Reference Manual of LISA Resource Management Strategy Budgets for the Mid-South Region

PROCEDURE: Methodology included an extensive literature review of Extension and Experiment Station publications from Tennessee and neighboring mid-mouth states. Current and previously recommended sustainable management systems and practices were identified and documented. Sustainable management practices that had merit in today=s economic and environmental conditions were reviewed by Extension Farm Management specialists from throughout the mid-south region. Data to support these estimates were obtained from farm records available through the TVA Cooperative program, personal interviews with farmers, current research and Extension budgets, and interviews with Extension specialists and research personnel. All budgets were reviewed by a review panel of Extension specialists and farmers from across the Mid-South.

EXPLANATION OF DATA: Hourly fixed costs, the new cost, expected life in hours, expected annual hours of use, storage space required and insurance cost were estimated for each price of machinery. The new costs for machinery are based on 1993 retail prices which were secured from published lists and machinery dealers. Expected life is based on research findings from several universities. The data assume reasonable storage facilities and average intensities of use.

Depreciation, housing, and insurance made up the fixed costs. Annual depreciation was calculated by dividing new cost less salvage value by the expected life. Investment in housing for machinery was determined based on the square foot of housing required by the machine. This amount was depreciated over 30 years with an annual maintenance charge of 1 1/2 percent of new cost. The annual insurance cost for fire and extended coverage was calculated by multiplying the average value of the machinery times an assumed insurance rate. The combined annual cost of depreciation, housing, and insurance was divided by the estimated hours of annual use to derive the fixed costs per hour.

Variable cost for machinery without engines consists only of repair costs. Variable costs for machines with engines included cost of fuel and lubrication in addition to repair costs. Repair costs were based on a percentage of new costs obtained from machinery research data while fuel consumption data were obtained from the Nebraska Tractor Trials. Oil and filter costs were assumed to be 10 percent of the fuel cost for tractors rated below 80 hp and 6 percent of fuel cost for tractors assumed to have diesel engines.

Machinery costs per acre were calculated based on the machine time needed to cover an acre. The machine time per acre times its hourly costs determined the acre cost for the machine. The theoretical field efficiency was obtained by multiplying the speed (mph) by the width (ft) and dividing by a factor of 8.25. This was then reduced to correct for the time required for turning, adjusting machines, filling hoppers, etc. and the acres per hour and hours per acre were determined. The field efficiency factors for each machine were obtained from research studies on machine efficiency.

An interest expense for each selected machine was determined. This figure was derived by taking half the investment in the machine and multiplying by the fixed interest rate.

Estimated labor requirements for crops and livestock were recorded by two-month periods. The labor requirements for selected crops were determined by listing a set of specific field operations which could be used to produce a given crop. The number of times each operation was performed was multiplied by the time required to perform the operation.

The capital requirements were for the brood stock and sire if needed, for feeders and for the buildings and equipment required to handle the enterprise.

Investments in field machinery and equipment were excluded from the livestock budgets. Capital requirements represent the initial investment.

Each enterprise budget is composed of five components. The revenue and expense data is in the final column of the budgets. Revenue is equal to expected yield times expected price per unit. Crop yields and livestock production rates used in the budgets are in most instances, above state averages. However, these yields and production rates are considered typical of many farmers in the mid-south region. Product prices in the budgets reflect average or normal prices that are expected to prevail during the next three to five years

Because of wide fluctuations in product prices and yields during recent years, a table denoting returns to land, labor, capital and management for varying price and yield combinations were included with each crop budget. These tables allow the user to select a price and yield combination that is considered applicable and to use the return figures given in the tables.

Variable expenses include the costs which vary with the level of output. These costs were normally for production items which were used within a given production period such as feed, seed, fertilizer and part of the machinery costs.

The amount of fertilizer listed in the crop budgets was based on a medium soil test, and in most instances, a specific pesticide was designated in order to compute a cost. All livestock enterprises were charged market price for all the feeds they consumed with the exception of pasture where only the costs of production were included.

Also most fertilizer and lime was assumed to be spread by bulk application with the cost of application included in the fertilizer and lime prices used in the budgets. Fixed expenses consisted of those costs that occur regardless of the level of output once the operation is established.

Building and equipment costs in the livestock budgets are based on the investment costs. Depreciation was computed at 5 percent of initial costs (a 20 year life) and repairs were calculated at 1 percent of initial costs, unless otherwise stated.

Labor and interest charges fall into both variable and fixed categories. Hired labor and interest on operating capital are variable expenses, while the value of family labor and interest on investment capital are assumed to be fixed expenses.

A section which outlines the machine and labor requirements for each crop enterprise is included with each crop budget. The table lists a set of field operations which may be used in the production of a given crop along with the machine time and man-hours required including indirect labor.

Multi-year crop rotation budgets were developed using information provided by the enterprise budgets. Changes in production practice, costs and resource requirements were made to reflect adjustments created by the system. These changes were then entered into the SMART system=s BUDGETOR subroutine.

PLANETOR is the foundation of the microcomputer-based SMART farm decision support system. It is a Awhole farm@ budget generator that incorporates economic and environmental data to develop RMS budgets. Developed under a project funded jointly by the Extension Service and Cooperative State Research Service-United States Department of Agriculture, this program is designed to help farmers and ranchers evaluate both environmental and economic aspects of their farming practices.

PLANETOR provides both an economic analysis and environmental assessment of a particular farm or representative farm. Three databases comprise the system; soils, chemicals, and enterprise budgets. The environmental section of PLANETOR evaluates each field for erosion control, water quality, and pesticide toxicity with each receiving a rating of low, medium, or high.