By: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics
Budgeting helps guide you through your decision making process as you attempt to commit resources to the most profitable enterprises on the farm. Crops or Livestock? Corn, Soybeans, Wheat, Hay? We can begin to answer these questions with well thought out budgets that include all revenue and costs. Without some form of budgeting and some method to track your enterprises’ progress you’ll have difficulty determining your most profitable enterprise(s) and if you’ve met your goals for the farm.
Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of developing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.
Newly updated Enterprise Budgets for 2013 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website: http://aede.osu.edu/programs/farmmanagement/budgets
Enterprise Budget projections updated for 2013 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); Wheat-Conservation Tillage, (Grain & Straw); Alfalfa Hay; Alfalfa Haylage; Grass Hay, Swine-Farrow to Wean; Swine- Wean to Finish.
Our enterprise budgets are economic budgets. This means that, in addition to cash expenses and depreciation, opportunity costs of land, labor, management and capital are included. By including these costs we are able to estimate an economic profit which is different from an accounting profit. By including opportunity costs of labor and management in an economic enterprise budget, the user can determine whether the enterprise is economically viable in the time-frame being considered.
Using current input costs for Ohio row crops we find that the break-even price for corn to be between $4.98 and $5.31 per bushel (assuming 158 or 190 bushel production potential).
Using current input costs for Ohio soybean we find that the break-even price to be between $11.73 and $12.47 per bushel (assuming or 46 or 55 bushel production potential).
Our enterprise budgets are compiled on downloadable Excel Spreadsheets that contain macros for ease of use. Users can input their own production and price levels to calculate their own numbers. These Enterprise Budgets have color coded cells that allow users to plug in numbers to easily calculate bottoms lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers. Budgets include a date in the upper right hand corner of the front page indicating when the last update occurred.