 My name is Jessie Rowan. I'm on the farm and agribusiness team within Extension. And I wanted to talk a little bit today about budgeting for vegetable crop production. This is kind of my soapbox, so I'll try to keep it short. But to start with, okay. So I know a lot of y'all, no matter what size your operation, may not exactly correlate growing vegetables into budgeting. I know the fun side of things is planting, growing, harvesting vegetables, but budgeting is a really big part of it. Today, I'm gonna go over the why, the how, and then some of the resources we have available for you. I'm gonna start this slide with one of the big reasons why you should budget. Increasing prices. Fertilizer, really no one can deny. Fertilizer gas prices, just to name a couple, that prices have just gone up over the past year too. And so another one of the big reasons why you should budget in your vegetable production is that just being aware of those financial effects and being able to better control your spending, that can lead to you making better financial decisions for your farm, which can lead to profitability. That's the really big why. So you're doing this so you can better plan for your operation and so you can better plan for profitability. Budgeting is also just a really good management tool to have and it can provide a lot of answers to the questions you have about your operation. And so a little more into detail of why you should. So in your operation, no matter what size you are, you want to use the resources you have to the best of your ability. Second, budgeting can really help you determine the viability of your operation. You need to be able to pencil in a profit before you even plan or harvest, because there are enough things outside of your control. Y'all all grow things so you know that weather and all that can be extremely unpredictable. So there's enough things outside of your control that having a plan to be profitable from the get-go is crucial. Third, budgeting can really help you discover places that could use improvement within your operation. Things that could be leaner, things that could be improved or more efficient. And fourth, just having your expenses planned out from the beginning can really benefit you because there are gonna be expenses that pop up. Like I said before, things that are unpredictable, but being prepared and at least knowing the minimum of what you're gonna spend or at least having an expected amount of expenses listed out, that just helps you better plan for your expenses and for those unpredictable things that may pop up. And so if you're willing to start budgeting within your operation, you might say, hey, how do I start budgeting? I've just been growing things for years. I'm trying to actually budget everything out and see how much I'm spending, see how much I'm earning. The first step would be to assess what you have. Machinery, land, anything, any kind of fixed asset you might have because that's really going to determine a lot of what you can do if you don't have a tractor and you want to grow five acres or something, you're most likely gonna need a tractor or a lot of labor. And so just laying out and understanding what you have access to. Second, look at predicted variable cost. And that's gonna be something that me or other extension agents can really help you with. You can speak to farmers around you. You can look at budgets and quotes online to figure out or at least get estimates on a lot of variable expenses. But the third step, determining your fixed cost or your sunk cost, that's gonna be a lot more specific to your operation. The sunk costs are just gonna be things that you've spent money on and you can't get your money back for it. They're already sunk into your operation. And the fixed costs are gonna be things like machinery, large pieces of equipment, just even small equipment on your operation, even the, like some of the things you may use to outline your operation. But those are gonna be really specific to your operation and you're not gonna be able to get those numbers from a neighbor or something like that. So every farm is different. So I talk to people and I walk them through budgets every day. They may see a budget for someone that's growing the same thing as them, five miles down the road. And it's totally different than what their numbers are gonna be. For one, you could have a totally different type of soil. You could have to apply a lot of amendments. It may be a lot more rockier. You may just have to spend a lot more time making that land workable. Second, your location to markets. Depending on where you're at throughout the state and how you're willing to travel to sell your produce, that's really going to make a difference in how you can market your products and what kind of prices you can get for them. Managerial ability is also gonna be another thing that's different form to form. Someone may be doing this full-time, someone may be doing it part-time, have a full-time job off the farm. And just the time that they're able to spend with it is gonna be different. Like I mentioned a second ago, the market channel, whether you're selling wholesale, direct consumer, whether you're selling through a CSA, those are all going to depend, those are all going to determine the pricing that you can use and just how your operation's gonna work. Machinery, you may have inherited a form from your, inherited a form, just got some land from your dad but you need to buy machinery. You need to buy everything to get started on a farm. You may have inherited land that came with a 20-year-old tractor and you spend more on repairs than your next-door neighbor, but you're not spending a monthly payment on that tractor every month. So machinery is gonna be different from farm to farm and depending on even what you buy, the scale of your operation, you may spend more money, get a larger tractor, gonna have larger payments, but it might be more multi-use. And things like land costs, that's also that falls intuitive. It may be land that you're renting, you might rent equipment. But machinery and land costs and a lot of these things are just gonna be so different from farm to farm depending on what you have to start with, what you're willing to take out money for and how much debt you're willing to take out to get started. And then also you can't forget about access to labor. Depending on where you're located at, you may have better or worse access to labor. Everyone knows that fruit and vegetable production speaking mainly to vegetables here, but it's really labor-intensive. So you could plant five acres of watermelons, but if you don't have enough people to keep them, it's gonna be a really hard go once it becomes harvest time. And so you really just need to think about the access to labor, whether you can use something like the H2A program, if you wanna go through that process and get a handful of workers or if you're in a location where you can get other seasonal workers. Also, so any kind of budget that you find, whether I really, I promote extension budgets because I have worked on those for the past year and a half, I think they have really accurate information and they've had a lot of input from specialists and farmers alike, but any budget that you use that's not from your farm, a budget that you get from somewhere else is really just gonna be valuable framework for you to use. It'll be really good to use as a base budget to kinda look at it, see how things are broken down, see what the expenses are and just kind of how much the expenses, how many, trying to say, the amount of expenses you spend pre-harvest or post-harvest, how much you can expect to go towards machinery. It's really just a good place to start there and use it as a base. And so once you use that budget on your farm, it can become a wonderful benchmark fee to use within your operation, something that you turn to year after year that provides you really good insights into your operation. If you start using and updating it with numbers every year from your operation, so after a handful of years, you'll be able to look at the differences from year to year and see, maybe if you switch to a different irrigation system one year, you can see the different expenses and the different returns you got based off of that change that year, if everything else remained the same. You can just look at different production systems. Say you make a pivot into organic, whatever it may be, really the goal of an enterprise budget is for you to integrate that into your farm and use it year after year. And these are important no matter how big or small your operation is. I mean, I've seen people use these on a half an acre and really keep track of what they're growing at every square foot of that half acre and really know the cost and returns for each row, for each crop that they have. So I'm gonna double deeper into enterprise budgets, specifically the ones provided through extension. I wanted to talk about some of the assumptions because I get a lot of questions about these budgets. And like I mentioned a moment ago, I made most of them so I can answer about any question we have for them. But some of the assumptions that are in it, they're based on a per acre basis. So everything is an acre grown of watermelons, an acre of tomatoes, but they all can be scaled down or scaled up depending on how big or small your operation is. They can be cut in half and quarters or even less if you're willing to do the math separate like that. Also, so average prices are used, that's because it would have been a really tedious budget if I listed the process for 10 different types of watermelon seeds. I just looked at watermelon seeds, watermelon seed prices picked an average number in between those and use that in the budget because again, this is just a guide, it's not the numbers, it's not the exact numbers you're gonna have on your operation. Just something to give you a good guide to use. And so also another assumption is that within this budget, I kind of went under the assumption that someone is growing this crop on an acre. They're using a truck and a trailer to haul that produce to a wholesale market and sell it all in one or two sole lumps. Selling it just in big volumes at once or maybe twice. And again, this is where it's greatly gonna differ if you're selling direct to consumers, you're gonna have a lot of different costs and a lot of different prices that you can get for the produce. So assuming that it's sold wholesale and using the average interest rate, also within the budget, I assumed that the land is rented, that cost for renting the land is included in the budget. It's something that, you're gonna wanna either mix that completely if the land is family land that you've had for years or if it's something you've bought, you're gonna need to add in those payments or at least partial payments for it in the bottom part of that budget within the fixed cost. The last thing that I feel like is crucial within these enterprise budgets is so these budgets are just measuring just a set of time for the months of production for each of those crops. So the budgets related to grains or like turnip grains, that budget is set up on a three month time period because that's how short the window is between planting and harvesting of that crop. Some of the other crops that are gonna be longer, they might be six months. And I do that so that you can kind of stack these and ultimately, I'll touch on it more later, but ultimately create like a whole farm budget. And that way you can kind of budget through the seasons of the year. So if you grow watermelons throughout the summer and then the fall you plant a cover crop, all of that would be put into your whole farm budget. But these enterprise budgets are just broken down by crop and on a per acre basis. That's kind of the definition of enterprise budget in my mind is how much you can expect to spend and get in return for a specific crop on a specific set acreage. So I wanted to further break down the budget. So the enterprise budget is set up into six really main categories. Some of them are really just as simple as one line in the budget. And so like I mentioned a moment ago, pricing is going to greatly depend on the market that you sell through and your timing. So the budget I use for this presentation is watermelons, if you can't tell us what I've been mentioning the whole time. So I wanted to show kind of the receipts, the revenue section of this budget. So this would be at the very top of it. You'd have watermelons, an average yield and then a cost per unit. And again, this is wholesale. This is looking at wholesale prices for the whole season. But everyone that's ever grown watermelons knows that there's a peak price you can get in early July. This graph shows, I wish I could point it out, but okay, okay. So everyone knows that around July, you can have, you can get a really good price on your watermelons. If they were to come into season a little later, you might fall into that low where prices are lower for farmers as a whole. So that really, that's where it's going to depend farmer to farmer and how you sell your produce. You may sell it to a grocery store for 350 each. You may sell it at a farmer's market for $6 each because it's the beginning of July. And that's what everyone's looking for. And so there's usually a little peak around August and September as well. But again, not nearly as noticeable as that peak you have in early July. And so the second one, variable cost, that is what makes up a majority of the budget. This is where it breaks down kind of the, it's really the expected cost per acre of production of whatever the crop may be. And it's broken down. It includes things, some of the same things in every budget like a soil test because we, everyone at extension recommends you get a soil test that way you're fertilizing accurately. And you know, plants by the thousand, they all have this per unit basis right here that you can look and see like the fertilizer is priced by the unit. That's something that my farm and agribusiness team we did a lot of calculations to figure out the price per unit. That way, you know, you're not looking at, you know, the price of, because you know, the unit and the prices and the weight are all going to vary depending on the blend that you get. And also a lot of these herbicides, insecticide, fungicide categories that's something that's also been a very greatly farmer to farmer. All the recommendations that I got they all came out of that vegetable growers handbook. That was my best friend when coming up with some of this information just seeing what we recommend and then I can call around and figure out the prices and talk to farmers and see what they've actually spent. This same for, so like land rent is accounted for in here but then I have a line for crop insurance because I know not every farmer is going to have crop insurance but I want it to be something they think of and something that they think to include in a budget because if you were to have a budget of your operation and you had crop insurance you would definitely want to count that. And I know a lot of small farms don't necessarily have that especially a lot of diversified operations on but it's just something to think of and something you would need to include if you were to have it for your operation. And then also I've split up things by choice by pre-harvest and harvest and post-harvest expenses just to hopefully assist people with a little bit of plan and cash flow that way you can kind of break it down and see how much I'm gonna be spending before I even harvest anything out of the ground and then how much I'm gonna be spending in a really short window of time. So the next category is really not even a whole category, it's a line. So underneath the variable costs you have your income above variable costs. This is just how much you were to make if you were to take your total revenue up here and subtract all your variable costs that's how much you have above that at that given time before you take away any of your fixed costs. And that's because like I mentioned a minute ago the fixed costs are so different from farm to farm that's really hard for me to estimate what it is gonna be for your farm whereas I can give a better estimate on the variable cost. And so the next category that's really big is important just because I can't estimate it as well as I can variable costs. It's still really important, it's just really specific to your operation that would be the fixed cost. That's gonna be things like depreciation of your equipment, land ownership. If you were to have a loan out for the land you bought a bought five acres for a farm and you're paying a monthly payment on it you'd put that right here. This is where all of the money you spend on your machinery as far as repairs and maintenance and depreciation is gonna go there and depreciation can be calculated. But the repairs and maintenance that's gonna be something that you can keep track of over the season. And it's really, we usually throw in an overhead, a miscellaneous overhead charge in there just because we know there's gonna be unexpected cost that spring up over the season. We try to just put a little bit of a cushion in there so that if you're calculating these numbers you have a little bit of room in there for, if some, if the irrigation part breaks and you have to go buy it you've got a little bit of cushion in there because everyone that's ever worked on a farm knows that things like that happen every day and that you always need to have a little bit of cushioning for that. And so the last one is gonna be returns and that's something I'll go back to this picture. So after you come up with your total cost that's including variable and fixed cost you're gonna then start separating returns to the operator, the land, the capital just returns to the farm as a whole. And then also if you're an operator you want to pay yourself. These numbers are in here just kind of as estimates because I know people are gonna pay themselves different things, they may pay themselves in another line, they might write some of their expenses. Some of the money that they're gonna pay themselves they might write that in at the top of the budget as operator labor doing stuff earlier in the year. But this is really just gonna show you the bottom line of your operation. I mean how much money is being returned to your farm after all of the expenses have been accounted for. And also at the very bottom of these enterprise budgets we have got a break-even table that again it looks like a lot of numbers and this is not something I want someone to quote these numbers exactly for their operation. It's just a guide. But I really like these break-even tables. And I should have mentioned this earlier but all of these enterprise budgets can be played around with within Microsoft Excel. You can plug and play any numbers within these. But these break-even tables they allow you to look at what if I were to raise my price a quarter per box. And say I made the same projected yield it kind of just shows you what your different income might be. And of course this is all income above variable costs because I told you the fixed costs are gonna be so different from farm to farm in person to person but looking at the income minus all the variable costs and just how that can change. Like even you could do the math you know do worst case scenario. Say I still want to charge 350 but I produce 15% less than I thought I was gonna make. I would still make this much money above my variable cost. It really just, it can help you figure out how much revenue you need to generate. Looking at how much you're doing volume wise look at your variable expenses. I really just like these because you can look you can scoot up and down this table and say even if I had to lower my prices to $3 a box but if I could produce this many watermelons I could make that much money which is just you can just compare it between prices and yields. I really like having that flexibility and having being able to look at those different options. And this I'm not gonna go real in depth on this but so after you've used an enterprise budget within your operation the next step would be to have a whole farm budget. And this is something that's really great for determining the overall profitability of your operation and you know how well you're using the resources you have. It's one of the best tools for analyzing the impacts of the goals of the objectives of your farm. It's really helpful to look at your farm as a whole and you know whenever you're coming up with this whole farm budget that's a really great time to include those things like cover crops. It really just gives you a chance to look at your farm you know on a year to year basis not just three months here, four months here six months here you know you may be spending just six months on the production of this one crop but what are you doing the other six months of the year you know how are you spending money or not spending money to benefit your farm. You could be using it for just six months out of the year and you could throw together a whole farm budget and realize oh if I planted a cover crop you know I might could use less fertilizer the next season you know or I might could grow this other crop in this six month window of time that I have it just can really open your eyes to the different opportunities you have and how you can spread those calls out throughout the year and just how you can manage your land and your farm well on a yearly basis. And I couldn't leave today without talking about budgeting in 2022 this is something I have gotten numerous calls about because like I said at the beginning of the budget at the beginning of the presentation that you don't want to forego budgeting if for no other reason than the increasing prices this year. So everyone knows about the increasing prices fertilizer gas and most farmers know that they'll have to raise prices some this year just how everything else has gone up even just the gas to you know maybe deliver your crops has gone up you know abruptly and while there is a threshold you know that the prices could be too high for consumers I wish I could say you know charge solely based on your cost of production and you know disregard to what where the threshold is for your customers you have to really find that happy medium because if you don't raise your prices you know it might be really hard I say it might be it would be really hard to make a profit this year just with these two big things having gone up so much you can't abruptly raise your prices without thinking it through and just knowing you know having an idea of what my customers are willing to pay but also you have to look at how your costs have increased and pass it on some and I wanted to say that I wanted to list some of the ways you know that you could come back that combat the increasing cost and you know the fight to not want to increase your prices too much so my first thing I would say to control what you can really you really don't want to leave you want to leave as little up to chance as possible you want to have a profit penciled out even if you have to pivot even if even if you have to change your plan you want to have a plan set out at the beginning of the year I'd recommend testing your soil you don't want to guess on fertilizer application on water application that's something that Andre De Silva could talk to you further about but you know just being as accurate and efficient as you can controlling what's within your means and you know maybe just thinking of ways to increase efficiency and the leanness of your operation just where that's possible I know that's tough but a lot of these extension agents can help you come up with you know alternatives things that you could do some examples that come to the top of my mind could be machinery you know either getting machinery that allows you to do more you know selling something that you don't use as much you know and getting something that really has several uses using weed cloth as many times as you can even if that's just you know whatever you can do within your means that can be things like cover crops like I mentioned on the slide before something that helps you save money the next year but really just focus on efficiency and have an open mind on alternatives a lot of these price increases have led people to think about you know what could I do differently on my farm where could I source fertilizer you know in a different source or you know in a different format you know maybe they've never used chicken litter before but they do know someone down the road that has chicken litter you know just being open to those alternatives and trying to make it as efficient and lean wherever you can all right and I'm open to any questions I hope I went through the budget pretty thoroughly I was hoping to do so because that's something I get probably the most questions on but I'll take any questions or I've listed my contact information and I also have a couple of links here I know you can't click on these links but I'd be willing to send them to y'all or I may go ahead and put it in the chat these are links to record keeping sheets which help you have better budgets on your farm and also a link to the horticultural enterprise budgets that we have on the extension website