Ontario Enterprise Budgets
Help Section

Table of Contents

1. Introduction to the Ontario Enterprise Budgets
2. What are Budgeting Tools?
3. Inputting Data in the Crop Budgeting Tools
4. Inputting Data in the Livestock Budgeting Tools
5. What are Manual Budget Forms?
6. Inputting Data in the Manual Crop Budget Forms
7. Inputting Data in the Livestock Manual Crop Budget Forms

Introduction to the Ontario Enterprise Budgets

Enterprise budgets are developed to aid producers in evaluating alternative cropping and livestock plans. These budgets are planning tools to estimate costs and evaluate enterprise alternatives. The sample costs are only a guide to illustrate a method of preparing your projections.

An enterprise budget has the following characteristics:

• It estimates costs and returns expected for a single enterprise.
• It represents one combination (from among hundreds available) of inputs such as seed, chemicals, and fertilizer to produce some level of output.
• It is a written plan for a future course of action including estimated costs and returns for that particular enterprise.
• It provides a format and a basis for developing enterprise budgets appropriate for a given farm situation.

At the same time, some things must be recognized that are not implied by an enterprise budget:

• It is not the only combination of inputs that can be used to produce this crop. For example, soil type and fertility cause fertilizer requirements to vary widely.
• It does not imply that anyone whose costs are different from this must have incorrect data or poor records. Volume discounts, local prices, and tillage methods are just a few of the causes of cost variation.
• It does not imply that all producers can achieve these costs and yields. Different soil types, different ways in which the soil has been utilized and cared for in the past, or seasonal and regional weather differences, all can cause the actual results to vary greatly from what is presented.

Each producer should develop an individual production plan. Input your own information in the spaces provided. The resulting estimate will assist you in choosing your enterprise mix, target prices and marketing strategies for your farm.

What are Budgeting Tools?

Budgeting Tools were developed as a tool for assessing the risk associated with farm businesses. The budgets for each commodity will allow you to enter data specific to your operation into the budget, have the appropriate calculations be performed, and be able to view/modify/print the results for your own use. This powerful computer application provides a unique opportunity for producers to assess the risk in various components of their operations. Many planning alternatives can now be evaluated in the time it would take to manually develop and evaluate a single plan. This frees up time for you to investigate alternatives and to consider 'what if' questions.

The livestock budgeting tools each have a help section included in the Excel file. Please refer to this information for more detailed help instructions related to the livestock enterprise.

Inputting data in the Crop Budgeting Tools

Perennial crops produce a crop more than one year and usually live for many years. They require an establishment period and following the establishment period produce a crop year after year. The perennial crop budgets include a section for the establishment costs and the annual operating costs once the crop is in full production.

Annual crops are planted and harvested within the same growing year. Annual crop budgets only require annual operating costs to be inputted.

Data input steps:

1. Enter the number of acres planted to the crop.

   Enter Optimistic, Expected and Pessimistic expectations for yields and prices.

• The Optimistic estimate is what you would reasonably expect to be seen at least 1 out of every 6 years.
• The Pessimistic expectation should be the poorest result your would reasonably expect to occur 1 out of every 6 years
• The Expected outcome is the most likely outcome you expect this year.

2. This "1 year out of 6" optimistic and pessimistic range provides an estimate of the standard deviation of prices and yields for your farm, and allows a simple risk analysis for the individual enterprise.For commodities which can be insured through the Market Revenue Insurance Plan (MRIP) or crop insurance, there is a section which asks you to enter the premiums you will pay on each of these items. If you are not participating in MRIP or crop insurance you can skip this section, but make sure you answer No when asked if you are participating.
3. Enter the enterprise specific variable costs as detailed in the budgets.
4. Enter the enterprise specific fixed costs as detailed in the budgets.

General Variable and Fixed Costs or general overhead costs are those whole farm costs that can be difficult to allocate to a specific enterprise. These costs will show little or no change whether one crop or another is grown. That is to say, your crop mix choice should be the same after allocating general overhead costs as it was before they were added. For this reason they are not directly included in the enterprise budgets. There is a table that allows you to allocate these overhead costs and transfer them to the budget if you wish to arrive at a total cost of production.

Inputting Data in the Livestock Budgeting Tools

The Livestock Budgeting Tools each have a Help section included in the Excel file. Please refer to this information for more detailed data input instructions related to the livestock enterprise.

What are Manual Budget Forms?

Manual Budget Forms for each commodity can be viewed and printed from the web site location. These budgets would provide sample figures for each income and expense item, as well as space on the printed page to enter data specific to your operation and then perform your own paper calculations. There is no risk analysis feature on the Manual Budget Forms.

Inputting data in the Manual Crop Budget Forms

Perennial crops produce a crop more than one year and usually live for many years. They require an establishment period and following the establishment period produce a crop year after year. The perennial crop budgets include a section for the establishment costs and the annual operating costs once the crop is in full production.

Annual crops are planted and harvested within the same growing year. Annual crop budgets only require annual operating costs to be inputted.

Data input steps:

1. Enter Expected outcomes for yields and prices. Expected outcome is the most likely outcome you expect this year.
2. Enter Market Revenue Insurance or Crop Insurance payments.
3. Enter the enterprise specific variable costs as detailed in the budgets.
4. Enter the enterprise specific fixed costs as detailed in the budgets.
5. Calculate your total revenue (Expected yield x Expected price + any Market Revenue or Crop Insurance payments).
6. Calculate your total expenses (Variable costs + Fixed costs).
7. Calculate your Gross Margin (Revenue - Variable costs).
8. Calculate your Break even price on your farm (Total Expenses/Expected yield).

General Variable and Fixed Costs or general overhead costs are those whole farm costs that can be difficult to allocate to a specific enterprise. These costs will show little or no change whether one crop or another is grown. That is to say, your crop mix choice should be the same after allocating general overhead costs as it was before they were added. For this reason they are not directly included in the enterprise budgets. There is a table that allows you to allocate these overhead cots and transfer them to the budget if you wish to arrive at a total cost of production.

Inputting Data in the Manual Livestock Budget Forms

Data input steps:

1. Enter Expected sales for each commodity. Expected outcome is the most likely outcome you expect this year.
2. Enter the enterpise specific variable costs as detailed in the budgets.
3. Enter the enterprise specific fixed costs as detailed in the budgets.
4. Calculate your total revenue per production unit ie. per cow, ewe, calves purchased, lambs purchased, head of cattle (Expected number of head marketed or pounds produced x Expected price / number of production units).
5. Calculate your total expenses (Variable costs + Fixed costs).
6. Calculate your Gross Margin (Revenue - Variable costs).
7. Calculate your Break even price on your farm (Total Expenses/Number of Head Marketed or Pounds of Livestock Produced).