The mushroom industry over the last period has become more and more difficult to succeed in. Costs have continually increased and returns have decreased making mushroom growing less profitable. Many growers have been lost to the industry and existing growers are experiencing a major drop in their income!
In these circumstances it is very important for all growers to scrutinise and examine their business closely in order to try to maximise their profits. To facilitate this process I have put together an excel worksheet that allows growers to examine their profitability. This spreadsheet permits growers to put in their own figures and values. On doing this they can see their level of profit. More importantly it allows growers to examine the effect of changes in their production system. Values can be changed on the spreadsheet and an automatic change in the bottom line will be visible. I have shown this spreadsheet to many growers over the last period (and indeed many growers have their own programmes already for this process).
I enclose a copy of two sets for figures (situation 1 in €euro and situation 2 in £sterling). The example shown is based on a 5-house unit, cropping 26 crops per year, yielding 500 lbs per tonne and receiving 86 cent or 55 pence/lb for their mushrooms. With the figures I have used returns of €30431 and a production cost of .78 cent per lb is achieved in the € example. In the sterling example a return of £19,358 is achieved with a cost of production per lb of 50 pence.
I expect at this stage that a lot of growers reading this article - (if any growers are reading it) - are saying to themselves ‘I am not making €30,000 - I am losing money! Or the price for mushrooms is too high, the price of casing & chemicals too high! Indeed there may be many others figures or values that they disagree with! The figures that I have used have been based on information supplied by growers but I know that there are many shortcomings in the situations included.
For example no figures for repayments, permanent labour or maintenance are included in these examples. In a sense however this is not important, as the main point of this spreadsheet is to show the effect of change on your production system after growers have added their own figures.
At this stage I want to return to the example, which I have included and examine certain changes and the effect that these will have on the bottom line!
1. The effect of a change in yield.
Situation
€Euro
£Sterling
Present -500lbs/tonne
€30,431
£19,358
At 450lbs/tonne
€15,361
£9,721
At 550lbs/tonne
€45,501
£28,995
2. The effect of a change in price.
Situation
€Euro
£Sterling
Present-86c or 55p per lb
€30,431
£19,358
At 81c or51.8p per lb
€16,781
£10,622
At 91c or 58.2p per lb
€44,081
£28,094
Both 1 & 2 above show the major effect on margin of changes in both yield and price. Of course many growers are probably saying ‘if I could get that extra 50lbs per tonne or 5 cent extra per lb I would do so! Writing about it, won’t put it in practice!' This is true of course - but it is no harm being aware of the effect on your margin that these changes will result in!
Also in the next examples we will examine the effect of changes while maintaining your current performance.
3. The effect of adding extra tonnage to your house.
Situation
€Euro
£Sterling
Present- 21 tonne
€30,431
£19,358
At 17 tonne
€21,071
£13,352
At 25 tonne
€32,291
£20,481
At 25 tonne after one year
€39,791
£25,281
In the above examples I assume a once off payment of €7500 (€1500 per houses) for simple staging for the additional compost. Please note that after the first year this can be added to the margin. Extra (or less) costs for casing, chemicals, and labour are included where relevant.
This example shows the major effect that extra tonnage has on margins. It should also be noted that in some areas growers are putting up to 30 tonne in their houses using basic simple shelving.
This example also highlights the danger of dropping tonnage or fill weights if growers move to a single layer of blocks.
4. The effect of adding additional houses.
Situation
€Euro
£Sterling
Present- 5 houses
€30,431
£19,358
moving to 7 houses
€42,311
£26,896
7 house with extra tonnage(25t)
€46,355
£29,379
In this example I assume that a new house costs €20,325 . This gives a repayment of €4939 per year over 5 years at an interest rate of 8%. Therefore for 2 houses the repayment is €9878 . Moving from 5 houses to 7 growers obtain the benefit of the 2 extra houses plus the advantage of a shorter cycle which is not really possible with 5 houses (assume that the cycle is moved from 10 weeks to 9 weeks). We can see the dramatic effect of extra houses plus extra compost.
5. The effect of phase 3.
Assuming 1 tonne less fill and cost of compost 180 € per tonne. Also assuming a 7-week cycle (crops/year move from 26 to 37).
Situation
€Euro
£Sterling
present- 500lbs on phase2
€30,431
£19,358
550lbs per tonne on phase3
€21,189
£13,388
600lbs per tonne on phase 3
€41,613
£26,449
650lbs per tonne on phase 3
€62,037
£39,510
From this we can see clearly that good, highly productive phase 3 increases margins dramatically. However if phase 3 performs poorly it results in a performance much worse than phase 2 because of the extra costs involved with phase 3.
6. The effect of converting to Dutch shelving.
Situation
€Euro
£Sterling
present- Phase2 conventional system
€30,431
£19,358
a)Dutch Shelving; 6 rows phase 2
€7,944
£4,963
b) Dutch Shelving; 9 rows phase 2
€44,888
£28,579
c) Dutch Shelving; 9 rows phase 3 &550lbs per t
€22,514
£28,579
d) Dutch Shelving; 9 rows phase 3 &650lbs per t
€80,786
£53,419
Effect of Dutch shelving Assume yield goes up 50 lbs per tonne to 550 lbs/tonne
a) 6 shelves. Assume fill wt of 20 tonnes and repayment of €32913 per annum over 5 years. This is based on a cost of €135,444 for shelving/equipment cost. I used an interest rate of 8% and as with all examples the calculation is based on a 5 house unit.
b) 9 shelves Assume a fill wt of 30 tonnes and same yield increase. Repayments go to €37673. This is based on a cost of €155,034 for shelving/equipment based on a 5 house unit and 8% interest rate. (Certain costs are increased such as casing & chemicals in the 9 shelf examples).
c) 9 shelves and phase 3. Price of compost increases and shorter cycle of 7 weeks. Yield assumed of 550 lbs /tonne.
d) This is the exact same situation as above but yield is assumed to be 650 lbs/tonne:
Please note: Please note that investment in Dutch shelving requires a lot of analysis before a decision is made. The above examples are but a few of the possible permeations. Many factors influence the decision and its ramifications for growers. However we can make certain conclusions.
It is essential to increase tonnage levels when moving to a Dutch shelving situation.
The larger the unit the easier it is to justify Dutch shelving as equipment cost is spread over many houses and is thus less per house.
The availability of grants also has a major effect on a grower’s investment decision.
Using phase 3, phase 2 ½ or spawn run compost generally makes sense with Dutch shelving.
Summary: 1) This article and the accompanying spreadsheets are designed to encourage growers to scrutinise their business closely. The figures included are not to be taken as 100% accurate and are merely for illustration purposes.
2) The effect of small changes in both price & yield has a major affect on profitability.
3) Increasing tonnage within your existing houses has a major impact on profitability. In my opinion this is the simplest but also the most important message to come from this article.
4) The present trend is for growers to expand to larger units. This again is a profitable optimum.
5) When phase 3 is good, it is highly profitable to go down this route, but if it performs poorly phase 2 is a better option.
6) Dutch shelving is an option but leads to complex decisions regarding whether it is right for individual growers. Factors such as fill weight, unit size and availability of grant aid are important in making this decision.
