Etaferahu Takele, Area Farm Management Advisor, UCCE Southern California and Don Stewart, Staff Research Associate, Ag Issues Center

This article provides a sample estimate value of a lemon tree when a loss occurs due to fire or any other cause. Tree loss or damage by fire in southern California have occurred frequently (see a picture of an example of fire damage of citrus trees in southern California). Estimates may be needed for compensation.

The following example is calculated using the Trees and Vine Loss Calculator Excel Template Version 2.0.  the template is available for download at https://coststudies.ucdavis.edu/en/tree-vine-loss .   Tree loss values can be calculated in two options.  One, with replanting where loss is estimated until the replacement eventually generates equivalent income to what the old tree would have generat4ed.  The other option without replanting, the value of which is estimated over the expected life of the tree.  The reason for without replanting may be due to age of the orchard or there is an easement, tight of way, or other reason.

The template, as we described before requires only basic knowledge of Excel.  The formulas for calculations are embedded and a used guide/instruction page available with the template.  Only some data regarding the tree lost is needed which includes the age of the tree at loss; its productivity history; estimated life; product price; and some production costs such as harvest6ing and pruning (costs that will vary with age of trees: as well as a discount rate for calculating the net present value (NPV) of the loss.

The value of loss is provided in NPV which is a discounted cash flows due to the time value of money (TMV). TMV is the concept that money you have now is worth more than that expected in the future due to its earning potential through investment and changes caused because of inflation or other factors. The discount rate or the rate used to account for time, will depend on the type of analysis undertaken. The appropriate discount rate could be the opportunity cost of putting money to work elsewhere—simply put, it's the rate of return one could earn in the marketplace for an investment of comparable size and risk.

CALCULATING THE VALUE OF A LEMON TREE LOSS                                                                          

Option 1: With Replanting                

Assuming that a single tree in an orchard lost at age 7 and removed before harvest but too late to replant that year, and replanted the following year. The compensation is the sum of the annual differences between the net income that would have been realized if the tree had survived (had not been lost) and the net income that is realized from the replacement tree until the lost tree and the new planted tree reach the age of comparable yield.

Option 2: Without Replanting

The compensation is the present value of the net income that would have been realized if the tree had survived through its expected life. The expected annual loss from the lost tree equals the expected revenue minus the pruning and harvest costs that would have been incurred if the tree had not been lost. Costs for damage to investments such as irrigation systems or trellis systems are not included in this calculation and should be determined separately.                

Example:

In the example table below, The data for costs and income are based on the Sample Costs To Establish An Orchard And Produce Eureka Lemons study developed in 2020 for Ventura County. (https://coststudyfiles.ucdavis.edu/uploads/cs_public/38/fa/38fa8f9c-c93b-4c62-9740-a850bbc40df9/2020lemonsventuracounty.pdf. The loss value estimate was $436.70 for option with planting and 2,133.66 for option without replanting.

Data Entry and Printing                     

Data should only be entered into the yellow shaded cells in the General Data Input section. The spreadsheet is not password protected and should not be modified, otherwise the formulas will be messed up and the template will be out of use. The spreadsheet will automatically recalculate the net present value whenever new data is entered. Cells with zeros (0) in them will appear as blanks. The tree/vine spacing if not known or is on a non-square pattern, then the number of trees/vines per acre may be entered in the cell.   A default print page range is set in the spreadsheet so that the general input and cost sections will print when the print button is pressed. More instruction in the Template.