Use of Enterprise Budgets to Estimate Production Costs 



The major functions of the ERS program for developing 

 COP estimates are: 



• Collecting and filing data, 



• Preparing enterprise budgets, and 



• Calculating national and regional weighted-average costs . 



The figure shows the data flow through the COP system, 

 when one uses the budget generator, to produce COP 

 estimates. 



Preparation of Survey Results 



When a crop is surveyed, the responses are first 

 computerized by NASS. ERS receives the resulting data 

 set, which contains the responses from all versions of the 

 questionnaire (versions for detailed expenditures and for 

 each COP commodity). Then analysts prepare tables to 

 help sort the data by commodity. If the commodity were 

 corn, for example, all corn versions would be sorted out for 

 further analysis. ERS analysts then sort this corn subset by 

 State, the lowest current level of disaggregation. 



From this final State crop data set, analysts estimate most 

 of the input items used to produce the crop. For example, 

 they determine the average seeding rates and fertilizer use. 

 The machines and equipment in use are determined and 

 put in a regional machinery complement. ERS analysts 

 assemble all the survey data needed to describe corn 

 production for surveyed States and put them in a format 

 usable by a computer program that manipulates the survey 

 data as well as data from other sources. 



A central component of the COP project is a computerized 

 budget generator. The budget generator is a means of 

 systematically assembling individual items of cost data and 

 developing an itemized enterprise budget for a particular 

 commodity. The budget generator minimizes human error 

 and facilitates u.se of standard procedures in developing 

 budgets. It can store and use large quantities of data. As 

 additional cost data become available or as input costs 

 change, the new information is entered into the computer 

 data files. An updated enterprise budget can then be 

 produced ba.sed on the new or updated data. 



Six basic files are associated with the budget generator: 



parameter sets, machinery complements, c(|uipmcnt sets, 

 irrigation complements, budget files, and name lists. 



Parameter Sets 



Each State that has a COP enterprise has its own 

 parameter set. Parameter data sets are items that do not 

 change by commodity or enterprise within a State. For 

 example, fuel and fertilizer prices are parameter-set data 

 (7, 2, 4, 11, 12, 16). The per-gallon price of gasoline 

 remains the same whether it is used for corn or hog 

 production. Use of State parameter sets requires fewer 

 data entries. 



The most complicated part of the budget generator is the 

 procedure for calculating costs of owning and operating 

 machinery and equipment. Each farm has a different set 

 of machinery and equipment in terms of items owned and 

 operated, age, and size. The budget generator uses 

 machinery complements and equipment sets to calculate 

 ownership and operating costs. The machinery 

 complements are used primarily for crop budgets, and the 

 equipment sets are used primarily for livestock. 



Machinery Complements 



The American Society of Agricultural Engineers (ASAE) 

 has developed formulas to calculate machinery repair costs 

 as well as a replacement allowance (economic 

 depreciation), taxes, and insurance based on the cost of llic 

 machine and annual hours of use. Fuel consumption for 

 tractors is based on maximum power takeoff (PTO) 

 horsepower and a 55-percent load rate. For other fuel- 

 using machines, consumption is computed at an hourly 

 rate as defined in the machinery complement. 



Other machinery costs are computed on a doUars-per-hour 

 basis with costs defined by hours of use for each machine. 

 Hours of use depend on machine size, speed, and field 

 efficiency and on the number of times the operation is 

 performed. Hours of machine time required are 

 determined by engineering "performance" equations. The 

 theoretical time required for each machine operation is 

 adjusted by a factor that relates observed time to 

 theoretical time. Per-acre time requirements for each 

 machine are multiplied by the number of limes the 

 operation is performed to estimate hours of use. 



ERS analysts rely on FCRS data to estimate machine use, 

 size of machines, and number of times ihe oiicration is 

 performed. They also determine the size combinations of 

 pulled machines and tractors, (liven such information, the 

 budget generator calculates apprt)priate costs. 



