 2year 3year 4
Hauling, $0.44/mi., 200 mi.-yr. 1; 3,000 mi ea., yrs. 2-4$88.00$1,320.00$1,320.00$1,320.00
Boxes ($0.50/3 lb mushrooms)$13.00$293.00$200.00$80.00
Utilities ($0.07/Kwh)$25.00$200.00$200.00$200.00
Labor ($6/hr)
Soak/rack-yr 1: once x 1 min/log$100.00
Yrs 2-4: 4 times/yr x 1 min/log $400.00$400.00$320.00
Harvest (17.5 lbs/hr) $27.00$603.00$411.00$165.00
Hauling (wage x distance/40 mph)$30.00$450.00$450.00$450.00
(4) Total fixed costs$283.00$3,266.00$2,981.00$2,535.00
Establishment costs$2,406.00
Total costs$2,689.00 $3,266.00 $2,981.00 $2,535.00
(5) Net revenue over total costs($2,409.00)$2,894.00 $2,269.00 ($855.00)
(6) Break-even price @ this yield$2.61
(7) Break-even yield @ Price per lb.3,277.43
(8) Total labor costs$4,316.00
Total labor hours719.33
Prepared by Dale Johnson, Univ. of Maryland & Andy Hankins, VA State Univ.