• TABLE OF CONTENTS
HIDE
 Copyright
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 Introduction
 Enterprise budgets
 Conclusions
 Appendix






Group Title: Agricultural Economics report 13
Title: Income potential of alternative crops in northern Florida
CITATION PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027481/00001
 Material Information
Title: Income potential of alternative crops in northern Florida
Physical Description: v, 37 leaves : ; 28 cm.
Language: English
Creator: Hipp, Timothy S
Publisher: Dept. of Agricultural Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences
Place of Publication: Gainesville
Publication Date: 1970
 Subjects
Subject: Food crops -- Economic aspects -- Florida   ( lcsh )
Grain -- Economic aspects -- Florida   ( lcsh )
Corn -- Diseases and pests -- Economic aspects -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: Timothy S. Hipp.
General Note: Cover title.
General Note: "October 1970."
Funding: Florida Historical Agriculture and Rural Life
Additional Physical Form: Agricultural economics report - University of Florida Dept. of Agricultural Economics ; no. 13
 Record Information
Bibliographic ID: UF00027481
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 001615883
oclc - 19039925
notis - AHP0327

Table of Contents
    Copyright
        Copyright
    Title Page
        Page i
    Acknowledgement
        Page ii
    Table of Contents
        Page iii
    List of Tables
        Page iv
        Page v
    Introduction
        Page 1
    Enterprise budgets
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
    Conclusions
        Page 33
        Page 34
    Appendix
        Page 35
        Page 36
        Page 37
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida






v October 1970
.4, /3


Ag. Econ. Report 13


Income Potential of Alternative


Crops in


Northern Florida


Department of Agricultural Economics
Florida Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville


Timothy S. Hipp


_ 'I- --~~~-~~-~~--l-L----~---s~--~n~---~














ACKNOWLEDGMENTS


Very special consideration must go to Dr. John Holt, Agricultural

Economics Department, for his guidance in the general content, organi-

zation, and critical review of this report. Similarly, indebtedness is

owed to Drs. C. N. Smith, W. K. Mathis, and H. B. Clark of the Department

of Agricultural Economics, and D. S. Burgis of Gulf Coast Experiment

Station, for their review and criticism of this paper. Dr. J. T. Johnson

and Mr. D. W. Jones of the Agronomy Department made valuable suggestions

regarding the yield and input data. Although the author had a substantial

amount of assistance in compiling the budgets in this report, he assumes

full responsibility for any mistakes.














TABLE OF CONTENTS


ACKNOWLEDGMENTS . . . ..

LIST OF TABLES . . . .

INTRODUCTION . . . .

ENTERPRISE BUDGETS . . . .

Assumptions Used in Developing Budgets
Explanation of Budgets . .
Using the Budgets . . .
Partial Budget Questions and Answers .
Changing the Assumptions . .
Additional Examples . .

CONCLUSIONS . . . . .

APPENDIX . . . . .


Page

ii

iv

1

2

2
5
21
21
25
31

33

35
















LIST OF TABLES


Table Page

1 Input prices used in calculating budgets 7

1.1 Estimated equipment and machinery cost per hour for
field crops, northern Florida 8

2 Estimated annual labor, machine, and tractor requirements
per acre for corn (single cropped) 9

2.1 Corn (single cropped) enterprise budget, northern Florida,
1969 10

2.2 Corn (single cropped) enterprise budget, northern Florida,
1970, with assumption of 40 percent reduction in yield
from blight 11

3 Estimated annual labor, machine, and tractor requirements
per acre for grain sorghum (single cropped) 12

3.1 Sorghum (single cropped) enterprise budget, northern
Florida 13

4 Estimated annual labor, machine, and tractor requirements
per acre for grain sorghum (double cropped) 14

4.1 Sorghum (double cropped) enterprise budget, northern
Florida 15

5 Estimated annual labor, machine, and tractor requirements
per acre for soybeans (single cropped) 16

5.1 Soybeans (double cropped) enterprise budget, northern
Florida 17

6 Estimated annual labor, machine, and tractor requirements
per acre for small grains 18

6.1 Small grain enterprise budget--Oats (double cropped),
northern Florida 19

6.2 Small grain enterprise budget--Wheat (double cropped),
northern Florida 20







LIST OF TABLES--Continued


Table Page

7 Partial budget for comparing changes in receipts and
costs for (1) single cropping 300 acres in corn and
(2) double cropping 300 acres with sorghum and wheat 22

8 Partial budget for comparing changes in receipts and
costs for (1) double cropping sorghum and wheat and
(2) single cropping sorghum 24

9 Corn: Break-even yield and price relationships assumed
in short- and long-run periods 26

10 Sorghum: Break-even yield and price relationships
assumed in short- and long-run periods 27

11 Soybeans: Break-even yield and price relationships
assumed in short- and long-run periods 28

12 Oats: Break-even yield and price relationships assumed
in short- and long-run periods 29

13 Wheat: Break-even yield and price relationships assumed
in short- and long-run periods 30














INCOME POTENTIAL OF ALTERNATIVE CROPS
IN NORTHERN FLORIDA

Timothy S. Hipp


INTRODUCTION


Southern corn leaf blight may have reduced 1970 Florida corn yields

by 40 percent. The disease may overwinter in the fields and be present

early in next year's crop. The purpose of this report is to evaluate, from

a farm management standpoint, the alternatives to growing corn. The pro-

fitability of alternative crops is compared with corn, assuming that corn

yield reductions due to blight will be similar to those experienced in

1970. The analytical framework used in this publication makes it possible

for the reader, through the use of the enterprise budget approach, to make

his own estimates about future yields and to analyze interrelations between

alternative costs and profits.

Enterprise budgets have been developed for the most important alterna-

tive crops: grain sorghum, soybeans, and small grains; i.e., oats and

wheat. Grain sorghum will be analyzed both as a single crop enterprise

planted in March and as part of a double crop system planted after a small

grain crop is harvested or grazed off. There are no definite data on

yields and planting dates for sorghum under field conditions. However,

limited data suggest that, if sorghum is planted after mid-June, yields

may be reduced as much as 30 percent.



*Timothy S. Hipp is presently the Assistant Area Economist at the Gulf
Coast Experiment Station located in Bradenton, Florida.







The blight problem notwithstanding, cost and return information is

basic to selecting the combination of enterprises and practices that will

give the highest net income. Therefore, the data in this publication may

be used for farm planning after the blight crisis is past.


S ENTERPRISE BUDGETS


Enterprise budgets are a listing of the expected annual costs and

returns from particular farm enterprises. They are developed in three main

parts: (1) gross receipts, which contain two of the most important varia-

bles in farming--yield and price; (2) cash expenses, the out-of-pocket

costs that must be covered or paid for in a given production period; and

(3) other expenses, which include the fixed costs that can be allocated to

a specific enterprise. Such expenses as taxes and interest on real estate,

telephone, social security taxes for hired workers, travel in the farm

pickup or car, and similar costs cannot be allocated to an individual enter-

prise. Therefore, an enterprise budget may not include all the costs asso-

ciated with farming. From a farm planning viewpoint these costs are not a

factor in deciding which crops are most profitable. However, they are a

factor in determining whether or not the farm survives.

Assumptions Used in Developing Budgets

In order to develop a realistic budget certain assumptions must be

made. These relate to farm size, machinery requirements, improved manage-

ment practices, yields, and prices.

Farm Size

If a farm size is assumed and the production practices followed on it

are specified, a machinery complement can be chosen. Then variable and

fixed costs for alternative budgets can be developed. The size of farm






chosen for this paper is 500 acres with mixed soil types, including 300

acres usually planted in corn. The remaining acreage is assumed to be

used for other crops or livestock enterprises, e.g., peanuts, soybeans,

hogs, cattle.

Machinery

The equipment requirements are assumed to be in the 4-row class. The

farm operator in question owns all the necessary equipment for any of

the crops mentioned in the budgeting. Drying machinery is not included

since at present only a few farmers own this equipment. Therefore, a

drying charge of 10 per bushel has been made in the budgets.

Improved Management

The farm operator is assumed to use the latest production techniques and

agronomic recommendations, This assumption is vital for the better-than-

average yields chosen for the budgets.

Yields

All of the yields considered are above the state average. They are:

Corn 65 bushels without blight

Corn 36 bushels with blight

Sorghum 55 bushels single crop

Sorghum 45 bushels double cropped

Soybeans 30 bushels double cropped

Oats 60 bushels double cropped

Wheat 35 bushels double cropped

Prices

The following assumptions are made regarding prices for the commodities

under consideration.

Corn

$1.60 per bushel @ 12 percent moisture. This price selected for








planning purposes in 1970-71 has been based upon limited numbers

of contracts offered in 1969-70 to farmers in the Gainesville area.

Sorghum

$1.44 per bushel @ 12 percent moisture. This price was determined

by assuming feed buyers will pay approximately 90 percent of the

going corn price, even though the relative feeding value of sorghum

is considered to be 95 percent that of corn. This is an attempt

to account for the unfamiliarity of Florida feeders with the feed-

ing value of grain sorghum.

Soybeans

$2.25 per bushel. If the blight affects corn yields in the midwest,

there may be a large increase in soybean acreage. The price of

1971 soybeans at harvest will probably be near the present C.C.C.

loan rate of $2.25.

Oats

$.87 per bushel @ 12 percent moisture. The 1969 oat crop averaged

$.82 per bushel to the farmer. Because of the relative feeding

value of oats as compared with corn for various types of livestock,

a rise in corn prices should also cause an increase in oat prices.

Wheat

$1.45 per bushel @ 12 percent moisture. This price is 20C per

bushel higher than the national loan rate. The estimated open-

market price for wheat as a feed grain is based on corn priced at

$1.60 per bushel. Since farmers in the Southeastern states may

plant more wheat this fall than usual, prices could, consequently,

soften by next spring.







Explanation of Budgets

Annual labor, machine, and tractor requirements and a schedule of

operations were developed for each crop. From these tables the machinery

and labor coefficients have been transposed into the budget format. The

costs of the materials used and the variable and fixed cost of the

machinery operated are presented in Tables 1 and 1.1, respectively.

Labor and machinery requirements for corn are shown in Table 2.

Tables 2.1 and 2.2 contain corn budgets with essentially the same cost

figures, except for the drying charge. The first budget (2.1) was the

planning budget; in more general terms, this is what most farmers aimed for

in 1970, based on last year's price and expected yield. Table 2.2 shows

the effect of a reduction in yields due to blight. It is noted that, even

with a 14 percent increase in price, the greater than 40 percent decrease

in yield lowered returns to such an extent that all costs were not recovered.

Because of the decline in corn crop income that farmers experienced in 1970,

returns from the crop barely covered cash expenses. Therefore, farmers are

searching for more profitable alternatives.

Labor and machinery requirements for sorghum are shown in Table 3. An

enterprise budget for single cropped sorghum grown with the same production

practices as corn, e.g., planted in March and harvested in August, is con-

tained in Table 3.1. With the given price and yield assumptions, this

enterprise is more profitable than blighted corn and compares very favorably

with 65 bushel corn. Since sorghum may be planted anytime after the last

frost and until around the middle of June, it may be part, in conjunction

with a small grain, of a two crop farm enterprise approach.

Labor and machinery requirements developed for double cropping are given

in Table 4. Costs and returns data are contained in Table 4.1. As stated,

before, there is a shortage of data about planting dates and the








corresponding yields on grain sorghum. However, agronomists assume that

earlier planted grain sorghum yields more than that planted late in the

year. Thus the assumption of a 45 bushel yield for a double cropping

system is made.

Soybean requirements are budgeted in Tables 5 and 5.1 with the

price and yield assumptions stated earlier. If the price of $2.25 per

bushel is an accurate figure, then returns from soybeans are at the same

approximate level as double cropped sorghum.

Labor and machinery requirements for growing small grains are shown

in Table 6. The remaining two budgets indicate oats (6.1) and wheat (6.2)

to require about the same resources. Wheat is slightly more profitable

than oats, given price and yield assumptions for each crop.















Table l.--Input prices used in calculating budgets


Item Description Unit Price


Dollars


Seed
Corn
Grain sorghum
Soybeans
Oats
Wheat


Medium flat
Hybrid, grain type
Recommended variety
Recommended variety
Recommended variety


Fertilizer
Mixed


Nitrogen

Spreading


Herbicide
Corn, sorghum
Soybeans

Insecticides
Soybeans
Application

Fuel & lubricant
Gasoline
Diesel fuel
Motor oil
Oil filters

Grain drying
All grains


6-12-18 delivered bulk,
trace elements included
0-15-15, delivered
33 1/3% ammonium nitrate,
delivered
Custom applied


2,4-D
Alachlor


2 1/2% parathion dust
Airplane


Regular
High grade
S.A.E. 30 heavy duty



Batch or continuous flow


.28
.23
4.00
1.60
3.00


ton
ton

ton
acre


gal.
gal.


cwt.
lb.


gal.
gal.
qt.
each


bu.


58.00
48.50

64.00
1.25


3.15
13.00


7.00
.10


.29
.18
.40
3.25


.10












Table l.l.--Estimated equipment and machinery cost per hour for
field crops, northern Florida


Variable
New cost less Estimated Fixed cost cost
Machinery itema salvage value life per hourb per hour

Dollars Hours Dollars Dollars

Tractor, 80 H.P.
class 7,500 12,000 1.21 1.85

Disc, 10' tandem 1,000 2,500 .72 .65

Plow, 5-16" 1,500 2,500 1.06 1.08

Planter, 4-row on
tool bar 700 1,200 1.10 .87

Cultivator, 4-row
rear mounted 1,000 2,500 .66 .52

Combine, 2-row
head 8,000 2,000 6.13 3.40

Truck, 2-tone 4,000 3,000 2.63 1.94

Grain Drill, 10' 800 1,200 1.10 .87

Sprayer, 200 gal.,
20' boom 700 1,000 1.15 .91



aAll machines except combine are estimated to last 10 years.

Includes depreciation, interest on investment, taxes,
insurance, and housing.

CIncludes fuel, oil, maintenance, and repairs.

Assume 340 hours per year of use.

eFred 0. Saunders, James 0. Wise, W. C. McArthur, J. R. Alli-
son and R. J. Amick, Farm Machinery Costs in Georgia, Athens;
University of Georgia College of Agriculture Experiment Stations
Research Report 45, June 1969, pp. 38.

















Table 2.--Estimated annual labor, machine, and tractor requirements per
acre for corn (single cropped)a


Operation

Discing old stalks

Plowing


Planting

Cultivating

Applying NH3


Spraying 2,4-D


Combining


Haulingb


Machine used

10' tandem harrow

5-bottom semi
mounted

4-row, wide row

4-row, wide row

Supplied by
distributor

Pull-type low
volume sprayer

Medium size, 2-row
head

2-ton truck, 40
mile road trip


Date

Feb.


Feb. -Mar.

Mar.-Apr.

Apr. -May


Apr.-May


May


Aug.-Sept.


Aug.-Sept.


TOTAL


Machine
hours

.33


.40

.25

.33


Tractor
hours

.33


.40

.25

.33


.33


Man
hours

.33


.40

.25

.33


.33


.25 .25


.33

2.69


1.89


.40

3.09


aDoes not include travel by pickup to and from fields.

bEstimated man hours include possible delay unloading.
to 300 bushels are assumed.


Loads of 240














Table 2.1.--Corn (single cropped) enterprise budget, northern Florida, 1969


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Grain, 12% moisture bu. 1.40 65.00 91.00

Cash expenses
Seed (pop. 12,000 plants/A) lb. .28 10.00 2.80
Fertilizer (6-12-18, spread) cwt. 3.20 6.50 20.80
NH3 lb. .05 140.00 7.00-
Lime (once every 3 years) ton 7.50 .33 2.48
Herbicide (2,4-D)a lb. .82 .50 .41
Interest on above expenses
for 6 months $ .09 33.49 1.51
Tractor use hour 1.85 1.89 3.50
Other field machinery hour .81 1.56 1.26
Combining hour 3.40 .80 2.72
Truck hauling hour 1.94 .33 .64
Labor hour 2.00 3.09 6.18
Drying bu. .10 65.00 6.50
Total cash expenses 55.80

Returns above cash expenses 35.20

Other expenses
Fixed cost of tractor hour 1.21 1.89 2.29
Fixed cost of other machinery hour .94 1.56 1.47
Fixed cost of combine hour 6.13 .80 4.91
Fixed cost of truck hour 2.63 .33 .87
Total fixed cost 9.54

Returns to land and management 25.66



aIf 2.5 lbs. of atrazine 80 W is used as a broadcast pre-emergence
weed control treatment, add $7.13 per acre.













Table 2.2.--Corn (single cropped) enterprise budget, northern Florida, 1970,
with assumption of 40 percent reduction in yield from blight


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Grain, 12% moisture bu. 1.60 36.00 57.60

Cash expenses
Seed (pop. 12,000) lb. .28 10.00 2.80
Fertilizer (6-12-18, spread) cwt. 3.20 6.50 20.80
NH3 lb. .05 140.00 7.00
Lime (once every 3 years) ton 7.50 .33 2.48
Herbicide (2,4-D)a lb. .82 .50 .41
Interest on above expenses
for 6 months $ .09 33.49 1.51
Tractor use hour 1.85 1.89 3.50
Other field machinery hour .81 1.56 1.26
Combining hour 3.40 .80 2.72
Truck hauling hour 1.94 .33 .64
Labor hour 2.00 3.09 6.18
Drying bu. .10 36.00 3.60
Total cash expenses 52.90

Returns above cash expenses 4.70

Other expenses
Fixed cost of tractor hour 1.21 1.89 2.29
Fixed cost of other machinery hour .94 1.56 1.47
Fixed cost of combine hour 6.13 .80 4.91
Fixed cost of truck hour 2.63 .33 .87
Total fixed cost 9.54

Returns to land and management -4.84



alf 2.5 lbs. of atrazine 80 W is used as a broadcast pre-emergence weed
control treatment, add $7.13 per acre.




















Table 3.--Estimated annual labor, machine, and tractor requirements per
acre for grain sorghum (single cropped)a


Operation

Discing old stalks

Plowing

Planting

Cultivating

Applying NH3


Spraying 2,4-D

Combining

Haulingb


Machine used

10' tandem disc

5-16"

4-row, 32" rows

4-row

Supplied by
distributor

Pull-type

12' platform

2-ton truck, 40
mile round trip


Date

Feb.

Feb.-Mar.

Mar. -Apr.

Apr.-May


Apr. -May

May

Aug.-Sept.


Aug.-Sept.


TOTAL


Machine Tractor Man


Machine
hours

.33

.40

.30

.39




.25

.50


.33

2.50


Tractor
hours

.33

.40

.30

.39


Man
hours

.33

.40

.30

.39


.39 .39

.25 .25

.50


.40

2.06 2.96


aDoes not include travel by pickup to and from fields.

bEstimated man hours include possible delay unloading.
to 300 bushels are assumed.


Loads of 240















Table 3.1.--Sorghum (single cropped) enterprise budget, northern Florida


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Grain, 12% moisture bu. 1.44 55.00 79.20

Cash expenses
Seed lb. .23 10.00 2.30
Fertilizer (6-12-18, spread) cwt. 3.20 5.50 17.60
NH3 lb. .05 120.00 6.00
Lime (once every 3 years) ton 7.50 .33 2.48
Herbicide (2,4-D) lb. .82 .50 .41
Interest on above expenses
for 6 months $ .09 28.79 1.30
Tractor use hour 1.85 2.06 3.81
Other field machinery hour .81 1.67 1.35
Combining hour 3.40 .50 1.70
Truck hauling hour 1.94 .33 .64
Drying bu. .10 55.00 5.50
Labor hour 2.00 2.63 5.26
Total cash expenses 48.35

Returns over cash expenses 30.85

Other expenses
Fixed cost of tractor hour 1.21 2.06 2.53
Fixed cost of other machinery hour .94 1.67 1.57
Fixed cost of combine hour 6.13 .50 3.07
Fixed cost of hauling hour 2.63 .33 .87
Total fixed cost 8.04

Returns to land and management 22.81




















Table 4.--Estimated annual labor, machine, and tractor requirements per
acre for grain sorghum (double cropped)a


Operation

Plowing

Planting

Cultivating

Applying
NH2

Spraying
2,4-D

Combining

Haulingb


Machine used

5-16"

4-row, 32" rows

4-row

Supplied by
distributor

Pull-type


12' platform

2-ton truck, 40
mile round trip


Date

May-June

May-June

June-July


June-July

July-Aug.


Sept.-Oct.


Sept.-Oct.


TOTAL


Machine
hours

.40

.30

.39




.25


.33

2.17


Tractor
hours

.40

.30

.39


Man
hours

.40

.30

.39


.39 .39

.25 .25


1.73


.40

2.63


aDoes not include travel by pickup to and from fields.

bEstimated man hours include possible delay unloading. Loads of 240
to 300 bushels are assumed.















Table 4.1.--Sorghum (double cropped) enterprise budget, northern Florida


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Grain, 12% moisture bu. 1.44 45.00 64.80

Cash expenses
Seed lb. .23 10.00 2.30
Fertilizer (6-12-18, spread) cwt. 3.20 5.50 17.60
NH3 lb. .05 120.00 6.00
Lime (once every 3 years) ton 7,50 .33 2.48
Herbicide (2,4-D) lb. .82 .50 .41
Interest on above expenses
for 5 months $ .09 28.79 1.08
Tractor use hour 1.85 1.73 3.20
Other field machinery hour .85 1.34 1.14
Combining hour 3.40 .50 1.70
Truck hauling hour 1.94 .33 .64
Drying bu. .10 41.00 4.50
Labor hour 2.00 2.63 5.26
Total cash expenses 46.31

Returns over cash expenses 18.49

Other expenses
Fixed cost of tractor hour 1.21 1.73 2.09
Fixed cost of other machinery hour .99 1.34 1.33
Fixed cost of combine hour 6.13 .50 3.07
Fixed cost of hauling hour 2.63 .33 .87
Total fixed cost 7.36

Returns to land and management 11.13





















Table 5.--Estimated annual labor, machine, and tractor requirements per
acre for soybeans (single cropped)a


Operation

Plowing

Planting

Spraying herbicide

Cultivating

Combining

Haulingb


Machine used

5-16" plow

4-row, 32" rows

Pull-type

4-row

12' platform

2-ton, 40 mile
round trip


Date

May-June

May-June

May-June

June-July

October


October


TOTAL


aDoes not include travel by pickup to and from fields.

Estimated man hours include possible delay unloading.
to 300 bushels are assumed.


Loads of 240


Machine
hours

.40

.30

.30

.39

.60


.30

2.29


Tractor
hours

.40

.30

.30

.39






1.39


Man
hours

.40

.30

.30

.39

.40


.37

2.36














Table 5.1.--Soybeans (double cropped) enterprise budget, northern Florida


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Soybeans bu. 2.25 30.00 67.50

Cash expenses
Seed bu. 4.00 1.00 4.00
Inoculation pkg. .60 1.00 .60
Fertilizer (0-15-15, spread) cwt. 2.63 6.00 15.78
Herbicide qt. 3.25 2.25 7.31
Lime (once every 3 years) ton 7.50 .33 2.48
Interest on above expenses
for 5 months $ .09 30.17 1.31
Tractor use hour 1.85 1.39 2.57
Other field machinery hour .85 1.39 1.18
Combining hour 3.40 .60 2.04
Truck hauling hour 1.94 .30 .58
Drying bu. .10 30.00 3.00
Labor hour 2.00 2.36 4.72
Insecticidea lb. .17 20.00 3.40
Total cash expenses 48.97

Returns over cash expenses 18.53

Other expenses
Fixed cost of tractor hour 1.21 1.39 1.68
Fixed cost of other machinery hour .94 1.39 1.31
Fixed cost of combine hour 6.13 .60 3.68
Fixed cost of hauling hour 2.63 .30 .80
Total fixed cost 7.47

Returns to land and management 11.06



a20 lbs. of 2 1/2% parathion application with airplane included in
price.























Table 6.--Estimated annual labor, machine, and
acre for small grains


tractor requirements per


Operation

Discing

Discing and
planting

Combining

Haulingb


Machine used

10' tandem disc

10' disc & grain
drill

12' platform

2-ton truck, 40
mile round trip


TOTAL


aDoes not include travel by pickup to and from fields.

Estimated man hours include possible delay unloading. Loads of 240
to 300 bushels are assumed.


Date

October


Oct.-Nov.

Apr.-May


Apr.-May


Machine
hours

.33


.40

.50


.33

1.56


Tractor
hours

.33


.40






.73


Man
hours

.33


.40

.50


.40

1.63














Table 6.1.--Small grain enterprise budget--Oats (double cropped), northern
Florida


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Oats, 12% moisture bu. .87 60.00 52.20

Cash expenses
Seed bu. 1.60 2.00 3.20
Fertilizer (6-12-18, spread) cwt. 3.20 6.00 19.20
Nitrogen lb. .12 50.00 6.00
Interest on above expenses
for 5 months $ .09 28.40 1.07
Tractor use hour 1.85 .73 1.35
Other field machinery hour .72 1.13 .81
Combining hour 3.40 .50 1.70
Truck hauling hour 1.94 .33 .64
Dryingb bu. .10 27.50 2.75
Labor hour 2.00 1.63 3.26
Total cash expenses 39.98

Returns over cash expenses 12.22

Other expenses
Fixed cost of tractor hour 1.21 .73 2.09
Fixed cost of other machinery hour .85 1.13 .96
Fixed cost of combine hour 6.13 .50 3.07
Fixed cost of hauling hour 2.63 .33 .87
Total fixed cost 6.99

Returns to land and management 5.23



alncludes application cost.

bIt is assumed that only half the crop needs drying.













Table 6.2.--Small grain enterprise budget--Wheat
Florida


(double cropped), northern


Price/cost Quantity Value or cost
Item Unit per unit per acre per acre

Dollars Dollars

Gross receipts
Wheat, 12% moisture bu. 1.45 35.00 50.75

Cash expenses
Seed bu. 3.00 1.00 3.00
Fertilizer (6-12-18, spread) cwt. 3.20 6.00 19.20
Nitrogena lb. .12 50.00 6.00
Interest on above expenses
for 5 months $ .09 28.20 1.06
Tractor use hour 1.85 .73 1.35
Other field machinery hour .72 1.13 .81
Combining hour 3.40 .50 1.70
Truck hauling hour 1.94 .30 .58
Drying bu. .10 17.50 1.75
Labor hour 2.00 1.63 3.26
Total cash expenses 37.36

Returns over cash expenses 13.39

Other expenses
Fixed cost of tractor hour 1.21 .73 2.09
Fixed cost of other machinery hour .85 1.13 .96
Fixed cost of combine hour 6.13 .50 3.07
Fixed cost of hauling hour 2.63 .30 .79
Total fixed cost 6.91

Returns to land and management 6.48



aIncludes application cost.

it is assumed that only half the crop needs drying.








Using the Budgets

Adjustments may need to be made in the budgets to adapt the numbers to

individual farm situations. However, these budgets do provide a convenient

framework through which such adjustments can be made. For instance, if

machine hours are different or the amount and price of fertilizer varies

from the data shown in the budgets, appropriate changes can be entered and

the budget recalculated.

The estimated returns from an enterprise budget can be used in conjunc-

tion with the partial budget, another farm management tool utilized by farm

planners. A partial budget is a systematic listing of the possible esti-

mated changes in costs and returns in a given time period when production

practices shift.

In partial budgeting the primary concern is with variable costs, mainly

because these are the only costs that change in the short-run or given time

period. Fixed costs will be the same for the entire farm regardless of the

level of production or the crops grown. This is why only cash costs are

considered when partial budgeting analysis is used.

Partial Budget Questions and Answers

Partial budgeting will be used to answer the following questions in

order to familiarize the reader with this technique.


Question:
In the face of blight next year, should a farmer with 300 acres of
cropland plant corn or should he double crop it with sorghum and wheat?
Data and computations with respect to these alternatives are presented in
Table 7.

Answer:
Plant 300 acres in a double cropping system of sorghum and wheat.
With the given assumptions in the budgets (2.2, 4.1, and 6.2) the farm
operator would have $8,154 more in returns to the fixed resources of machine-
ry, land, and management with this system than he would in growing corn.

















Table 7.--Partial budget for comparing changes in receipts and costs for


(1) single cropping 300 acres in corn and
300 acres with sorghum and wheat


(2) double cropping


Price Costs/ Total
Consideration Commodity Yield per bu. Returns Acres Returns

Bu./A Dollars Dollars No. Dollars


A.1. Increased receipts
from double
cropping

A.2. Decreased cash costs
by not single
cropping


TOTAL A


B.1. Increased cash costs
from double
cropping

B.2. Decreased receipts
by not single
cropping


TOTAL B


Sorghum


Wheat


Corn


36 1.60


Sorghum 45 1.44


Wheat


35 1.45


Corn


64.80 300 19,440

50.75 300 15,225



52.90 300 15,870


50,535


46.31 300 13,893

37.36 300 11,208


57.60 300 17,280


42,381


Result: The net change in returns to fixed resources can be
determined as follows: Total A ($50,535) Total B
($42,381) = $8,154.







question:
It appears, however, from data presented in the enterprise budget 3.1,
that single cropped sorghum is the best alternative. It is assumed that
the farmer will first try the single crop method but, before doing so, asks
whether double cropping with wheat would be better?
Data and computations with respect to these alternatives are presented
in Table 8.

Answer:
Plant the 300 acres in a double cropping system of sorghum and wheat.


Note: The reason the results of the partial budget seem to conflict

with the enterprise budgets is that, in partial budgeting, the emphasis is

on changes in revenue and cash costs. If returns over cash expenses from

Tables 4.1 and 6.1 were totaled, it is noted that they are $31.88 in com-

parison with $30.85 from Table 3.1. The difference is $1.03 which, when

multiplied by 300 acres, gives a product of $309--the same as the answer

from the partial budget.

The above analysis brings out the point that, from a short-run farm

planning viewpoint, only the returns above cash expenses enter the picture.

This is the main argument in favor of designing enterprise budgets in the

manner presented.


Question:
From the previous example it seems that double cropped sorghum with
wheat is the better alternative. Now, bringing soybeans into the question,
which is better, sorghum double cropped or soybeans double cropped? Both
will be planted with wheat; thus wheat will not enter the calculations.

Answer:
To answer this question the reader is invited to study the items of
returns above cash expenses in Tables 4.1 and 5.1. Soybeans are a slightly
better crop ($.04/acre), given the price and yield assumptions, in both
budgets, by a very small amount--only $12 on the entire 300 acres. There
is a one-to-one trade-off between soybeans and sorghum, i.e., they return
about the same. If either one is planted, the same approximate return can
be expected.


Question:
What happened to oats?














Table 8.--Partial budget for comparing changes in receipts and costs for
(1) double cropping sorghum and wheat and (2) single cropping
sorghum


Price Costs/ Total
Consideration Commodity Yield per bu. Returns Acres Returns


Bu./A Dollars Dollars


No. Dollars


A.1. Increased receipts
from double
cropping

A.2. Decreased cash costs
by not single
cropping


TOTAL A


Sorghum

Wheat


Sorghum


45 1.44

35 1.45


64.80 300 19,440

50.75 300 15,225


48.35 300 14,505


49,170


B.1. Increased cash costs
from double
cropping

B.2 Decreased receipts
by not single
cropping


TOTAL I


Sorghum


Wheat


Sorghum 55 1.44


46.31 300 13,893

36.37 300 11,208


79.20 300 23,760


48,861


!esult. The net change .n returns to fixed resources can be
ietermlneu ao follows: Total A ($49,170) Total B
-$48;,861 = $309







Answer:
With the assumptions made about the yields and prices of both wheat and
oats, it seems oats lost out. However, this does lead to the next topic to
be discussed--assumptions.


Changing the Assumptions

The estimated returns shown in the enterprise budgets are based on a

single set of price and yield assumptions. Obviously, alternative price and

yield assumptions would result in a different set of return estimates.

First, taking the yield assumptions as given in the budgets, it can be

seen what prices must be expected if a farmer is to grow the crop profitably.

As mentioned before, only cash costs enter the picture in short-run planning.

However, all costs must be considered in long-run planning.

Next year, farmers must plan at least to cover their cash costs. Fur-

thermore, if machinery or other payments are to be made, receipts from farm

product sales must be sufficiently large to pay all or a major portion of

the fixed as well as cash costs.

One way to answer the question of what price will bring a crop into

production is with the break-even equation:

Yield x Price = Short-run Cost; or Yield x Price = Long-run Cost.

Taking the yield assumption from budget 2.2, the break-even price for

corn with a 36 bushel yield is as follows:

Short-run Long-run

36 x P $52.90 36 x P = $62.44
P 52.90 P 62.44
36 36
Price $ 1.47 per bushel Price $ 1.73 per bushel

The solutions to the preceding equations indicate that, if a manager

expects a 36 bushel yield, he needs $1.47 to cover cash costs and $1.73 to

cover cash and fixed costs. With a $1.73 price there is a zero return to

land and management.
(25'





The following tables have been developed, as is the case with the

above example, through the use of the break-even equation. The most

common yields and prices have been used for the crops mentioned. The

tables are divided into two parts: (1) yields with corresponding break-

even prices in the upper portions and (2) prices with break-even yields

in the lower parts.

Break-even yield and price data for corn, sorghum, soybeans, oats,

and wheat are illustrated in Tables 9 through 13.



Table 9.--Corn: Break-even yield and price relationships assumed in
short- and long-run periods


Cost
per
Period acre Yield in bushels/Price ver bushel


Short-run $52.90b
Long-run 62.44c


30 35 40 45 50 55 60 65 70
$1.76 1.51 1.32 1.18 1.06 .96 .88 .81 .76
2.08 1.78 1.56 1.39 1.25 1.14 1.04 .96 .89


Price per bushel/Yield in bushels

b$1.05 1.15 1.25 1.35 1.45 1.55 1.65 1.75 1.85
Short-run $52.90 50 46 42 39 36 34 32 30 29
Long-run 62.44c 59 54 50 46 43 40 38 35 34



aData from Table 2.2.

bIncludes only variable or cash-outlay costs.

cIncludes all costs, both variable and fixed.


The data in Table 9 shows that, when a farmer expects a 40 bushel

yield, he needs $1.56 to cover both variable and fixed costs. Similarly,

if a price of $1.65 is guaranteed, he needs to make at least 38 bushels per

acre. However, the $1.65 price would enable him to cover all cash costs

with a 32 bushel yield in a short-run period.

(26'







Table 10.--Sorghum: Break-even yield and price relationships assumed in
short- and long-run periods


Yield in bushels/Price per bushel


30 35 40 45 50 55 60 65 70
$1.61 1.38 1.21 1.08 .97 .88 .81 .74 .69
1.88 1.61 1.41 1.25 1.13 1.03 .94 .87 .81


Price per bushel/Yield in

1.10 1.20 1.30 1.40 1.50
44 40 37 35 32
51 47 43 40 38


bushels

1.60 1.70
30 28
35 33


1.80
27
31


aData from Table 3.1.

bIncludes only variable and cash-outlay costs.

cIncludes all costs, both variable and fixed.


Farmers desiring to determine whether or not to grow sorghum can use

the data in Table 10 to analyze yield and price relationships. If a 40

bushel yield is expected, a price of $1.41 should be received in order to

achieve the break-even point. If $1.50 is guaranteed, then 38 bushel

yields are required to recover all production costs.

The data presented in Tables 11, 12, and 13 can be used in a like

manner in the analysis of yieJl--price relationships for soybeans, oats,

and wheat.


Cost
per
arepa


Pernod


Short-run
Long-run






Short-run
Long-run


$1.00
48
56


'Ma-r-1 fA


I


$48.35b
56.39C






$48.35b
56.39c





















Table 11.--Soybeans: Break-even yield and price relationships assumed in
short- and long-run periods


Cost
per
Period acrea Yield in bushels/Price per bushel

16 20 24 28 32 34 38 42 46
Short-run $48.97b $3.06 2.45 2.04 1.75 1.53 1.44 1.29 1.17 1.06
Long-run 56.44c 3.53 2.82 2.35 2.02 1.76 1.66 1.49 1.34 1.23


Price per bushel/Yield in bushels

$2.10 2.20 2.30 2.40 2.50 2.60 2.70 2.80 2.90
Short-run $48.97b 23 22 21 20 20 19 18 17 17
Long-run 56.44C 27 26 25 24 23 22 21 20 19


aData from Table 3.1.

bIncludes only variable or cash-outlay costs.

CIncludes all costs, both variable and fixed.





















Table 12.--Oats: Break-even yield and price relationships assumed in
short- and long-run periods


Cost
per
Period acrea


Short-run
Long-run






Short-run
Long-run


Yield in bushels/Price per bushel


30 35 40 45 50 55 60 65 70
$1.33 1.14 1.00 .89 .80 .73 .67 .62 .57
1.57 1.34 1.17 1.04 .93 .85 .78 .72 .67


$39.98b
46.97c






$39.98b
46.97c


Price per bushel/Yield in

.65 .70 .75 .80 .85 .90
62 57 53 50 47 44
72 67 63 59 55 52


bushels

.95
42
49


1.00
40
47


aData from Table 6.1.

Includes only variable and cash-outlay costs.

CIncludes all costs, both variable and fixed.


1.10
36
43


I







Table 13.--Wheat: Break-even yield and price relationships assumed in
short- and long-run periods


Cost
per
Period acre Yield in bushels/Price per bushel


Short-run $39.98b
Long-run 44.27c


18 22 26 30 34 38 42 46 50
$2.08 1.70 1.44 1.25 1.10 .98 .89 .81 .75
2.46 2.01 1.70 1.48 1.30 1.17 1.05 .96 .89


/


Price per bushel/Yield in bushels

$1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 1.60
Short-run $37.36b 31 30 29 28 27 26 25 24 23
Long-run 44.27c 37 35 34 32 32 31 30 29 28



aData from Table 6.2.

Includes only variable and cash-outlay costs,

CIncludes all costs, both variable and fixed.


Another important question which arises when the assumptions are

changed is when or under what circumstances a change should be made from

one of the alternative crops to another. The obvious answer is when one

crop becomes more profitable than another. A relatively easy way to figure

this is to use the break-even equation again--this time in a modified form.

Added in the cost of production figure will be another term--opportunity

cost. Opportunity cost is the income given up by not doing the best or

next best thing. In this case it is the income (returns over cash expenses)

lost from not growing the next best crop. It should be remembered that, as

before, the primary concern, from a crop comparison or short-run planning

viewpoint, is with cash costs and returns above cash expenses. This was

explained earlier when alternative crops were compared through the use of





the partial budget. The new break-even short-run formula is:

Yield x Price Cash Costs + Opportunity Cost.

Additional Examples

Question:
When will single cropped sorghum be more profitable than a double
cropped sorghum and wheat enterprise? The assumptions are: price of
sorghum is $1.44, price of wheat is $1.45, and the yield of double cropped
sorghum is 45 bushels per acre. Taking the returns above cash expenses
from Table 4.1 and Table 6.2, the returns are $18.49 + $13.39, or $31.88.
This is the opportunity cost of growing single cropped sorghum or the income
given up by not growing double cropped sorghum and wheat. Plugging $31.88
into the equation as the value for opportunity cost, the solution is as
follows:

Yield x $1.44 $48.35 + $31.88
(from Table 3.1)

Solving for yield: Y 80.23
$1.44

Yield 55.72 bushels

Answer:
Single cropped sorghum will be more profitable than double cropped
sorghum and wheat when a manager expects the yield of the former to be
higher than 55.72 bushels per acre. Another answer is when the returns
over cash expenses from double cropping falls below the returns over cash
expenses from growing the single crop. This may happen in three ways in
which the yield of sorghum, the price interrelationships, and the vield of
wheat play parts in affecting the outcome. If it is assumed that the price
of sorghum is $1.44, then single cropping will be more profitable when:
(1) the yield of double cropped sorghum falls below 44.3 bushels$ (2) the
price of wheat is less than $1.42; or (3) the yield of wheat is not greater
than 34.2 bushels. These calculations will be explained further in the
following examp) s.


Question:
Another related question concerns the circumstances under which a
manager changes from wheat to oats. With the use of the break-even equa-
tion, two factors--the price of oats required and the yield needed--to
change production from wheat to oats can be determined. Assumptions uti-
lized in the budgets shown in Tables 6.1 and 6.2 apply to these calcula-
tions.

Answer:
(a) What price?

Yield x Price Cash Costs (from 6.1) + Opportunity Cost (from 6.2)
60 x P $39.98 + $13.39
P $53.37
60

Price $ .89







(b) What yield?

Yield x .87 = $53.37

Yield = 61.3 bushels

Also, with the assumptions given in the oat budget (6.1), it can be

computed what changes in assumptions relative to wheat are needed for

deciding on the switch in production. If the returns over cash expenses

received from growing wheat fall below $12.22, then oats are more profit-

able.

This situation may develop in two ways. One is when the yield of

wheat is below 34.2 bushels. The second is when the price of wheat falls

below $1.42.

The above example illustrates how a small amount of arithmetic can

help in making management decisions. Oats will be more profitable than

wheat when (1) the price of oats is above $0.89; (2) the yield of oats is

greater than 61.3 bushels per acre; (3) the price of wheat is below $1.42;

or (4) the yield of wheat is under 34.2 bushels per acre.


Question:
When will single cropped soybeans be a better crop than single cropped
sorghum? The assumptions and numbers are those presented in Tables 3.1 and
5.1.

Answer:
(a) What price of soybeans?

30 x P = $48.97 (from 5.1) + $30.85 (from 3.1)
P = $79.82
30

Price = $2.66 per bushel of soybeans

(b) What yield of beans?

Y x 2.25 $79.82
Y = 79.82
2.25

Yield = 35.5 bushels per acre of soybeans







(c) What price of sorghum?

55 x P $48.35 (from 3.1) + $18.52 (from 5.1)
P 66.88
55

Price $ 1.22 per bushel of sorghum

(d) What yield of sorghum?

Y x 1.44 $66.88

Yield 46.4 bushels per acre of sorghum


In the above example, single cropped soybeans will be more profitable

than single cropped sorghum in four cases: when (1) the price of soybeans

is higher than $2.66 per bushel; (2) soybean yields are larger than 35.5

bushels; (3) the price of sorghum falls below $1.22; or (4) the yield of

sorghum drops to 46.4 bushels or less.

As the foregoing examples point out, the partial budgeting technique

can serve as a useful tool for making managerial decisions. With the use

of the break-even formula, any specific situation may be simulated by

changing assumptions and varying either the price of yield, one at a time,

of a specific crop. This information can then be used to make managerial

decisions.


CONCLUSIONS


Results of the analysis in this report indicate that almost any combi-

nation of crops considered is superior to growing corn in 1971 when it is

assumed that blight resistant seed is not available. Grain sorghum is the

most profitable single crop enterprise. However, when looking at the pros-

pect of double cropping, all of the crops considered return to given fixed

resources a maximum of $1.17 to a minimum of $.04 per acre. Therefore, no

one crop or combination of those mentioned is very much more profitable than

any other.







Obtaining answers to the questions posed in this report is an impoi~snt

phase of farm management. The calculations are easily made.

With the help of accurate enterprise budgets, partial budgeting analysLs,

the concept of opportunity cost, and the use of the break-even formula, farn

managers are able to figure out answers to most of the questions about the

profitability of alternative crops.

Farmers who are faced with crises such as that caused by southern co:r

leaf blight can use the methods presented here in determining what alterna-

tive enterprises to bring into being.


Issued in furtherance of Cooperative Extension work, Acts of May 8 and
June 30, 1914, in cooperation with the U. S Department of Agriculture,
J. N. Busby, Dean for Extension, Cooperative Extension Service, University
of Florida, Gainesville, Florida,






































APPENDIX







PRICES FARMERS CAN AFFORD TO PAY FOR
BLIGHT RESISTANT CORN SEED


Question:
How much can a farmer afford to pay for blight resistant corn seed?

Answer:
The answer to this question depends on three main variables: (1) expec-
ted yield; (2) the price of harvested corn; and (3) the opportunity cost of
raising corn. Opportunity cost is the income given up from some alternative
crop. In other words, if an acre or other plot of land is planted in corn,
then it cannot be planted in any other crop.


Opportunity cost is usually the income lost from not growing or doing

the best or the next best thing. In the case considered in this report,

the opportunity cost of raising corn is the returns to land and management

for growing the most profitable alternative crop or crops. From the enter-

prise budgets it is noted that single cropped grain sorghum is the most

profitable, given the assumptions stated.

Example 1

Assumptions

Corn Yield = 55 bu.
Price $1.60/bu.

Calculation

Total Cost Cash Costs (less seed) + Fixed Cost + Opportunity Cost
$52.00 + 9.54 + 22.81
$61.54 + 22.81
Total Cost $84.35

Break-even equation

Yield x Price Total Cost (less seed) + Price of Seed (10 lbs.)
55 x $1.60 $84.35 + Price of Seed (10 lbs.)
$88.00 $84.35 + Price of Seed (10 lbs.)
$3.65 Price of Seed (10 lbs.)
$.365 Price of Seed per lb.

Answer

Price per bushel $.365 x 56
$20.44





Example 2


Assumptions

Yield = 60 bu.
Price = $1.60/bu.

Calculation

Total Cost = $84.85
60 x $1.60 = $84.85 + Price of Seed (10 Ibs,)
$96.00 $84.85 + Price of Seed (10 lbs.)
$11.15 = Price of Seed (10 lbs.)
$1.115 = Price of Seed per lb.

Answer

Price per bushel = $1.115 x 56
= $62.44


Example 3

Assumptions

Yield = 65 bu.
Price = $1.60/bu.

Calculation

Total Cost $85.35
65 x $1.60 = $85.35 + Price of Seed (10 lbs.)
$104.00 $85.35 + Price of Seed (10 lbs.)
$18.65 Price of Seed (10 lbs.)
$1.865 Price of Seed per lb.

Answer

Price per bushel $1.865 x 56
$104.44


Given the assumptions from the enterprise budgets, a farmer must expect

at least a 54.5 bushel yield before he can pay more than the 1970 price of

$.28 per pound. Nevertheless, depending on the yield expected and the price

anticipated, with the higher yields in the examples illustrated, he can pay

from less than $20.44 per bushel to more than $104.44 per bushel. The

break-even equation used may be extended to all yields, prices, and oppor-

tunity costs to fit specific sets of circumstances.




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