Dec 12, 2022

Family orchard RJK Farms battles rising costs

A Washington father and his sons keep their tree fruit operation competitive in challenging times by adjusting business practices and mitigating rising costs.

A third-generation farm, RJK Farms grows apples, cherries and pears. Kent Karstetter and his sons Brady and Mitchell grow on 450 acres. Apple varieties include Galas, Honeycrisps, Juici Delites, Karmas, Granny Smiths and organic Goldens for processing. RJK’s 1,200 total farm acres include hay and row crops, plus an additional 2,000 leased acres.

Quincy, Washington’s RJK – named after Kent, his father Richard and brother Jerry – began in 1961 when the elder Karstetter, a firefighter who died in 2021 at 86, joined some investors. By 1990, the two brothers and father became the remaining investors. The orchard is one of the oldest high-density orchards using dwarf trees in existence.

While investors can financially help an organization, it can come at a cost, including deferred maintenance preferred by investors who want quick returns. The elder Karstetter points to a neglected grove in renewal that relied on band-aid approaches. Trees were grafted, which only works for a decade, instead of more permanent replantings. 

Skyrocketing costs and input shortages forced the Karstetters to prepay for supplies, including fuel. Recently, they purchased $70,000 worth of liquid nitrogen, which won’t be used until next fall. It’s a hedge, betting prices could shoot to $100,000. Because advance purchases can wreck a farming operation’s budget, growers are reluctant to pay far in advance. But, if they don’t, they may not receive the product when needed.

Battling costs

To help ensure adequate supplies in an uncertain marketplace and gauge profitability, RJK keeps its finances live, within a week or two in its books. The move was inspired by a neighboring field corn farmer who pays on net 7 days. When making deals, RJK is careful to wait until closing before signing-up for what they think prices could be. 

“It’s a constant moving target, a constant indefinite, that keeps you on your toes,” Brady Karstetters  said. “Every single day and week, it’s another challenge. You must reevaluate and consider the world we’re living in, where it’s all about efficiencies. You make the wrong hedge, it could be the last. You have to be a better bookkeeper now more than ever.”

The orchard made changes, including composting annually instead of every couple of years. “Commercial fertilizers are like a shot of tequila,” Kent Karstetters said. “Compost is like a glass of wine because it has to kind of sit there and go through all the different processes and is a lot slower approach.”

When soil tests reveal imbalances, commercial fertilizers can quickly supplement the soil, while composting is expensive. Compost supplies, however, are limited. Planning ahead and reserving a spot on a supplier’s list is critical.

Beating break-even

The way costs are, growers wanting to stay in the top categories of varieties must be willing to invest for the highest qualities and yields, the only products the marketplace demands. Producing break-even crops aren’t sufficient for long-term farm profitability.

“If you farm that break-even apple one or two years too many, you will go broke because you won’t have the money to renew,” Kent Karstetters said. “You need the winners to help renew your losers.”

In the late 2010s, RJK Farms was forced to dump 800 bins of Honeycrisps worth $750,000 when blisters appeared.

“You cannot have a crop failure,” he said. “There’s nothing like a good ass-kicking that makes you learn because you don’t forget it. When it’s someone else’s money, yeah, you got slaughtered. But there’s nothing like feeling it. When you feel it in your wallet, you never want to make that mistake again.”

In 2009, RJK added cherries and pears. It started cherries to prevent losing apple pruning labor to neighboring cherry growers. Warehouses don’t like dealing with small cherry growers, Kent  said, so success dictates becoming a large cherry grower.

Pears were added to fill holes in packing windows. 

Pears, which enter production slowly, have proven more challenging because of higher costs, including sprays, which are more expensive than other tree fruit.

“Returns have not been as good,” Kent Karstetters said. “There’s not a lot of people doing pears here. That’s why we got into pears. The jury’s still out on whether they’re good or bad. We definitely make more money on apples and cherries, but pears are something different.”

While Kent Karstetters is excited about the future, he’s also wary, noting that large ag operations that buy up land make it difficult for new entrants to compete. If you’re not already into farming and don’t have boots on the ground, or if you buy into a farm, the costs are high, making it prohibitive for young people to enter the field.

“It’s scary for my children,” Kent Karstetters said. “What I pay for ground used to be what I would pay to plant the orchard. The costs to plant an acre of orchard has gone up 250%.”

Also, regulations make it tough for young growers.

“We’re not in as much control as the last couple generations have been with their futures,” Brady Karstetters said. “We have to compete with a lot bigger people. It’s making it extremely hard to get in on the ground.”

The Karstetters maintain hands-on orchard management.

“You’ve got to get out and go inside the orchard and look at it,” Kent said. “The tree will tell you what it needs.” 

— Doug Ohlemeier, assistant editor

Photo: Mitchell (from left), Kent and Brady Karstetter run RJK Farms. The Washington apple, pear and cherry farm is changing its business practices to help counter rising costs and supply shortages. Photo: Doug Ohlemeier

Correction note: A headline incorrectly stated RJK’s company name. Fruit Growers News regrets the error.