The Whole Farm Plan: Looking at the Big Picture

The whole farm plan, or total farm budget, is an outline of the proposed operation of a farm business. It indicates what to produce, how much to produce, and how to produce it.

There are two types of whole farm plans a long-range plan and a short-range or annual plan. The long-range plan sets a course for the business, projecting the crop and livestock programs that will provide the greatest net returns over a period of years. Because the plan is a projection of an average year in the future, average prices and yields are used when developing a long-range plan.

The annual plan is for a particular year showing the transition from the present farming system to the system proposed in the long-range plan. The annual plan uses expected prices for the coming year, and it may deviate from the long-range plan to take advantage of yearly price fluctuations.

Why Have a Plan?

The experiences of more than 50 farmers from Tennessee who participated in a 6-year whole farm planning demonstration project suggest that total farm budgeting can help increase farm profits. Farmers who developed and then followed their proposed crop and livestock plans had an average projected net farm income of $42,991 per farm, and their actual average net farm income in the sixth year of the demonstration project was $44,746. Farmers who developed plans but did not implement them had a projected average net farm income of $36,690 per farm; however, their actual net income in the sixth year of the demonstration program was minus $6,017. In fact, they had a negative net farm income all 6 years, while the group that followed their plans had a positive net income all 6 years.

Although planning can help make efficient use of farm resources, preparing the plan is only the first step. The plan must be implemented.

Creating a Long-Range Plan

The first step in preparing a long-range farm plan is to set goals. The planning approach described here assumes that the primary business objective is to maximize, or at least increase, net farm income.

The next step is to take an inventory of resources land, labor, capital, and management.

Land Use. Farmers who participate in soil and water conservation planning with a local Soil Conservation District (SCD) already have an inventory of their land resources. Farmers who do not have inventories should begin by constructing a map of their farm or obtaining a map from the county Agricultural Stabilization and Conservation Service (ASCS), Soil Conservation Service (SCS), or SCD office.

Identify each field and record the acreage. Identify soil types, erosion problems, wetlands, rock outcrops, and any other obstructions that would affect the cropping system. Make separate groupings of the fields that can be planted in continuous row crops, those that should be in a row crop-sod rotation, and those that should be in hay or pasture. The tillage system is important in planning land use; land that is not suitable for continuous row crops under conventional tillage may be usable with no-till.

Record the crops that can be grown in each field and the expected average yield, based on the average yield for each field over the past 3 to 5 years. If the fertilizer program or cultural practices are to be changed, this should be reflected in the yield estimates.

Labor. Classify labor by quantity and quality. In most cases it is the labor distribution rather than the total labor supply that is of most importance in the farm plan. Therefore, record available labor for each 2-month period. A full-time operator can be expected to supply about 250 hours of labor per month. Hired labor seasonal and regular should be evaluated in the plan based on quality, wage rate, and availability.

In taking an inventory of the land, either construct a map or obtain one from the county ASCS or SCS office. South Dakota SCS District Conservationist Shirley Gamen discusses a range conservation plan with landowner Harry Livermont (SCS Photo by Eugene H. Alexander, Jr., SD-889)

Capital Inventory. This category includes buildings, machinery, livestock, and money cash and available credit. Record each building's dimensions, conditions, present and alternative uses, and value. List each piece of machinery and record its condition and value. Record the quantity and value of each class of livestock. Determine the amount of money and credit available to invest. If credit is used, prepare a net worth statement to help determine the amount of money that can be borrowed safely.

Managerial Skills. The most difficult factor to evaluate is management ability. Start by studying your farm records, noting the yields, rate of production, and experience with various enterprises. Two other factors are also important in assessing your managerial potential. The first is to identify the types of enterprise that interest you. The second is to assess your willingness to seek and follow sound advice; without that ability, you will have a difficult time as a farm manager.

Enterprise Budgets

Selecting the right enterprises is a key factor in successful farming. Major crop and livestock enterprises vary considerably in their return per hour of labor, percentage return on capital, and return per acre of land. While some enterprises offer a high potential return, others often result in a negative return when all costs are considered.

Enterprise budgets are used to compare the potential profitability of different crop and livestock systems. (See Part III, Chapter 5 for information on how to prepare and use enterprise budgets.) Sample enterprise budgets for the major crops and livestock in a given region are usually available at County Extension Offices. Use the sample budgets as a guide and make adjustments to fit specific situations. Recent farm records can help in making adjustments.

In the long-range plan, use average or normal yield and price. Expected normal yields were established in the land inventory. Average prices for the past 4 to 6 years provide a starting point for projecting long-term prices. However, prices may need to be adjusted to reflect changing economic conditions. Extension Marketing Specialists at land-grant universities can be helpful in projecting prices.

It is important to prepare a crop budget for the different levels of production within each land classification for owned and rented land. This will probably require preparing two or more budgets for the same crop in order to reflect different productivity levels.