An Economic Analysis Of Alternative Investment Opportunities In Apple Processing

The objective of this study was to evaluate the profitability of several alternatives for processing North Carolina apples. The investment alternatives include the production of canned slices, sauce, frozen slices, juice, vinegar, concentrate and essence, and butter. Small, medium and large size plants operating for three different lengths of season were evaluated in which only one of the products was produced. Other plants were designed to process two or more of the products. The plants wer e compared in terms of the internal rates of return expected from each operation. Many of the basic plants yielded rather high rates of return although some lines were ruled out either because they required a high proportion (greater than 18 percent) of the total North Carolina crop or because output levels represented a large proportion (greater than 10 percent) of the national market for that product. The juice plant was the most profitable. All the combined product plants were profitable, yielding rates of return greater than 20 percent at base prices. The plant producing juice and sauce was the most profitable combined-product plant. The profitability of apple processing was very sensitive to change in raw product and final product prices. The conversion rate from raw to finished product also greatly affected the profitability of each plant. Potential investors in processing facilities should find this study useful in planning their investment activities. Investment costs, equipment designs and specifications, and operating costs provide valuable background data for the industry. This information will assist investors in choosing among products and product combinations, sizes of plant, lengths of season, and prices required to attract an adequate raw product supply.