Budgeting Decision Tools - Texas A&M University
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Budgeting Decision Tools Samuel D. Zapata Assistant Professor & Extension Economist Master Marketer Seminar Series 10-01-20
Transcript of Budgeting Decision Tools - Texas A&M University
Budgeting Decision Tools
Samuel D. ZapataAssistant Professor & Extension
Economist
Master Marketer Seminar Series10-01-20
Enterprise Budget
n Detailed representation of revenues, costs, and profits associated with the production of agricultural products.
REVENUES- EXPENSES
PROFIT
Determining Your Numbers
n It is essential to keep recordsq Yieldsq Price receivedq Production activitiesq Input pricesq Input quantities
n Consistent estimates require at least twoproduction cycles
Production Records To Use
n Grand Average:q All records
n Rolling Average:q Most recent
n “Olympic” Average:q Eliminate top and
bottom
1 2 3 4 5
Valu
e
Production Cycle
1 2 3 4 5
Valu
e
Production Cycle
1 2 3 4 5Va
lue
Production Cycle
Cost Allocation Considerations
n Single farm with different enterprisesn Same inputs are used by several enterprisesn Define the appropriate units:
q Unit of area: n per acre, plot, greenhouse
q Unit of product: n per Ton, per head, per bushel
CORN BUDGET
Revenue
Expenses
CORN BUDGET
Variable Costs
Fixed Costs
CORN BUDGET
Inputs
CORN BUDGET
Quantities Used
CORN BUDGET Prices
CORN BUDGET Dollar Value ($/ac)
CORN BUDGET Enterprise Size
EnterpriseValues
Uses of Enterprise Budgets
n Estimate the profits of the entire farmn Identify the most profitable crops n Analyze the financial impact of production
decisionsn Price estimationn Identify the major sources of production costn Support farm loan applications
Breakeven Analysis
n Breakeven price:q Minimum price per unit required to cover all projected
costs
q Breakeven price = Expected costExpected yield
n Breakeven yield:q Minimum yield required to cover all projected costs
q Breakeven yield = Fixed costExpected price – Average variable cost
Breakeven Analysis
CORN BUDGET
Breakeven Price –Variable Costs
Breakeven Price –Total Cost
Enterprise Budget Resources
n Available tools:q Texas crop and livestock budgetsq Spreadsheet budgets – build your ownq Machinery Cost Estimator
Online search: “AgriLife crop budgets”
https://agecoext.tamu.edu/resources
Available Resources
Budget Resources
Texas Crop and Livestock Budgets
Select a district
Available enterprise budgets (PDF format)
Download Excel file
Machinery Cost Estimator
Download Excel file
Questions
Samuel D. ZapataAssistant Professor and Extension Economist Department of Agricultural EconomicsTexas A&M AgriLife Extension [email protected]
@SZapataD12https://agrilife.org/samuelzapata
