Agricultural
Microeconomics
Presentation
Title
Lesson 1: Unit Overview
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SA
http://www.andrewsgray.com/2012/07/cattle-at-sunset/
This
coursedeveloped
developed
by Environmental
The Environmental
at UNC
Chapel
Hill for
The North
of and
Science
This course
by The
FinanceFinance
Center atCenter
UNC Chapel
Hill for
The North
Carolina
School Carolina
of ScienceSchool
and Math
NCDPI
is
licensed
a Creative
Commonsunder
Attribution-NonCommercial-ShareAlike
3.0 Unported License
and
Mathunder
and NCDPI
is licensed
a Creative Commons Attribution-NonCommercial-ShareAlike
3.0 Unported License
The Future of Farming
“Innovations that are guided by
smallholder farmers, adapted to local
circumstances, and sustainable for the
economy and environment will be
necessary to ensure food security in the
future.”
~ Bill Gates
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Overview of Unit
• Week One – Learn the basics
– The economics of running a small farm
• Week Two – Analyze an innovation
– Developing a financial analysis
spreadsheet model
• Week Three – Putting it all together
– Developing a business case
• Week Four – Class Presentations
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Week One: The Basics
• Piedmont Farm case study – A grassfed beef operation
• Revenue and pricing considerations
• Cost and expense considerations
• Government subsidies
• Tax incentives
• Financing options
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Week Two: Financial Analysis
• Cost / benefit analysis of a new
innovation.
• Computer spreadsheet modeling
– Cash flow analysis
– Price sensitivity analysis
– Investment analysis
• Advanced spreadsheet modeling
(graphing and other tools)
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Week Three: Business Case
• The importance of a business case
• Elements of a successful business case
• Preparation of a business case
– Economic and financial analysis
• Presentation of a sample business
case to class
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Piedmont Farm
• 150 acre grass-fed beef farm in
central North Carolina
• 75 head of cattle
• Holistic and sustainable management
of land
• Family owned and operated
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #1
Market price sensitivity – What
happens to the retail price of beef if
Piedmont Farm increases the price per
pound sold to grocery stores? How
might customers react to the change in
price?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #2
Changes in Supply - If more grass-fed
beef is available from other farms, what
happens to Piedmont Farm’s revenue?
What might the owners do to reduce
the impact to Piedmont farm?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #3
Competition - How do Piedmont Farm’s
prices compare with what you can find
in a conventional grocery store? If the
farm’s prices increase, will it still have
the same amount of revenue (in other
words, would it still sell the same
amount of beef?). Why or why not?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #4
Type of Operation – What might
happen if the farm went back to
traditional grain-fed beef in the winter
months? What would this do to the
farm’s revenue from the sale of beef?
What would happen to costs?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #5
Scale of Operation – What happens to
the farm’s operating costs if it increases
the number of cattle on the ranch?
How much more acreage does it need?
How much more hay? How much more
labor?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #6
Fixed Costs – What happens if the
farm’s sales (revenue) decrease? Which
expenses can it change?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #7
Owner’s Salary – Is the net farm income
enough to cover the owner’s salary?
Why or why not? How would you make
changes?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Discussion Question #8
New Equipment – What would happen
if the farm needed to replace a piece of
farm equipment? What would you do
to cover the costs of this new expense?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Next Class: Pricing and Revenue
Presentation Title
Considerations
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SA
http://www.andrewsgray.com/2012/07/cattle-at-sunset/
This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI
is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License