The Southern Ag Today team of editors and contributing authors are, for the most part, a group of Extension Agricultural Economics Faculty from the Southern Region Land-Grant University Systems. Many of this same group are responsible for a decades-old tradition of publishing crop and livestock enterprise budgets in their respective states or regions. Extension budgets are typically published early in the year before the growing season starts, and they serve a number of purposes. The first is to simply provide examples of common practices used in region-specific enterprises, as well as to illustrate a possible set of revenue/costs expectations for the coming year. Ag lenders sometimes rely on these budgets as benchmarks to compare loan applications and borrowers’ production plans. Various state and federal agencies and other agricultural industry researchers may use these budgets to compare practices, costs, or expected yields across regions and over time. However, most of us that contribute to creating Extension budgets would consider those as secondary benefits.
Extension budgets are best used as a planning tool, and even better if you make them your own with the published budget serving as a guide. To that end, many of our budget projects also offer downloadable spreadsheets and other tools to create your own budgets. The pre-season budget planning process offers a number of management benefits, including the ability to:
- compare potential profits of various enterprises or production plans and choose appropriate crop mixes.
- assess cost of production and break-even prices/yields; which help develop marketing plans and select appropriate levels of insurance.
- conduct sensitivity analyses on specific items. For example, determining the impact of recent fertilizer price increases on expected net returns and evaluating potential production plan adjustments.
Another benefit to a formal spreadsheet budget is the ability to do what I call active or continuous budgeting. The idea being that the budget and the budgeting process does not end when the growing season starts. As you progress through the production season, planned expenses become actual expenses while yield and price expectations are constantly changing. Incorporating these in-season changes into your budgets as you go will keep you mindful of cashflow needs and will assist with ongoing production and marketing decisions. The process will also sharpen your management skills and improve your pre-season production plans in future seasons.
To find budget publications and resources in your area, click below for your state’s Land-Grant University Extension program.