Edward B. Rayburn, Ph.D
West Virginia University
Extension Forage Agronomist
What is an enterprise budget?
An enterprise budget is a written GOAL statement for a crop or livestock production activity; listing the production goal, management activities, resource requirements, and economic returns.
An enterprise budget contains the following elements or sections:
With this information the manager can use the enterprise budget as a plan of operation before production to address the following questions:
The manager can also use the enterprise budget as a reference point after marketing. Here it provides the manager;
How to budget.
Budgets are organized thoughts and simple arithmetic. Many farmers budget in their head. However the best budgets are written down so that they can be reviewed to ensure that all resource requirements and costs are covered and so that they can be studied after production and marketing to increase learning from the experience.
Most of the information needed for a good budget is available locally from past experience, the farm plan or county soil survey, soil tests, and phone calls to the county agent for production recommendations and to agricultural supply stores for purchased input costs.
Budgets from different Enterprises work together.
One use of enterprise budgets is to question "how can I do this better" or "how can I do that at a lower cost". In some cases it means looking at another budget, from an enterprise that provides an input for the one in question. The cow-calf enterprise is a good example. When trying to reduce production costs, the cow-calf budget shows that the major cost is for hay and pasture. We see real quick that if we feed more pasture and less hay we will reduce production costs. However, to evaluate how to reduce the cost of producing a ton of hay we need to go to the hay budget to evaluate alternative strategies.
Frequently "standard budgets" are published by universities or popular farming publications. However, the only budget that really matters is the one that applies to your farm. There are a number of example budgets available on the Forage-Livestock System. These are to be used only as examples. When applying these budgets local production goals, management activities, and prices must be substituted for the numbers provided. These budgets are in the "*.wk1" spreadsheet format which in general can be read by most spreadsheet software. The following table lists the purpose of the spreadsheet and its file name.
Forage-livestock system enterprise budgets and animal performance spreadsheets.
(These can be opened using Microsoft Excel.)
|Purpose of spreadsheet||File name|
save to disk & view with spread sheet program
|prorate overhead costs to crops and livestock||overhead.wk1|
|estimate net return for a cow calf herd||cowcalf.wk1|
|estimate the cost for producing replacement heifers||heifer.wk1|
|estimate the break even price for stocker cattle||stocker.wk1|
|estimate the cost of pasture||pasture.wk1|
|estimate the cost of hay production||hay.wk1|
|estimate the cost for annual grain or forage crops||ann_crop. wk1|
|estimate the cost of fencing||fence.wk1|
|Ration balancing and animal performance models|
|evaluate beef cattle nutrition and management in feed lots||ccsii.wk1|
|evaluate beef cattle nutrition and
management under MiG
documentation for ccsii.wk1
|evaluate dairy cattle nutrition and
management under MiG
documentation for dprb.wk1
The time put into working with enterprise budgets will pay management dividends. By using budgets to compare alternatives within and between enterprises, managers improve their production and management skills. Enterprise budgets aid in cash flow planning, in controlling production costs, and in determining the break even price (BEP) for a commodity and assessing if it is reasonable possible to make a profit from an enterprise.