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1. Partial Budgeting AAE 320
Paul D. Mitchell
2. Goal Explain purpose of partial budgets
Illustrate their structure and use
Give some examples
3. Partial Budget Purpose Analyze net return from small changes or refinements to farm operation
Partial Budget: focus only on parts that change, not budget each enterprise completely, but build on enterprise budgets
Fine tune current operation: Hold all else fixed to evaluate a small change
Marginal/incremental analysis: change input use, shift between inputs or between outputs
4. Simple Examples Plant rootworm Bt corn or conventional corn with soil insecticide
Plant more corn and less soybeans
Rent an additional 100 acres for corn
Buy combine or continue custom hiring
Sell current tractor and buy a bigger one
Soil test for N or just use credits/guess
5. Partial Budget Basic Idea Benefits:
1) What will be the new or added revenues?
2) What costs will be reduced or eliminated?
3) What will be the new or added costs?
4) What revenues will be reduced or lost?
Answer these 4 questions and then calculate
Net Benefit = Benefits Costs