In Poland, agriculture and horticulture face many challenges, both general and sectoral. Low purchase prices of agricultural products, including apples, are becoming a serious problem for producers of agricultural produce and fruit. Many factors can affect these prices, including overproduction, competition with imports and changing weather conditions. For fruit growers, high production costs and increasingly lower purchase prices – below production costs – are often an insurmountable challenge. Owners of indebted farms are unable to repay their loans and are forced to close their current operations. Technomaszbud cooperates with a partner company that specializes in debt relief for farms, their restructuring and business transformation into other sectors of the economy. Below I present one of the cases.
After 35 years of running a small orchard farm (1,000 tons of apples/year), the owner decided to stop production. It was difficult for him to decide on this and, as he said, the process of maturing to this decision took about 2 years. The reason for this decision was the growing debt from year to year. In 2021, the prices of commercial grade apples dropped dramatically to 0.08 Euro/kg, and have now stabilized at around 0.20 Euro/kg. However, these prices do not allow repaying previously taken loans.
On the initiative of the partner company, which focused on the restructuring of agricultural and fruit farms, a meeting was held at the Technomaszbud headquarters in Warsaw, the purpose of which was to determine the client’s capabilities and select the most profitable area and potential sales market. Technomaszbud is active in two sectors: agro and wood biomass, and produces lines for the production of granulated feed and wood pellets. Due to the location of the current business, which is the “garden area” near Grójec/PL, a new sector of activity was naturally chosen. The choice fell on the production of fuel pellets. The key determining factors were the close availability of raw materials, the growing year-on-year demand for clean wood biomass fuel and available infrastructure. The owner of the orchard farm has 2 small cold storage halls, 1 warehouse building and an electrical connection of approximately 65 kW.
Together we had to:
- analyze data and forecast demand;
- optimize production processes;
- analyze aspects of marketing and sales (create Business Plan);
- identify possible risks and how to deal with them.
For production, we have proposed a complete LDG-3000 KOMBI pellet production line, which additionally includes an MB-500 hammer mill, an SA-600 aerodynamic sawdust dryer with a PS-1500 feeder, an LCP-600 pellet cooling and packaging line and a pallet wrapper X100. The capacity of the line is approx. 500 kg/hour for sawdust from coniferous biomass and can be expanded to approx. 1000 kg/hour depending on future demand.
The problem we had to face together were inconvenient single hall areas in which separate machines had to be placed along the production line. Our designers individually designed some of the auxiliary equipment, while the farm owner had to demolish one partition wall separating both halls.
Ultimately, the scheme for setting up the machines on an area of 13x12x4 m (length x width x height) looks like this:
Draft 1
Draft 2
Draft 3
Summary
The accepted business strategy assumes annual production and sale of fuel pellets at a level of about 900 tons. We divided the amortization of the line costing about 81,000 euros over 5 years. The cost of infrastructure is low because the owner has his own premises. The production line requires 2 employees. The owner’s involvement allows us to further reduce the production cost. The cost of wet raw material is approximately 14 Euro/stere, and the cost of electricity is 0.28 Euro/kWh. The assumed sales price of pellets of EUR 230/ton net allows us to generate an annual profit before tax of approximately EUR 29,000.
After a year of work, the owner shared his first impressions. Expectations have been met, but the biggest problems it faces are unstable raw material prices, concerns about energy costs and whether pellets will be recognized as ecological fuel throughout the EU and for how long. Apple orchard cultivation brought annual losses of approximately EUR 11,000 in 2020-2023.
The decision to change the business profile turned out to be the right one. The former fruit grower looks to the future cautiously but optimistically.