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1*31.-8
CONTENTS
An
Introduction
Procedure
to
the
Te x a s
Crop
and
Livestock
Budgets
Te r m i n o l o g y
Used
1n
Budgets
Calculating
Annual
Capital
Requirements
C a l c u l a t i n g M a c h i n e r y, E q u i p m e n t a n d L i v e s t o c k O w n e r s h i p C o s t s
Other
Information
Available
Limitations
Availability
Appendix
I.
Formulae
for
Estimating
Machinery
Cost
9
9
10
10
10
11
11
11
12
Equipment
Fuel
Procedure
12
12
Calculations
12
12
12
Cost
Breeding,
Livestock
Depreciation
Interest
Building
Fuel
Repair
Labor
Property
Insurance
Depreciation
Interest
Operating
TEXAS
Calculation
Costs
and
Maintenance
Labor
Depreciation
Interest
Auto
and
Fuel
Repair
Operator
Insurance,
Depreciation
Interest
V
3
5
5
6
7
7
9
Tractor,
Machinery
and
Implement
Cost
Calculation5
Field
Capacity
Calculation
Fuel
Requirement
and
Cost
Calculations
Lube
Cost
Calculation
Repair
and
Maintenance
Insurance
Depredation
Interest
on
Investment
Note on Hours of Annual Use of Tractors, Machinery and Implements
Repair
Hired
Insurance
• 9$P"V
1
2
on
Truck
and
Cost
Calculation
Maintenance
Labor
License,
and
on
Milking
13
13
Investment
Procedures
Calculations
Ta x e s
Investment
and
Working
Livestock
Insurance
(Purchased
Livestock)
on
Investment
Cost
or
Calculation
Utility
and
Procedure
Cost
Maintenance
Ta x
on
Capital
Cost
PA N H A N D L E
Investment
Calculation
DISTRICT
Procedure
CROP
13
13
13
14
14
14
14
15
15
15
15
15
15
15
16
16
16
16
16
16
C1.1
Alfalfa
Establishment,
Alfalfa,
Corn
for
Corn
Furrow
Grain,
for
Corn
Furrow
Irrigated,
(Natural
Furrow
Irrigated,
(Natural
Gas)
C1.7
Irrigated,
Sorghum,
Furrow
Irrigated,
Sorghum
Wheat,
for
Pasture,
Crop
Tractors,
Custom
C1.19
Gas)
C1.21
Sprinkler
Gas)
C1.25
Gas)
C1.27
Gas)
C1.29
Sprinkler
Irrig
C1.31
(Natural
Gas)
C1.33
Irrig.
Report
and
Input
C1.35
Equipment
C1.36
Resources
Truck
C1.39
Resources
Operation
Irrigation
C1.40
Resources
C1.41
Equipment
Farming
Budget
Establishment,
Implements
or
(Natural
(Natural
Products
Operating
Auto
Irrigated,
Permanent
Gas)
C1.23
(Natural
Irrigated,
C1.15
C1.17
(Natural
Irrigated,
C1.13
Dryland
(Natural
Irrigated,
Sprinkler
Pasture
Gas)
Dryland
Furrow
Permanent
(Natural
H a y,
Irrigated,
Sprinkler
C1.9
C 1 . 11
Dryland
Furrow
Soybeans,
Gas)
Dryland
Wheat,
Wheat,
(Natural
C1.42
Operations
Parameters
Machinery
Cost
TEXAS
PA N H A N D L E - H I G H
C1.43
Report
Report
C1
PLAINS
LIVESTOCK
Cow-Calf
11
Budget
■-y^k
C1.3
C1.5
Sorghum,
Sorghum,
Gas)
Gas)
Sorghum,
Sorghum,
C1.1
(Natural
Furrow
Forage
Gas)
Irrigated,
Forage
Forage
(Natural
Sprinkler
Grain,
Silage,
Irr1.
C1.45
L1
.
.46
1
L1.1
i«s«\
Livestock
TEXAS
Products
PLAINS
SOUTH
Alfalfa
Establishment,
Alfalfa
H a y,
Cotton,
Grain
Irrigated
Sorghum,
Sorghum,
Furrow
Dryland
(Heavier
Dryland
Irrigated
Aside
Irrigated
Soybeans,
Wheat,
Wheat,
Wheat,
Tractors,
Operating
Irrigated
Pivot
Set
Crop
(Heavier
Sprinkler
Center
Soils)
Soils)
Row
Crops
Irrigated
Irrigated
Aside
Land
Soils)
(Sandy
for
Input
Te x t .
iii
Soil)
Wheat
Equipment
Resources
Soils)
Soils)
Report
and
C2.13
C2.15
C2.17
C2.19
C2.21
C2.23
C2.25
C2.31
Soils)
Te x t u r e
(Heavier
C 2 . 11
C2.29
Te x t u r e
(Heavier
C2.9
C2.27
Irrigated
(Sandy
Irrigated
Products
Implements
Soil)
Te x t u r e d
Furrow
Dryland
Furrow
Soil)
Dryland
Dryland
Wheat,
Te x t u r e d
Furrow
S u n fl o w e r s ,
Wheat,
Soils)
(Sandy
for
S u n fl o w e r s ,
Soils)
(Sandy
(Heavier
Land
Soils)
(Sandy
C2.3
C2.7
Soils)
Te x t u r e d
Irrigated
Sprinkler
Set
(Sandy
(Heavier
Sorghum,
Sorghum,
Te x t u r e d
C2.1
C2.5
Irrigated
(Heavier
Sprinkler
Grain
Irrigated
Dryland
Furrow
Cotton,
(Sprinkler)
Sprinkler
Dryland
L1.3
C2.1
(Sprinkler)
Furrow
Corn,
Cotton,
Irrigated
Irrigated
Corn,
Cotton,
Report
DISTRICT
C2.33
C2.35
C2.37
C2.39
C2.41
C2.43
C2.45
C2.46
C2.48
Auto
or
Truck
Custom
Operation
Farming
Budget
C2.51
Operations
C2.52
Parameters
Report
Cost
PA N H A N D L E - H I G H
PLAINS
Alfalfa
Report
LIVESTOCK
Establishment,
Alfalfa
Alfalfa,
Cotton,
Cotton,
Dryland
Dryland,
Planting)
Guar,
Guar,
Sorghum,
Sorghum,
Dryland,
Wheat,
Wheat,
H a y,
(Solid
(2X2
Cotton,
Sorghum,
C3.1
C3.3
C3.5
1v
Irrigated
C 3 . 11
Rows)
C3.13
Row
C3.15
Pattern)
C3.17
Narrow
Planting
C3.9
Irrigated
40"
Conservation
Tillage
C3.19
Irrigated
C3.21
Dryland
C3.23
Irrigated
C3.25
Dryland
C3.27
Irrigated
C3.29
Conservation
Dryland
Dryland,
C3.7
Establishment,
Dryland,
Dryland(2x1
Dryland
Irrigated
Bermudagrass
Cotton,
L1.3
C3.1
Irrigated
Bermudagrass
Cotton,
CROP
Dryland
Establishment,
Coastal
C2.55
L1.1
L1.1
Report
DISTRICT
Alfalfa,
Coastal
C2.54
Budget
Products
PLAINS
ROLLING
C2.50
Equipment
Cow-Calf
Livestock
TEXAS
C2.49
Resources
Irrigation
Machinery
TEXAS
Resources
Conservation
Tillage
C3.31
.
33
C3
Tillage
C3.35
•^Mt^
rCrop
Products
Implements
Tractors,
Operating
and
Report
Equipment
C3.37
C3.38
Resources
C3.41
Input
Auto
or
Truck
Custom
Resources
Operation
Resources
Irrigation
C3.44
Operations
Budget
Parameters
Machinery
TEXAS
ROLLING
Cost
PLAINS
Farrow
C3.45
Report
DISTRICT
Cow-Calf
to
Report
LIVESTOCK
Finish
Livestock
NORTH
CENTRAL
Alfalfa
Coastal
Set
Aside
with
Production
Cotton
C4.
Production
L 3 . 11
1
C4.1
Ye a r
Establishment
Bermudagrass
Overseeded
Corn
L3.9
Bermudagrass
Coastal
Bermudagrass
L3.7
Second
Bermudagrass
L3.3
Hogs
Hay
Hay
1
L3.5
Report
DISTRICT
CROP
Alfalfa
C3.48
1
Production
Budget
Products
TEXAS
Coastal
Production
P1g
Calf
L3.
L3.
Hog
Finishing
Stocker
C3.47
Production
Feeder
r
C3.43
Equipment
Farming
V
C3.42
Hay
Pasture
Ryegrass
after
after
&
Clover
C4.3
C4.5
C4.7
C4.9
C 4 . 11
Wheat
C4.13
Wheat
C4.15
Cotton
Set
Aside
Land
with
Diversion
Payment
C4.17
Wheat
Set
Aside
Land
with
Diversion
Payment
C4.19
Land
without
Diversion
v
Payment
C4.21
Sorghum
Sorghum
Production
Wheat
Wheat
Tractors,
Production,
Auto
Custom
Production
Input
Crop
C4.31
Row
C4.33
C4.34
C4.39
C4.40
C4.41
Operations
C4.42
Report
Cost
TEXAS
Dairy
C4.37
Equipment
C4.44
Report
DISTRICT
LIVESTOCK
Cow-Calf
(with
Production
to
C4.45
L4.
1
Production
Production
Hog
P1g
Market
L4.1
Silage)
(without
Finishing
Feeder
Silage)
Production
L4.3
L4.5
L4.7
Production
L4.9
L4.
11
Hogs
Goat
Production
L4.13
Sheep
Production
L4.15
Stocker
Livestock
NORTHEAST
C4.29
Resources
Parameters
Stocker
Grazing
Resources
Farming
Farrow
with
OA.21
Resources
Operation
Dairy
C4.25
Equipment
Truck
Machinery
NORTH
CENTRAL
Wheat
Continuous
after
and
Irrigation
Budget
C4.23
Report
Implements
or
after
Continuous
Products
Operating
Hay
Production,
Wheat
Crop
for
Calf
Calf
Production
Products
TEXAS
Corn,
Procuction
(Native
Pasture)
L4.19
C5.
L4.21
1
Management
C5.1
Report
DISTRICT
Typical
L4.17
Corn,
High
Cotton,
Level
Typical
Cotton,
High
Sorghum,
Sorghum,
Management
Level
Management
Typical
High
Coastal
Coastal
Management
Management
Level
Bermudagrass
Bermudagrass
H a y,
C5.3
C5.5
C5.7
C5.9
Management
C 5 . 11
Establishment
C5.13
Typical
Management
C5.15
C o a s t a l B e r m u d a g r a s s H a y, H i g h L e v e l M a n a g e m e n t C 5 . 1 7
Soybeans,
Typical
Soybeans,
Wheat
Wheat
High
Level
Production,
Production,
Management
Management
Typical
High
Management
Level
Southern
Coastal
Peas
Bermudagrass
Coastal
Small
Yuchi
Christmas
Tree
Tree
C5.33
Establishment
Peaches,
&
Ye a r
vi i
C5.41
C5.45
Ye a r
C5.47
Third
Ye a r
C5.49
Fourth
Ye a r
C5.51
Fifth
Ye a r
C5.53
Twelfth
Report
and
Cut)
C5.37
Second
through
Products
C5.35
(Wholesale)
(Choose
First
Peaches,
Implements
Pasture
Production
Peaches,
Tractors,
C5.29
Grains
Peaches,
Crop
C5.25
C5.27
Pasture
Production
Sixth
C5.23
C5.31
Peaches,
Peaches,
C5.21
Bermudagrass-Clover
Clover
Christmas
Management
C5.19
Equipment
Ye a r s
C5.55
C5.57
C5.58
Operating
Auto
Input
or
Resources
Truck
Custom
Resources
Operation
Resources
Irrigation
C5.67
Operations
Budget
C5.68
Parameters
Machinery
NORTHEAST
Cost
TEXAS
Cow-Calf
with
Production
with
Production
Market
Hog
Stocker
Stocker
Contract
Broiler
Contract
Breeder
Operating
Auto
Custom
or
Production
L5.19
Pullet
Production
L5.21
Irrigated
Equipment
Resources
Resources
V111
L5.17
Breeder
Resources
Operation
L 5 . 11
L5.15
Cotton,
Truck
L5.9
Production
Dryland
Input
L5.7
Calf
Report
DISTRICT
and
L5.5
L5.13
Report
Implements
L5.3
Production
Products
TEXAS
Products
L5.1
Calf
Broilers
Upland
Tractors,
Replacement
Production
Cotton,
Crop
Replacement
Production
Contract
WEST
C5.71
L5.1
Raised
Pig
Light
Report
DISTRICT
Purchased
Feeder
Heavy
C5.70
Production
Production
Dairy
Report
Lease
Cow-Calf
Dairy
C5.65
C5.66
Equipment
Farming
Livestock
FAR
C5.62
L5.23
C6.1
C6.1
C6.3
C6.5
C6.6
C6.9
C6.10
C 6 . 11
Irrigation
Equipment
C6.12
^
Farming
Operations
Budget
Machinery
FAR
C6.13
Parameters
Report
Cost
TEXAS
WEST
Report
DISTRICT
Cow-Calf
Livestock
WEST
Report
DISTRICT
Sorghum,
Coastal
Coastal
Bermudagrass
Bermudagrass
Coastal
Hybrid
Pasture,
Establishment,
Bermudagrass
Coastal
Pasture,
Bermudagrass
Hay
Establishment,
Kleingrass
Pasture,
Oats,
Grain
Peanuts,
Irrigated,
Cotton,
Cotton,
Crop
Products
Tractors,
Auto
Custom
j^\
Irrigation
and
Input
or
Irrigated
C7.7
Grazing
Dryland
Grazing
Solid
Planting
C7.15
C7.17
C7.21
C7.23
Irrigated
C7.27
Resources
Resources
Equipment
C7.13
C7.25
Resources
Operation
C 7 . 11
Dryland
Equipment
Truck
C7.9
C7.19
Report
Implements
Operating
C7.5
Dryland
for
C7.3
Dryland
Dryland
Small
Spanish
Dryland
Irrigated
and
L6.3
C7.1
C7.1
Irrigated
H a y,
Sudan-Sorghum
Kleingrass
CROP
Establishment,
C6.16
1
L6.1
Dryland
Bermudagrass
Coastal
L6.
Production
Products
TEXAS
CENTRAL
C6.15
C7.29
C7.30
C7.33
C7.34
C7.35
C7.36
Farming
Operations
Budget
C7.37
Parameters
Machinery
WEST
CENTRAL
Report
Cost
TEXAS
DISTRICT
Report
LIVESTOCK
Cow-Calf
L7.3
Goat
Production
L7.5
Budget
Coastal
Bermudagrass
Coastal
Establishment,
Bermudagrass
Corn
H a y,
Native
Oats
Runner
Spanish
Spanish
Dryland,
Dryland,
Peanuts,
Peanuts,
Dryland
Peanuts,
Sudan-Sorghum
Dryland
Solid
Skip-Row
Irrigated,
Irrigated,
Peanuts,
Sudangrass
Dryland
Grazing,
Peanuts,
Peanuts,
Dryland
Pasture,
Solid
Skip-Row
C8.3
C8.5
C8.7
C8.9
Dryland
Pasture,
for
C8.1
Dryland
H a y,
Grass
Dryland
Dryland
Establishment,
Kleingrass
L7.9
1
Dryland
Sorghum,
Kleingrass
C8.
Dryland
Pasture,
Silage,
Kleingrass
L7.7
Report
CROP
Bermudagrass
Coastal
Runner
L7.1
Production
Products
DISTRICT
Runner
C7.40
1
Sheep
TEXAS
Runner
L7.
Production
Ranch
Livestock
CENTRAL
C7.39
C 8 . 11
C8.13
C8.15
C8.17
C8.19
Planted
C8.21
Planting
C8.23
Plant
Planting
C8.25
C8.27
Dryland,
Solid
Plant
C8.29
Irrigated,
Solid
Plant
C8.31
H a y,
Dryland
C8.33
Pasture,
Dryland
C8.35
^
Wheat,
Dryland
Peaches,
C8.37
Irrigated,
Peaches,
Irrigated,
Peaches,
First
Ye a r
C8.39
Second
Ye a r
C8.41
Third
Ye a r
C8.43
Irrigated,
P e a c h e s , I r r i g a t e d , F o u r t h t h r o u g h F i f t e e n t h Ye a r s C 8 . 4 5
Crop
Tractors,
Products
Implements
Operating
Auto
Report
and
C8.56
Operations
C8.58
Parameters
C E N TM
R aA cL h i n e r y T E X A S
C oDsI tS T R I C T
Cow-Calf
Dairy
Dairy
Production
to
Report
C8.60
R eL pI V
o rEt S T O C K
C8
L .86. 1
1
Production
(with
Production
Farrow
Hog
Pig
Dryland,
Production
Hogs
L8.3
L8.5
L8.7
L8.9
L 8 . 11
Goat
Production
L8.13
Sheep
Production
L8.15
Stocker
Calf
Products
DISTRICT
Corn,
Silage)
Production
Market
TEXAS
L8.1
Silage)
(without
Finishing
Feeder
Corn,
C8.55
Equipment
Budget
l
C8.54
Resources
Farming
A$y\
C8.52
Resources
Operation
Irrigation
Livestock
EAST
C8.48
Resources
Truck
Custom
r
Equipment
Input
or
C8.47
Dryland,
High
Procuctlon
Report
CROP
Typical
Level
C9.
Management
Management
L8.17
L8.19
1
C9.1
C9.3
Cotton,
Dryland,
Peanuts,
Peanuts,
Dryland,
Irrigated,
Sorghum,
Sorghum,
Soybeans,
Southern
Sweet
Dryland,
Typical
Management
C9.7
Level
Typical
Dryland,
Management
Management
Level
Typical
(Fresh
Corn
Management
Management
Market),
Dryland
Production,
Dryland
Pasture,
Bermudagrass
Common
Crimson
C9.5
High
Bahlagrass
Common
Management
High
Dryland,
Peas
Typical
Dryland
Pasture,
Bermuda-Clover,
Clover
C 9 . 11
C9.13
C9.15
C9.17
C9.19
C9.21
Dryland
Dryland
Establishment,
C9.9
Dryland
C9.23
C9.25
C9.27
Coastal Bermuda Est., Dryland, Typical Management C9.29
Coastal
Bermudagrass
Coastal
Bermuda
H a y,
Pasture,
Dryland
C9.31
Dryland
C9.33
Coastal Berm. Est., Dryland, High Level Management C9.35
Coastal
Arrowleaf
LA
S-1
Bermuda-Clover,
Summer
Christmas
Christmas
C9.37
Clover
Establishment,
Dryland
C9.39
Clover
Establishment,
Dryland
C9.41
Lovegrass
Small
Dryland
Pasture,
Grains
Pasture,
Te m p o r a r y
Tree
Tree
Production
Peaches,
Second
Peaches,
Third
xii
C9.45
Dryland
C9.47
(Wholesale)
C9.49
(Choose
First
C9.43
Dryland
Pasture,
Production
Peaches,
Dryland
&
Ye a r
Ye a r
Ye a r
Cut)
C9.53
C9.57
C9.59
C9.61
"*s^!\
Peaches,
1^^
Fourth
Ye a r
C9.63
Fifth
Ye a r
C9.65
Peaches,
Peaches,
Crop
and
Custom
Truck
C9.69
C9.70
C9.76
Resources
Operation
C9.78
Resources
C9.79
Equipment
Farming
C9.80
Operations
Budget
Parameters
Cost
DISTRICT
TEXAS
L9.1
Production
Calf
L9.3
Production
L9.5
Contract
Broilers
L9.7
Contract
Broilers
L9.9
Contract
Broiler
Contract
Breeder
Products
TEXAS
Breeder
Pullet
DISTRICT
Corn,
L 9 . 11
Production
L9.13
Report
CROP
C10.
Wheat,
C10.3
Dryland
C10.5
Dryland
Land,
Bermudagrass
xi i i
With
Cover
Establishment,
L9.15
1
C10.1
Dryland
Sorghum,
Aside
Production
Dryland
Cotton,
Coastal
C9.84
1
L9.
Production
Stocker
Set
C9.83
Report
LIVESTOCK
Dairy
CENTRAL
C9.81
Report
Cow-Calf
f^
C9.67
Resources
Irrigation
Livestock
SOUTH
Ye a r s
Equipment
Input
or
Twelfth
Report
Implements
Operating
Machinery
EAST
through
Products
Tractors,
Auto
Sixth
C10.7
Crop
C10.9
Dryland
C 1 0 . 11
Coastal
Bermudagrass
Coastal
Bermudagrass
Kleingrass
H a y,
Pasture,
Establishment,
Kleingrass
Pasture,
Grain
C10.23
C10.25
C10.27
Dryland
Pasture,
C10.29
Dryland
C10.31
Report
Implements
and
C10.33
Equipment
Input
C10.34
Resources
Truck
Custom
C10.21
Dryland
Grazing,
Products
or
C10.19
Dryland
H a y,
Sorghum
Auto
C10.17
Dryland
H a y,
Sorghum
Operating
C10.15
Dryland
Oat
Tractors,
Dryland
Dryland
Oats,
Small
C10.13
Dryland
H a y,
Kleingrass
Crop
Dryland
C10.38
Resources
Operation
C10.40
Resources
Farming
C10.41
Operations
Budget
C10.42
Parameters
Machinery
SOUTH
CENTRAL
Report
Cost
TEXAS
DISTRICT
Cow-Calf
Report
LIVESTOCK
Feeder
Production
L10.3
Pig
Production
L10.5
Hogs
L10.7
Production,
Broilers,
Contract
Costs
Broiler
L10.1
Calf
Finishing
Contract
C10.45
L10.
1
Production
Stocker
Dairy
C10.44
Without
&
Returns
Breeder
Silage
per
House
Production
L10.9
L 1 0 . 11
L10.13
Contract Breeder Pullets, 3 House Unit, 2 Batches L10.15
Contract
Cage
Egg
Production
xi v
-
2
House
Unit
L10.17
Contract
Livestock
TEXAS
Commercial
Products
COAST
UPPER
Cotton,
Cotton,
Rice,
Dryland,
Custom
Dryland,
Level
Typical
High
Input
C 11 . 9
Management
C 11 . 11
Management
C 11 . 2 1
Resources
C 11 . 2 2
Resources
C 11 . 2 3
C 11 . 2 4
Operations
Parameters
Cost
BEND
C O A S TA L
Cow-Calf
Production,
C 11 . 2 7
Report
DISTRICT
LIVESTOCK
C 11 . 2 8
L14.1
Partially
DISTRICT
Corn,
Improved
Pasture
Report
CROP
Irrigated
Cotton,
Cotton,
Forage
C 11 . 2 5
Report
Products
TEXAS
C 11 . 1 5
C 11 . 1 8
Equipment
Budget
C 11 . 1 3
C 11 . 1 7
Resources
Operation
C 11 . 5
Management
Equipment
Truck
C 11 . 3
C 11 . 7
Management
Level
and
Farming
Livestock
SOUTH
High
C 11 . 1
Management
Report
Irrigation
Machinery
TEXAS
Management
Typical
Dryland,
Implements
or
L10.21
C 11 . 1
Management
Level
Products
Operating
Auto
High
Dryland,
Soybeans,
CROP
Management
Level
Typical
Dryland,
Soybeans,
Tractors,
High
Irrigated,
Sorghum,
Crop
Typical
Irrigated,
Sorghum,
L10.19
Report
DISTRICT
Dryland,
Rice,
Pullets
Sorghum
L14.1
L14.3
C12.1
C12.1
Dryland
C12.3
Irrigated
C12.5
H a y,
Dryland
C12.7
Sorghum,
Dryland
Sorghum,
Sorghum,
Irrigated
Dryland,
Wheat,
Peanuts,
C12.13
C12.15
Dryland
C12.17
Spanish,
Dryland
C12.19
Irrigated
C12.21
Broccoli,
Irrigated
C12.23
Cabbage,
Irrigated
C12.25
Cantaloupes,
Irrigated
Carrots,
C12.27
Irrigated
C12.29
Cucumbers,
Irrigated
C12.31
Honeydews,
Irrigated
C12.33
Ye l l o w
Bell
Jalapeno
Onions,
Irrigated
C12.35
Peppers,
Irrigated
C12.37
Peppers,
Watermelons,
Watermelons,
Citrus
Tillage
Irrigated
Spanish,
Peanuts,
C 1 2 . 11
Conservation
Soybeans,
Citrus
C12.9
Establishment,
Establishment,
First
Second
Irrigated
C12.39
Dryland
C12.41
Irrigated
C12.43
Ye a r,
Irrigated
C12.45
Ye a r,
Irrigated
C12.47
Grapefruit
Establishment,
3rd
Ye a r,
Irrigated
C12.49
Grapefruit
Establishment,
4th
Ye a r,
Irrigated
C12.51
Grapefruit,
Grapefruit,
Mature
Purchased
Grove,
Mature
Irrigated
Grove,
Irrigated
C12.53
C12.55
Oranges
Establishment,
3rd
Ye a r,
Irrigated
C12.57
Oranges
Establishment,
4th
Ye a r,
Irrigated
C12.59
Oranges,
Mature
xv i
Grove,
Irrigated
C12.61
Oranges,
Purchased
Mature
Grove,
Plant
Cane
Ratoon
Bermuda
Type
Cane,
Grasses,
Bermuda
Establishment,
H a y,
Pasture,
Grass
Kleingrass
Crop
Tractors,
#^\
Auto
Establishment,
Custom
C12.93
Parameters
Report
Cost
TEXAS
Cow-Calf
Cow-Calf
Livestock
SOUTHWEST
Unimproved
Production,
Cow-Calf
Bermuda
Coastal
Coastal
Bermuda
1/3
Production,
Products
TEXAS
Coastal
C12.95
Report
AREA
Production,
C12.96
L13.1
Brush
Improved
Country
Pasture
Improved
Pasture
Report
DISTRICT
Pasture
Bermuda
Pasture,
xvi i
C12.81
C12.92
Operations
Machinery
SOUTH
C12.79
C12.91
Equipment
Budget
C12.75
C12.90
Resources
Farming
C12.73
C12.88
Resources
Operation
C12.71
C12.84
Resources
Truck
C12.69
C12.83
Equipment
Input
Irrigation
Jfifey
Dryland
Report
and
C12.67
C12.77
Dryland
Pasture,
Implements
or
Dryland
Dryland
Products
Operating
Irrigated
Establishment,
Kleingrass
Irrigated
Irrigated
B u f fl e g r a s s ,
C12.63
C12.65
Irrigated
Grass
Bermuda
B u f fl e
Irrigated
Establishment,
L13.3
L13.5
L13.7
C13.1
Establishment,
Pasture,
L13.1
Dryland
Dryland
Irrigated
C13.1
C13.3
C13.5
Coastal
Coastal
Bermuda
Bermuda
Coastal
Forage
H a y,
Pasture,
Establishment,
Bermuda
Sorghum
Oats
Forage
H a y,
For
For
Grazing,
Sorghum
Corn
for
Corn
for
Irrigated
Irrigated
Grazing,
Sorghum
Forage
Irrigated
Irrigated
Irrigated
H a y,
H a y,
C13.7
C13.9
C 1 3 . 11
C13.13
C13.15
Dryland
C13.17
Irrigated
C13.19
Silage,
Irrigated
C13.21
Food,
Irrigated
C13.23
Cotton,
Irrigated,
Long
Season
Va r i e t i e s
C13.25
Cotton,
Irrigated,
Short
Season
Va r i e t i e s
C13.27
Dryland,
Short
Season
Va r i e t i e s
C13.29
Cotton,
Sorghum,
Dryland
C13.31
Irrigated
C13.33
Dryland
C13.35
Irrigated
C13.37
Sorghum,
Guar,
Guar,
Peanuts,
Florunner,
Peanuts,
Spanish,
Soybeans,
Winter
Wheat,
Spring
Wheat,
Spring
C13.39
Dryland
C13.41
Irrigated
Wheat,
Winter
Irrigated
Wheat,
Processed
Beets,
Cabbage,
Irrigated
C13.45
Dryland
C13.47
Irrigated
C13.49
Dryland
C13.51
Irrigated
C13.53
Irrigated
Cantaloupes,Irrigated
Carrots,
Irrigated
xv i i i
C13.43
C13.55
C13.57
C13.59
Processed
Carrots,
Irrigated
Cucumbers,
Irrigated
Cucumbers
(Pickles),
C13.63
Irrigated
C13.65
Lettuce,
Irrigated
C13.67
Onions,
Irrigated
C13.69
Fresh
Market
Processed
Pecan
Pecan
C13.61
Spinach,
Spinach,
Orchard,
Orchard,
Irrigated
Irrigated
Establishment
Pre-Production
C13.71
Phase
C13.73
Phase
( Ye a r s
C13.75
1-4)
C13.77
P e c a n O r c h a r d , E a r l y P r o d u c t i o n P h a s e ( Ye a r s 5 - 9 ) C 1 3 . 7 9
Pecan
Orchard,
Operational
Phase
( Ye a r s
10-20)
C13.81
P e c a n O r c h a r d , E a r l y P r o d u c t i o n P h a s e ( Ye a r s 5 - 9 ) C 1 3 . 8 3
Pecan
Crop
Tractors,
Orchard,
Products
Custom
and
Truck
C13.85
C13.87
C13.88
C13.92
Resources
Operation
C13.94
Resources
C13.95
Equipment
Farming
C13.96
Operations
C13.98
Parameters
Machinery
SOUTH
Cost
TEXAS
Cow-Calf
Production,
Cow-Calf
Cow-Calf
Livestock
TEXAS
10-20)
Resources
Irrigation
Budget
( Ye a r s
Equipment
Input
or
Phase
Report
Implements
Operating
Auto
Operational
C O A S TA L
C13.101
Report
AREA
C13.102
L13.1
Unimproved
Production,
1/3
Production,
Products
BEND
Report
Brush
Improved
Improved
Report
DISTRICT
Country
Pasture
Pasture
CROP
L13.1
L13.3
L13.5
L13.7
C14.1
Corn,
Coastal
Plain
Upland
Upland
Corn
Corn,
Upland,
Set
Aside
Aside
Land,
Land
Tillage
Upland
Clean
with
Peanuts,
Peanuts,
Tilled
Cover
Crop
B u f fl e
Coastal
Coastal
C14.25
Crop
Tractors,
Custom
Irrigation
Farming
Dryland
Establishment
Pasture,
Establishment,
Pasture,
Dryland
Dryland
Dryland
Report
Implements
and
Input
or
Dryland
Pasture,
Products
Operating
Auto
C14.27
Bermudagrass
Kleingrass
Equipment
Resources
Truck
Resources
Operation
Resources
Equipment
Operations
xx
C14.19
C14.23
Bermudagrass
Kleingrass
C14.17
Irrigated
Establishment,
Grass
C14.15
C14.21
Watermelons
Grass
C14.13
Dryland
Soybeans
B u f fl e
C14.9
C 1 4 . 11
Conservation
Land
Aside
Plain
Upland
Sorghum,
C14.5
C14.7
Coastal
Sorghum,
Set
Tillage
Dryland
Sorghum,
Set
C14.3
Conservation
Cotton,
C14.1
C14.29
C14.31
C14.33
C14.35
C14.37
C14.39
C14.41
C14.42
C14.47
C14.48
C14.49
C14.50
C14.51
Budget
Machinery
TEXAS
Parameters
C O A S TA L
Cow-Calf
Livestock
Budget
Cost
BEND
Production,
Report
C14.54
Report
DISTRICT
LIVESTOCK
C14.55
L14.1
Partially
Products
Improved
Report
Index
Pasture
L14.1
L14.3
11
/jf*V
AN INTRODUCTION TO THE TEXAS CROP AND LIVESTOCK BUDGETS*
Estimating the production costs and returns of farm enterprises for planning purposes is a
difficult, but important, task. Timely and accurate cost of production estimates are necessary:
(a) to make input use decisions, and to arrange for operating capital requirements, (b) for
enterprise selection, (c) to estimate the potential profitability of capital investment decisions,
and (d) to develop marketing strategies and assess their impact on costs and returns.
Budgeting is a deceivingly simple tool which can be used for analysis of problems ranging
from day-to-day detailed choices to major questions about the size and type of farm business.
Budgeting, as a management tool, is the testing and estimation of likely outcomes from
decisions before they are implemented. Enterprise budgets are both a product of and the basic
building block for the planning process.
The Texas Crop and Livestock Budgets are projected enterprise budgets jointly prepared by
the Texas Agricultural Extension Service (TAEX) and the Texas Agricultural Experiment Station
(TAES) to assist farmers and ranchers in estimating "real" economic costs and returns of
production, in current dollars.1 The information presented in the budgets is prepared as a
management planning guideline and therefore is not intended to recognize or predict the costs
and returns from any particular farm or ranch operation. It is suggested that users modify the
budgets to fit their individual situations by making changes in yields, input levels, prices and
other factors. A column titled "Your Estimate" is provided on each budget to make
modifications convenient. Furthermore, the expiration date on each budget indicates updating is
necessary.
* Prepared by Robert H. Jenson, Assistant for Management Analysis, Department of
Agricultural Economics, Texas A&M University, College Station, February, 1986. This paper is
designed to accompany the distribution of the Texas Crop and Livestock Budgets (TAEX).
1 Alternative procedures are mixed in their method of handling the impact of inflation on
costs, or attempt to estimate nominal cash costs of production either before or after relevant
taxes. In fact, most budgets are a mixed bag of nominal, real, before-tax, after-tax, cash
and non-cash concepts and procedures.
The 1986 crop budgets include the anticipated government deficiency payments for cotton,
corn, sorghum, and wheat To qualify for these payments producers must be in compliance
with the government program for the respective crops. In evaluating the whole farm situation
proper acreage adjustments and fallow acreage costs must be included when determining costs
and returns per acre.
Procedure
One of the major problems involved in enterprise budgeting is the lack of information
concerning the amount of production which will result from a particular combination of
inputs. Information for the Texas Crop and Livestock budgets is .assembled from published and
unpublished sources. The data are obtained and continually revised with the cooperation of
farmers, ranchers, and agribusiness firms through informal surveys and personal contacts. Data
supplied by these sources are confidential and provide average values which are used in
developing and revising budgets. Scientific sampling techniques required to produce statistically
reliable estimates, however, are not used due to time .and cost limitations. When possible,
published information from the Texas Statistical Reporting Service and published research from
the Texas Agricultural Experiment Station (TAES) are used in preparation of the budgets.
Regionally based agricultural economists provide leadership in assembling the data and
constructing the budgets.
The input levels used, the combination of inputs and machinery operations, and the type
and length of ownership of machinery and equipment are not necessarily profit-maximizing.
They are only believed to be representative or typical for the specified geographic area.
Budget preparation is a time consuming task involving numerous data and mathematical
calculations. A computer program has been developed to aid in budget preparation. The TAEX
budgets are prepared using the Microcomputer Budget Management System (MBMS).2 This
2 McGrann, James, M., Kent D. Olson, Timothy A. Powell and Ted R. Nelson,
"Microcomputer Budget Management System User Manual." Dept of Agricultural Economics, "^
Texas A&M University, College Station, February 11, 1986.
#*\
computerized tool stores and retrieves base data, prices, and other factors; calculates machinery,
capital, and labor costs; organizes the costs and returns in a variety of formats; and performs
a number of budgeting analyses.
Terminology Used in Budgets
An enterprise budget is an economic recipe for the production of a commodity usually
expressed in terms of the production unit (e.g., per bushel, per head, etc.) or by a common
resource (e.g., per acre of cropland). It is a statement of all expected revenues and expenses,
both actual and imputed.
There are three general types of costs that make up the total economic cost of producing
any farm commodity. These are variable costs, fixed costs, and overhead costs.
Variable costs (sometimes referred to as operating costs) are those short-run costs that may
change with changes in level of production and/or are controlled by the manager. They are
generally the cost of items that will be used up during one production cycle. If the manager
!^*v
decided to cease the production activity, these costs are avoidable. Examples are such operating
inputs as fuel, fertilizer, chemicals and some hired labor costs. In the long run, all production
costs are variable.
In the TAEX published budgets, variable costs are further divided into pre-harvest and
harvest costs where applicable. This separation is particularly useful for decisionmaking in
which crop abandonment or graze-out are common practices. Once variable costs are incurred
(e.g., seed after planting), they have the characteristics of fixed costs and are referred to as
"sunk" costs.
Income above variable costs serves to guide most farm management decisions, particularly
in the short run. If income over variable costs is negative, and since variable costs are by
definition avoidable, a producer will minimize his losses by ceasing production. Selecting
enterprises which maximize income over variable costs will lead to greater short-run profit.
Fixed costs may be defined as those costs that either do not change with the level of
production or cannot be controlled or avoided. Examples are items such as property taxes,
3
insurance, depreciation, and interest on investment Cash or fixed dollar land rents and owneroperator labor may also be considered fixed costs.
Fixed and variable cost analysis is a useful tool in determining profitability of an
investment (e.g., machinery) based on its life or ownership period. It can aid in determining
the best replacement policies, whether to own or custom-hire services, and a host of other
decisions. However, fixed and variable cost analysis does not adequately explain the cash flow
and income tax effects of an investment Cash flow analysis is directed more to the question
of fiscal feasibility, or the ability to meet the financial obligations of the investment, than to
the question of profitability. Consequently, the two types of analysis must be used together in
order to present a clear and total picture of investment alternatives.
Overhead costs are costs of machinery, equipment, buildings, and management that cannot
be directly identified with an individual enterprise. Since these items are involved in the
overall farm operation, it is sometimes difficult to reasonably include them in enterprise
budgets. Examples of overhead costs might be telephone service, office supplies, general utilities *^%
and legal and secretarial expenses.
The allocation of fixed and overhead costs is not generally required for most farm
management decisionmaking. At best, it is an arbitrary procedure for shared resources (e.g., the
fixed costs are allocated by percentage of total annual use in the Texas budgets). However,
estimates of the fixed resource requirements and the relative efficiency at which alternative
enterprises use fixed and limiting resources is important to enterprise selection.
The concept of opportunity cost, rather than incidence of cost, is used in estimating a
number of production cost items. The opportunity cost of a production resource is its current
value in its next best alternative use. The opportunity cost concept is useful in estimating the
appropriate costs of inputs that are either not purchased or do not have a clear market value,
such as equity capital, land rents, returns to operator labor, and farm-produced feedstuffs.
Cost incidence versus opportunity cost is the primary difference between economic cost of
production and cost estimates derived from cost accounting records when all inputs to the ^i
0 y \
production process are included.
The projected net return in the budgets (the "bottom line") is the residual returns
remaining after accounting for accrued and imputed costs to other factors of production. (The
variable and fixed costs discussed above.) In most cases, the net return is a projected return to
certain overhead, management, and profit (risk) for the enterprise, the only remaining factors
of production for which returns have not been imputed.
Calculating Annual Capital Requirements
Annual operating capital is the short term capital required to finance cash variable and
fixed costs during the enterprise production cycle. The MBMS program allows for the
internally generated cash (e.g., from the sales of products of the enterprise) to offset the
operating input expenses. Any cash surplus is carried forward as savings and any deficit
constitutes an operating capital requirement The annual capital requirement is the weighted
average net capital requirement (weighted by days outstanding). The annual operating capital is
not the minimum or maximum of short-term financing required by the enterprise. Annual
capital requirements may even be negative if accumulated monthly receipts are greater than
expenses over the production cycle.
The interest charge on borrowed capital and the interest savings on surplus cash are listed
separately on the budgets to allow for different interest rates. The TAEX budgets assume that
100% of the required capital is borrowed (0% equity capital is used to meet operating
requirements).
Calculating Machinery, Equipment and Livestock Ownership Costs
One of the more difficult tasks in estimating costs of production is estimating the cost of
owning and operating farm machinery. Coupled with this difficulty is the associated problem
of how to allocate the cost of items (e.g., tractors) shared by a number of enterprises on a
farm. The MBMS program divides equipment and livestock into seven categories: tractors, selfpropelled machinery, implements, equipment, auto and trucks, breeding, milking and working
livestock, and buildings and other improvements.
Current replacement values and capital budgeting techniques are used as the basis for
calculating projected ownership costs (depreciation, interest, taxes and insurance) in the TAEX
budgets. This projected (economic) cost may be more or less than the estimated cost based on
the book values and IRS-approved depreciation schedules of the various classes of equipment
and livestock (rather than current market value) for established farms or ranches that have a
combination of used and new machinery. This method, however, more closely reflects the
"real" earnings required to cover the "real" cost of recapturing equipment investment, especially
during high rates of inflation. The depreciation method based on book value and used for
income tax purposes underestimates the total amount of capital needed for replacement of
machinery and equipment under inflation. Accelerated depreciation schedules, combined with
short accounting lives, may overestimate the real economic depreciation needed for long run
production. Users of the budgets should review their fixed costs closely and be conscious of
the differences in ownership cost based on current replacement values versus those developed
from historical or accounting costs .and used for income tax purposes.
Since detailed information on equipment fuel, lubrication, repair and labor requirements is
not generally available, MBMS uses a series of functional relationships and parameter settings
for each machinery and equipment item to estimate ownership and operating costs. (See
machinery and equipment data and parameters at the end of each budget set and formula
section that follows). The hourly cost calculated for each piece of machinery or equipment and
the per acre or or per mile cost of each farming operation, including associated labor and
materials costs, is also printed at the end of each set of crop budgets.
Other Information Available
Budget analyses available from the budget generator are detailed line item reports, summary
reports and reports by stage, operation, resource, residual returns and expense type. The crop
budgets are printed using the report by stage. The livestock budgets use the residual returns
and operations reports. Also available is the ability to generate whole farm cash flow
6
summaries on the basis of enterprise budgets and the number of units of each in the farm
organization. Details concerning this information may be obtained from the economistmanagement serving the particular Extension district
Limitations
Careful evaluation of the resource situations must precede the drawing of inferences from
an enterprise budget Farms having resource situations (available land, machinery, capital, and
management, for example) that differ from the situation assumed by the budgets can come to
considerably different conclusions. Differences in assumed annual hours of use of machinery
and equipment because of farm size or other uses, or size of the machinery used, can make
significant differences in per unit costs and net returns. These differences in resources and
organization must be evaluated and accounted for adequately if reliable conclusions are to be
drawn.
The Texas Crop and Livestock Budgets are projected budgets, not historical or actual. It is
difficult to make accurate estimates of future prices, yields, or other production uncertainties.
Most of the budgets are prepared 12 to 18 months in advance of the crop harvest or the end
of the livestock production cycle. Therefore, the user should evaluate current production
outlook information and use his expectations to update the budgets in preparing to use them.
In addition, year-to-year comparisons of the published budgets are not advisable due to
changes in farm size, technology, and farming patterns.
Availability
The Texas Crop and Livestock Budgets are published annually and distributed in loose-leaf
form on a subscription basis. Various budgets are published for each of the fourteen Extension
Districts in the state. To subscribe send $100 to: Extension Farm Management, Dept of
Agricultural Economics, Texas A&M University, College Station, Texas, 77843.
Individual copies of budgets for major enterprises in a particular Extension District may be
obtained at no cost through local county Extension offices.
APPENDIX I. FORMULAE FOR ESTIMATING MACHINERY COST4
TRACTOR, MACHINERY AND IMPLEMENT COST CALCULATION5
The tractor, self-propelled machinery, and implement calculation section is the major
computational part of MBMS. Several options are available to users to calculate both hourly
and per acre costs. The two major options are for calculation of repair, maintenance and
depreciation costs. Option one is based on user defined costs associated with an hourly use
base while option two duplicates the procedure and formulas in the 1983 ASAE Yearbook to
calculate repair, maintenance and depreciation costs. Nearly all of the published budgets are
calculated using option two, so that is what will be explained here.
Field Capacity Calculation
The field capacity of different implements and self-propelled equipment must be calculated
to determine tractor hours or self-propelled hours per acre.
Calculated capacity for tractors and self-propelled machinery is similar except that selfpropelled machinery has its own capacity estimate. A wheel tractor or a track layer relies on
the implements to determine capacity and power requirements.
Since multiple implements are allowed on one tractor the slowest implement should
determine the overall capacity. A tractor multiplier is used to convert the implement hours
per acre into tractor hours per acre.
The implement hours per acre is calculated from the implement information.
The capacity of self-propelled machinery, such as a combine, is calculated from the speed,
width and field efficiency information. The following equation is used to calculate capacity.
jPn
C = (S * W * FE) / 8.25
where
C = acres per hour calculated capacity
S = implement speed in miles per hour
W = swath width of the implement in feet
FE = field efficiency is the ratio of accomplishment in acres per hour compared
to theoretical maximum efficency
Speed is expressed in miles per hour, width in feet, and field efficiency as the ratio of
actual capacity to theoretical capacity. The constant, 8.25, is used to convert the units to
acres per hour.
The tractor and machine hours per acre are used to calculate operator hours per acre and
fuel per acre. They are also used to allocate the fixed costs of interest, depreciation and the
annual lease payment
The required operator's hours are a multiple of the tractor or machinery hours per acre.
We expect the operator to work longer than the machine due to pre-operation checkouts,
waiting, etc. This additional time is expressed as a percentage of the tractor or the machine
hours. The following equations are used to calculate operator's hours per acre for tractors or
self-propelled machinery.
4 For a complete listing of formulas used by MBMS see the "Microcomputer Budget
Management System User Manual", Chapter 9 (See footnote 2).
5 Irrigation equipment calculations are nearly identical except calculated on an acre-inch basis.
9
Operator's hours/acre = Tractor hours/acre * labor multiplier
Operator's hours/acre = Machine hours/acre * self-propelled labor multiplier
The operator wage is multiplied by the operator's hours per acre to calculate the cost of
operator labor per acre.
Operator cost/acre = operator's hours/acre * wage rate
Fuel Requirement and Cost Calculations
Fuel cost is calculated using equivalent PTO horsepower of the implements) and the
required fuel use multiplier of the fuel type. Equivalent PTO horsepower required varies
directly with implement width, tillage depth, soil texture, and speed of operation. All these
factors determine draft of an implement For tractors pulling two or more implements, the
required horsepower for that tractor is the sum of the required horsepower for each
implement The formulas for calculating fuel cost are shown below.
CFC = (F * HPR * FM)
where
CFC = calculated fuel use cost per hour
HPR = equivalent PTO horsepower required
FM = fuel use multiplier for each fuel type
FM^iin. = .54X + .62 - .04 * (697X)05
FMdiescl = .52X + .77 - .04 * (738X + 173)05
FMLPG = .53X + .62 - .04 * (646X)0 5
X = HPR divided by the maximum PTO horsepower available
Lube Cost Calculation
Lube cost per hour is calculated as a percent of the fuel cost The multiplier is stored in
the parameter file.
LC = FC * (LM * .01)
where
LC = lube cost per hour
FC = fuel cost as defined for the two options
LM = lube multiplier
Repair and Maintenance
Repair, maintenance and depreciation calculation procedure duplicates the Agricultural
Engineers Yearbook of 1983, sections: ASAE EP391 and ASAE D230.3. The formulae for
these calculations are:
R = LP * RC#1 * ((HPU + AU)/1000)RC*2 - (HPU/1000)RC*2)/ AU
where
R = repair and maintenance cost per hour (R & M)
LP = current list price
RC#1 = repair coefficient #1
HPU
=
hours
of
previous
accumulated
AU
=
hours
of
annual
RC#2 = repair coefficient #2
10
use
use
/0SS^
')
Repair Coefficient #7
RC#1 is a variable that helps determine the shape of the repair curve for a specific
machine.
Repair Coefficient #2
RC#2 is an exponent variable which, in conjuction with RC#1, determines the shape of the
repair curve.
Repair and maintenance costs are highly variable and unpredictable as to time of
occurrence. These equations are but estimates of average values. A typical variation could be
expected to range from 50 percent to 200 percent of the estimated cost in this data.
Insurance
Insurance cost is based on a fixed percentage of market value. Insurance cost per hour is
calculated by the following formula:
INS = (INR * .01 * M) / HAU
where
INS = insurance cost per hour
INR = insurance rate based on current market value (%)
M = current market value
HAU = hours of annual use
Depreciation
Depreciation is based on equations to estimate the remaining value of the machine and on
the assumption of constant annual use of the machine. Two values that are specified are
factors used to calculate salvage value and hourly depreciation. DF#1 is the percentage of
original value that remains after the first year depreciation. DF#2 is a component of the
standard double declining balance equation. Values for both depreciation factors were taken
from the 1983 Agricultural Engineers Yearbook.
Depreciation cost calculation uses the two depreciation factors to calculate salvage value and
to adjust current market value. This value is then divided by the number of years of expected
ownership times annual use.
The formula for calculating depreciation (D) is:
D = M - SV / (HAU * YO)
where
D = depreciation per hour
M = current market price
SV = LP * DF#1 * (DF#2) ** YO
LP = list price
DF#1 = depreciation factor #1
DF#2 = depreciation factor #2
YO = years owned
HAU = hours of annual use
Interest on Investment
Interest on investment is calculated using the following formula.
JF*
IC = ((M + SV) * (IR * .01)) / (2 * HAU)
where
IC = hourly interest cost on capital investment
11
M = current market value, purchase price
SV = salvage value, defined in depreciation calculations
HAU= hours of annual use
IR = interest rate, annual percent
Note on Hours of Annual Use of Tractors, Machinery and Implements
Hours of annual use (HAU) is a key variable in all the equations. The machinery cost in
the budgets can be significantly different from an actual farm with different annual machinery
use.
EQUIPMENT COST CALCULATION PROCEDURE
The costs of equipment such as augers, livestock handling equipment, etc. are calculated
with defined data. The option to have costs calculated does not exist as with tractors and
machinery. Depreciation, interest, insurance, taxes, fuel consumption, and repair and
maintenance costs are all calculated from defined data.
Fuel Costs
Fuel costs are calculated by multiplying the annual use by the fuel price. The annual use
is calculated by multiplying the specified gallons per hour of use by the annual hours of use.
Not all equipment uses fuel.
Repair and Maintenance Calculations
The hours of owner and hired on-farm labor and off-farm purchased parts and labor for a
specific repair and maintenance base hours of use level are defined. The formula for this
calculation is as follows:
R = ((FHL * CHL + FOL * COL + PLS) / BASE)
where
R = repair and maintenance cost per hour (R & M)
FHL = on-farm hired labor (hr)
CHL = cost of on-farm hired labor for R & M
FOL = on-farm owner labor for R & M (hr)
COL = cost of on-farm owner labor for R & M
PLS = off-farm parts, labor and supplies for annual R & M
BASE = operating hours on which repair and maintenance cost is based
Hired Labor
The amount of hired operator labor is specified on an hourly basis when the enterprise
budget is defined. The hourly quantity is multiplied by the hourly labor wage stored in the
labor resource file to determine hourly hired labor cost. This value is added to repair and
maintenance hired labor to determine total hired labor cost
Insurance
Insurance costs per hour are based on a fixed percentage of market value divided by hours
of annual use.
INS = (INR * .01 * M) / HAU
where
INS = insurance cost per hour
INR = insurance rate based
M
=
current
HAU = hours of annual use
12
on current
market
market value
value
^^
^7
Depreciation
Depreciation is a measure of the actual decline in value of the equipment in the current
year. It is dependent on the portion of remaining life used in the current year and on the
current market value adjusted for salvage value.
D = ((HAU / RL) * (M * (1 - (SV * .01)))) / HAU
where
D = current depreciation per hour
HAU = hours of annual use
RL = remaining life
M = current market value
SV = salvage value as a percent of current market value
Interest on Investment
Interest costs per hour are based on the average amount of investment (market value)
adjusted for one-half of depreciation in the current year. The total interest cost is then
divided by hours of annual use.
IC = ((M - D * HAU/2) * (IR * .01)) / HAU
where
IC = interest cost of capital
M = current markt value
D = depreciation as defined in depreciation calculations
HAU = hours of annual use
IR = interest rate (%)
AUTO AND TRUCK CO.ST CALCULATION PROCEDURES
The costs of operating automobiles and trucks include both fixed ownership costs and
variable operating costs. Fixed costs include depreciation, interest on investment, annual
insurance premium, license and tax. Operating costs include repair and maintenance costs, fuel
costs and owner operator labor costs. Costs are calculated on a per hour and per mile basis.
Fuel
Fuel costs are calculated on both a per hour basis and on a per mile basis. Both are
dependent on the efficiency of fuel use and on fuel costs.
FCMI = FUC / FU
FCHR= FCMI * MPH
where
FCMI = fuel cost per mile
FU = miles per gallon of fuel
FUC = fuel cost per gallon of fuel
FCHR= fuel cost per hour
MPH = average speed of operation in miles per hour
Repair and Maintenance Calculations
The hours of owner and hired on-farm and off-farm purchased parts and labor for a
specific repair and maintenance base hours of use level are defined. The formula for this
calculation is as follows:
13
R = ((FHL * CHL + FOL * COL +PLS) / BASE)
where
R = repair and maintenance cost per hour (R & M)
FHL = on-farm hired labor (hr)
CHL = cost of on-farm hired labor for R & M
FOL = on-farm owner labor for R & M (hr)
COL = cost of on-farm owner labor for R & M
PLS = off-farm parts, labor and supplies for annual R & M
BASE = operating hours on which repair and maintenance cost is based
Operator Labor
The number of hours of operator labor used for each vehicle is based on the number of
hours the vehicle is in operation. Hours of annual use is determined by multiplying the
number of miles the vehicle is driven annually by the average speed of operation.
OL = (1 / MPH) * MAU * LMULT
where
OL = hours of owner operator labor used annually
MPH = average speed of operation in miles per hour
MAU = miles of annual use
LMULT = labor multiplier
Insurance, License, and Taxes
The annual insurance premium and any applicable licensing fees and taxes paid for each
vehicle are defined values.
Depreciation
Depreciation is a measure of the actual loss of value in the auto or truck occurring in the
current year. Thus it may be different than depreciation used for tax purposes. The formula
takes the fraction of remaining life used in the current year (AU/RL) and multiplies it by the
current market value of the auto or truck (M) less salvage value (LP * SV * .01).
-*%
D = (AU / RL) * (M * (1 - (SV * .01)))
where
D = current annual depreciation
AU = annual use based on miles
RL = remaining life based on miles
M = current market value
SV = salvage value as a percent of current market value
Interest on Investment
Interest on investment is calculated as the opportunity cost of capital. Interest is calculated
on the actual market value of the vehicle less half the year's depreciation. This is justified by
thinking of interest in the following manner: the opportunity cost of capital is the rate of
return on capital which could be obtained in an alternative use. The alternative use of capital
in this case would be to sell the vehicle and use the receipts in another investment.
IC = (M - D / 2) * IR * .01
where
IC = total interest cost or opportunity cost of investment
M = current market value
D = d e p r e c i a t i o n a s d e fi n e d i n d e p r e c i a t i o n c a l c u l a t i o n
IR
=
interest
rate
14
^^
^^
BREEDING, MILKING AND WORKING LIVECTOCK
The cost of owning livestock depends on whether the animals were raised or purchased.
Raised animals must include all production inputs associated with raising the animal. Purchased
animals are treated like any other purchased asset, so depreciation must be calculated.
Livestock costs include interest on investment, insurance and property tax cost
Livestock Insurance
INS = INR * .01 * M
where
INS = insurance cost
INR = insurance rate based on current market value (%)
M = current market value
Depreciation (Purchased Livestock)
Depreciation is a measure of the actual loss of value in the purchased livestock occurring
in the current year. Thus it may be different than depreciation used for tax purposes. The
formula takes the fraction of remaining life used in the current year (1/RL) and multiplies it
by the current market value of the livestock (M) less salvage value .
D = (1/RL) * (M * (1 - (SV * .01)))
where
D = current annual depreciation
RL = remaining life
M = current market value
SV = salvage value as a percent of market value
Interest on Investment
Purchased and raised animals are treated as a capital asset. There is an interest
opportunity cost of holding onto the animal. This cost is calculated by the following formula:
IC = (M-D/2) * IR * .01
where
IC = opportunity cost of holding the animal
M = current market value
D = depreciation as defined in depreciation calculation
IR = interest rate
BUILDING CO.ST CALCULATION PROCEDURE
Building costs include both ownership costs and variable or operating costs. Ownership costs
include depreciation, interest on investment, insurance and property tax. Operating costs include
repair and maintenance costs and annual fuel costs or utility payments. The procedures and
formulas to calculate these costs are given below.
Fuel or Utility Cost
Annual fuel or utility cost is defined.
Repair and Maintenance
The repair and maintenance cost calculation procedure requires the following data: off-farm
parts and labor cost, and the number of hours of hired labor and operator labor which are
used for repair and maintenance.
15
R = ((FHL * CHL) + (FOL * COL) + PLS)
where
R = annual repair and maintenance
FHL = on-farm hired labor
CHL = cost of on-farm hired labor
FOL = on-farm owner-operator labor
COL = cost of on-farm owner-operator labor
PLS = off-farm parts and labor
Labor
The labor for operation of the building is specified when the enterprise budget is defined.
On-farm labor costs for maintenance and repair are calculated when repair and maintenance
costs are determined.
Property Tax
The calculation of property tax is also straightforward. Annual property tax is entered as a
$/yr value that appears in the fixed cost section of the budget
Insurance
Insurance is the cost of insuring the capital investment (building) against loss or damage.
Thus it is based on a percentage of the current market value of the building.
INS = INR * .01 * M
where
INS = insurance cost
INR = insurance rate based on current market value (%)
Depreciation
Depreciation is a measure of the actual loss of value in the building occurring in the
current year. Thus it may be different than depreciation used for tax purposes.
D = (1 / RL) * (M * (1 - (SV * .01)))
where
D = current annual depreciation
RL = remaining life (yrs)
M = current market value
SV = salvage value as a percent of current market value
Interest on Investment
Interest on investment is calculated as the opportunity cost of capital. Interest is calculated
on the actual market value of the building less half the year's depreciation.
IC = (M - D / 2) * IR * .01
where
IC = total interest cost or opportunity cost of investment
M = current market value
D = depreciation as defined above in depreciation calculation
IR = interest rate (%)
OPERATING CAPITAL CO.ST CALCULATION PROCEDURE
Annual operating capital is the short term capital required to finance cash variable and
16
fixed costs during the enterprise production cycle. The MBMS program allows for the
internally generated cash (e.g., from the sales of products of the enterprise) to offset the
operating input expenses. Any cash surplus is carried forward as savings and any deficit
constitutes an operating capital requirement. The annual capital requirement is the weighted
average net capital requirement (weighted by the days outstanding). The annual operating
capital is not the minimum or maximum of short-term financing required by the enterprise.
Annual capital requirements may even be negative if accumulative monthly receipts are greater
than expenses over the production cycle.
An example will illustrate how the annual operating capital interest borrowed and interest
earned are derived. Suppose you can borrow money at 12% interest, and you can receive 12%
interest on any cash surplus (called operating capital borrowed and operating capital equity in
the parameter file). Assume 100% of the operating capital is borrowed. The following table
shows the effect of three transactions.
Date
01/01/84
01/15/84
02/01/84
02/15/84
Cash
Receipts
—
50
100
—
Cash
Expenses
100
—
—
—
Difference
100
50
100
—
Balanc
Days Annual Interest
to Da
Date Outstanding Capital on OC
-100
-50
50
50
15
15
14
4.167
2.083
-1.944
.50
.25
-.233
The annual capital is calculated as the outstanding balance times the days outstanding
divided by 360 (e.g., 100 X 15 / 360 = 4.167). This value times the interest rate yields
interest payed or received (e.g., 4.167 X .12 = .5). In the budgets annual capital and interest
will appear positive (+) for money borrowed and negative (-) for money earned, i.e., interest
earned is a negative cost
There are two operating capital interest rates in the budgets including: (1) interest rate on
borrowed capital and (2) interest rate on surplus cash flow or savings. Separating operating
capital into these categories allows for different interest rates.
17