Farmers are spending this winter looking for solutions to a seemingly ongoing problem of stagnant farm prices and rising production costs.
Using the University of Arkansas Extension crop budgets as a reference, our 2006 budgets reflect increases of 144 percent in diesel prices and 50 percent in nitrogen (liquid 32%) prices since 2004.
Many producers are considering a multitude of options from re-negotiating farm leases to retirement. Those who can't pursue either of those alternatives may want to consider producing their traditional commodities in a different way or at least take a closer look at how they have historically produced individual commodities. An excellent way to do this is with enterprise (commodity) budgets.
As production costs fluctuate from year to year and new seed technologies become available, an enterprise budget should be considered “point A” in future crop mix decisions. Budgeting is simply a process of estimating income and expenses from each crop (or enterprise) being considered for production.
Using an enterprise budget allows you to easily compare the cost and returns of different production methods. For example, no-till versus conventional tillage, eight-row versus 12-row equipment, irrigated versus non-irrigated, or Roundup Ready versus conventional herbicide systems could all be compared.
For 2006, cotton producers in particular have many new seed varieties to consider. Each variety will have its own technology fee structure and set of related management practices that influence production costs. The budgeting process allows for an infinite number of “what if” scenarios to be analyzed on paper and before planting.
If producers need a template or starting place in the budgeting process, there are numerous resources. Most county Extension offices can provide hard-copy crop budgets.
The University of Arkansas Cooperative Extension Service has developed a variety of enterprise budgets for 2006. These budgets include field crops, horticultural crops and livestock enterprises. Specifically, there are 78 different field crop budgets, 15 horticulture crop budgets, and four livestock related budgets. These can all be found at local county extension offices and at the following Web address: http://www.aragriculture.org/farmplanning/Budgets/default.asp.
The budgets provided by many state Extension services strive to represent typical farming practices. University field crop budgets are commonly designed to reflect production costs specific to certain regions of a state or soil types within a state. These budgets can also provide estimated production costs associated with various seed varieties, herbicide programs, planting dates/maturity groups, and irrigation and tillage practices.
Though there may not be a published budget for all situations, they should provide at least a framework that producers can use for their specific operation. Above all, the budget templates will provide a thorough list of costs and expenses that should be considered in the budgeting process.
The current agricultural situation requires farmers to closely scrutinize each production management decision. The budgeting process takes some degree of thought and patience. It does require information gathering and decision making skills. But, those skills are inherent in all successful farm managers.
For assistance in this important part of your 2006 decision making process, contact your local county Extension office or the authors of this article. Call (870) 972-2481 or e-mail [email protected].
Scott Stiles, Rob Hogan and Kelly Bryant are University of Arkansas Extension economists. Comments or questions? Call 870-460-1091 or e-mail [email protected].