Meet your goals with good budgeting

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 or soybeans? Or wheat? 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.

Budgets

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 2008, have been completed and posted to the Farm Management Web site of the Department of Agricultural, Environmental and Development Economics. They can be downloaded from the department’s Web site.

Enterprise Budgets updated for 2008 include: corn/conservation tillage; soybeans/no-till (Roundup Ready); wheat/conservation tillage, (grain and straw); alfalfa hay/spring seeding; grass hay/large bale system; dairy cow and replacement/large breed; ewe and lamb budget/winter lambing.

Spreadsheets

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 budgets have a new look with color-coded cells that will enable users to plug in numbers to calculate bottom lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers.

Starting this year, we will be updating these Enterprise Budgets periodically during the year as large changes occur in price or costs. Budgets will include a date in the upper-right corner of the front page indicating when the last update occurred.

Highlights

Highlights of this year’s Crop Enterprise Budgets include increased prices for seed, diesel, nitrogen, phosphorous and potash.

Three different corn production budgets were developed with different nitrogen sources: anhydrous ammonia (NH3); urea-ammonia nitrate solution (urea-ammonia nitrate or 28 percent nitrogen); and urea.

Landlords and tenants should proceed with caution when negotiating cash rents based on 2008 field-crop budgets. Commodity prices and input costs may change dramatically resulting in much lower or negative returns.

Different price and cost combinations should be evaluated when budgeting for long-term decision making such as long-term cash rental agreements.

The entire set of Enterprise Budgets can be accessed at Ohio Enterprise Budgets.

About the Author

(Barry Ward is the leader of production business management in the Ohio State University Extension’s department of agricultural, environmental and development economics.) More Stories by Barry Ward

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