FARM MANAGEMENT

1
FARM MANAGEMENT
COCKSHUTT 50

• WK 4 WHOLE FARM BUDGETING

2
FARM MTG CONCEPTS

• Wk 1 Introduction
• Wk 2 Economics Farm Records
• Wk 3 Enterprise, Cash Partial Budgets
• WK 4 WHOLE FARM BUDGETS
• Wk 5 Capital Budgets
• Wk 6 Machinery Management
• Wk 7 Land Management
• Wk 8 Credit Management
• Wk 9 Labor Management
• Wk 10 Estate Planning

3
WK 4 WHOLE FARM BUDGETS

• Discussion Points
• I. Relation To Economics
• II. Linear Program Concepts
• III. Table 1 Resource Table
• IV. Table 2 Shadow Price Table
• V. Linear Program Decision Rules
• VI. Table 3limiting Factor Table
• VII. Table 4 Net Returns Table

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I. Relationship To Economics

• Optimum Allocation Of
• -- One Resource
• -- Two Resources
• -- Multiple Resources

Optimum Allocation To Produce -- One
Product -- Two Product -- Multiple Products
Whole Farm Budgets -- Optimum Allocation Of
Multiple Resources To Produce Multiple Products
To Achieve Max Profits
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II. Whole Farm Budget Concepts
WK 4 WHOLE FARM BUDGETS

• A. Methods
• 1. Graphic
• 2. Manual Calculation
• 3. Computer
• B. Needed Data
• 1. Resource Invent Quan Qual
• 2. Identify Potential Enterprises
• 3. Est Profits For Enterprises
• 4. Resources Per Enterprise Unit

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Table 1 Resource Table
Wk 4 Whole Farm Budgets
Enterprises Corn Hay
Net Returns 170 90

• Resources
• Land
• Spr Labor
• Sum Labor
• Capital

Total 200 Ac 400 Hrs 300 Hrs 30,000
1 Ac 3.5 Hrs 0 Hrs 180
1 Ac 1.5 Hrs 2.8 Hrs 140
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Table 1 Resource Table
ENTERPRISE CORN (1 Ac) HAY (1 Ac)
Net Returns 170 90
1.0 Ac 3.5 Hrs 0 180

• Land
• Spr Labor
• Sum Labor
• Capital

1 Ac 1.5 Hrs 2.8 Hrs 140
Table 2 Shadow Price Table
Land Spr Lab Sum Lab Capital
170/1
170.0
90
90/1
170/3.5
60
49
90/1.5
170/0
0
32
90/2.8
.64
170/180
.94
90/140
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Whole Farm Budget Decision Rules
Wk 4 Whole Farm Budgets

• Table 1 None
• Table 2 Which Enterprise
• gtBy Picking Enterprise With
• gtHighest Ret For Limiting Resource
• gtLimiting Resource Must Be Given ()

Table 2 Shadow Price Table
ENTERPRISE CORN (1 Ac) HAY (1 Ac)
49
60
Spr Lab
9
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
10
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
??? How Much Hay Can Be Grown With The
Available Land
Hay
11
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Table 1 Resource Table 1 Ac CORN 1 Ac
HAY Land 1.0 1.0 Ac

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
200 1
Hay
200 Ac OF HAY IF ALL THE LAND IS USED FOR HAY
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Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Table 1 Resource Table 1 Ac CORN 1 Ac HAY Spr
Lab 3.5 1.5 Hrs

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
200
Hay
400 1.5
266
13
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Table 1 Resource Table 1 Ac CORN 1 Ac HAY Sum
Lab 0.0 2.8 Hrs

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
300 2.8
Hay
200
266
107
14
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Table 1 Resource Table 1 Ac CORN 1 Ac
HAY Capital 180 140

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay
200
266
107
30000 214 140
15
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay
200
266
107
214
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Whole Farm Budget Table 3 Decision Rules
Wk 4 Whole Farm Budgets

• Table 1 None
• Table 2 Which Enterprise
• gtBy Picking Enterprise With
• gtHighest Ret For Limiting Resource
• gtLimiting Resource Must Be Given

Table 3 How Much Of Enterprise gt By Picking
Resource With gt Lowest Limiting Factor
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Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
??? How Much Land Will 107 Ac Of Hay Used?
Hay
107

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay
200
266
107
107
214
18
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
1071107
Table 1 Resource Table 1 Ac CORN 1 Ac
HAY Land 1.0 1.0 Ac

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
19
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
1071.5161
Table 1 Resource Table 1 Ac CORN 1 Ac HAY Spr
Lab 3.5 1.5 Hrs

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
20
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
161
1072.8 300
Table 1 Resource Table 1 Ac CORN 1 Ac HAY Sum
Lab 0.0 2.8 Hrs

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
21
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
300
107140
161
Table 1 Resource Table 1 Ac CORN 1 Ac
HAY Capital 180 140

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
22
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
161
300
14980
Left Over
93
0
15020
239

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
23
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
300
14980
161
Left Over
93
0
15020
239
1 Ac CORN 1 Ac HAY Land 1.0 Ac 1.0
Ac Spr Lab 3.5 Hrs 2.5
Hrs CAP 180 90

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
0
83
Corn
93
68
24
Table 4 Net Returns

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
300
14980
161
Left Over
93
0
15020
239
Corn 68
68
239
12240
1 Ac CORN 1 Ac HAY Land 1.0 Ac 1.0
Ac Spr Lab 3.5 Hrs 2.5
Hrs CAP 180 90

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214

83
Corn
93
68
0
25
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Land Spr Lab Sum Lab Cap

Xxx Xxxx 200 400 300
30000
Hay 107
107
300
14980
161
Left Over
93
0
15020
239
Corn 68
68
239
12240
Left Over
15
0
2788

• Table 3 Limiting Factor

Ent Land Spr Lab Sum Lab Cap
Hay 200 266 107
214
83
Corn
93
68
0
26
Table 4 Net Returns
Wk 4 Whole Farm Budgets

• Ent Units Net Returns

Xxx Xxxx
Hay 107
107 90 9630
Left Over
93
Corn 68
68 170 11,560
21190
Table 1 Resource Table
Enterprises Corn Hay
Net Returns 170 90
27
Wk 4 Whole Farm Budgets
Table 2 Shadow Price Table
Land gtSpr Lab Sum Lab Capital
170/1
170.0
90
90/1
170/3.5
60
49
90/1.5
170/0
0
32
90/2.8
.64
170/180
.94
90/140
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Summary
Wk 4 Whole Farm Budgets

• Whole Farm Budgets Allocates Multiple Resources
  Among Multiple Enterprises
• 2. Table 1 (Resource) Has 5 Major Parts
• 3. Table 2 (Shadow Price) Tell Which Enterprise
  By Picking The Highest For Limiting Resource
• 4. Table 3 (Limiting Factor) Tell How Much By
  Picking Lowest Limiting Factor
• 5. Table 4 (Net Returns) Tell How Much Profit

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Self Test
Wk 4 Whole Farm Budgets

• Table 4

• Total Profits

Table 1
Production Coeff
Table 3
Pick The Lowest
Which Enterprise
Table 2
Table 2
Pick Highest
How Much
Table 2
Table 2
Limiting Resource
Table 3
Limiting Factor
Table 2
Shadow Prices

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Associated LabActivities
Wk 4 Whole Farm Budgets

• This Week In Lab We Will Do Another Whole Farm
  Budget Problem Together As A Class And Then Each
  Student Will Do One To Be Turned In Friday.

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Evaluation
Wk 4 Whole Farm Budgets

• Your Understanding Of These Whole Farm Budget
  Concepts Will Be Tested On A Quiz The Fourth
  Friday Of Quarter And On The Midterm That Will Be
  On The Fifth Friday Of The Quarter. Speaking Of

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Midterm5th Friday Of The Quarter
Wk 4 Whole Farm Budgets

• Part 1 Objective Questions (T/F, Mc, Etc)
• 10 Pts Wk 1- Introduction
• 10 Pts Wk 2- Economics Records
• 10 Pts Wk 3- Budgets (Cash, Ent, Etc)
• 10 Pts Wk 4- Whole Farm Budgets
• 10 Pts Wk 5- Investment Analysis
• Part Ii. Problems
• 20 Pts Economics 5 Pts Budgets
• 18 Pts Linear Prog 9 Pts Investment

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NEXT TOPIC
1929 McCORMICK DEERING 22 -36

• CAPITAL BUDGETING
• INVESTMENT ANALYSIS