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Farm Business Management

Revised 12/15/04

PURPOSE The New Mexico FFA Farm Business Management Career Development Event provides competition that fosters information assimilation, critical thinking, and problem solving skills necessary to successfully manage a farm and pursue farm business management careers. It also enhances and encourages opportunities for all participants to receive instruction that develops farm business management skills

OBJECTIVES - Analyze farm/ranch business management information. - Apply economic principles and concepts of farm business management to the decision-making process. - Evaluate farm business management decisions. - Work together cooperatively as a group. The principles and concepts listed below can be included in each section of the event. A 1 Economic Principles Related to Farm Business Management Production functions diminishing returns a. profit maximizing point b. MFC = MVP MC = MR Opportunity costs alternative investment opportunities a. Cost analysis fixed cost a. variable cost b. Input combinations Enterprise selection equi-marginal returns a. specialization and diversification b. Supply and demand price and quantity determination a. elasticity of demand b. elasticity of supply c. substitute and complementary products d.

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Concepts Related to the Use and Analysis of Records to Manage Resources Analysis of records profit and loss a. financial statements b. ratios solvency liquidity profitability labor and feed efficiency inventory, assets liabilities, net worth Budgeting partial budgets a. whole farm budgets b. enterprise budgets c. Cash flow analysis summary a. projections b. Managerial accounting Tax management Concepts and Functions of Risk Management Investment analysis capital budgeting a. time value of money net present value credit b. sources loan applications interest leasing of real property c. land acquisition and ownership d. machinery management e. insurance f. life insurance property insurance crop insurance health liability Marketing analysis functions a. structures b. price determination c. supply demand comparative advantages




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price methods cash markets futures and options forward contracting international trade e. types of markets f. perfectly competitive markets few participants markets one participant markets Market and purchasing structure cooperatives a corporations b individuals c. Legal analysis estate planning a business organization b sole proprietorship business organization partnership contract farming written agreements c. Government programs and regulations d.

Rules and Regulations 1 Teams can have 3 or 4 members participating with each member working individually. The scores of the three members scoring the highest of the four will be considered as the representing team. All team members will be provided with non-programmable calculators by contest officials. In scoring problems, full credit will be given for accuracy. In developing the problems, intermediate answers will be provided whenever feasible so that mathematical or calculation errors do not severely penalize students in the longer sections of the event.



Career Development Event Format The Farm Business Management Career Development Event will consist of two general parts, a multiple choice test and a problem solving analysis. Microcomputers may be used in either or both of the general parts of the event. If microcomputers are used in the event they will be furnished by the event officials and all participating teams will be provided information about the type and operation of the hardware and software.

Part 1 - A Multiple Choice Test The multiple choice section of the Farm Business Management Career Development Event is designated to test team members' understanding of economical principles in farm business management. Multiple choice questions, some related to problem situations, form the basis for testing this understanding of the application rather than definition identification. Team members work individually. There will be 50 multiple choice questions with 60 minutes allowed for completion of this section of the event. 3 One hundred points allowed for this section of the event with each question worth two points. Part 2 - Problem Solving Analysis The problem solving analysis section of the Farm Business Management Career Development Event is designed to determine the team members' ability to apply economic principles and concepts of farm business management to the decision making process by actual problem analysis and to defend the decisions made. 1 2 3 4 5 Team members will compete individually in completing the problem solving section of the event. If microcomputers are used, the problem solving section may be restructured to involve a team exercise. One hundred fifty minutes will be allowed to completion of this section of the event. Two hundred points will be allowed for this section of the event. Forms such as enterprise, partial whole farm, and cash flow budgets will follow the sample and procedures for completion as presented in the Farm and Ranch Business Management text published by John Deere. Problem solving section of the event will use problems that are developed using the outline provided under the Objectives specified above. 1 2


Reference List


Jobes and Steward Carlson and Thompson Carlson and Thompson Bowers Carlson Carlson Lee, Boehlje, Nelson & Murry Erickson, Hinton and Szoke Herbst Higgs, Heidenreich, Leberger, Cropp and Mitchell Hopkin, Barry and Baker

Books/Guides/Mannuals* Title

Farm & Ranch Business Management ( 2nd Ed.) Farm & Ranch Business Management: Instructor's Guide Farm & Ranch Business Management: Student Guide Machinery Management (3rd Ed.) Machinery Management: Instructor's Guide Machinery Management: Workbook Agricultural Finance (8th Ed.) Microcomputers on the Farm: Getting Started Farm Management: Priciples, Budgets, plans Agricultural Mathematics (2nd Ed) Financial Management in Agriculture (4th Ed.)

Publication Date Source

1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1987 1 1 1 1 1 1 6 6 12 5 5 5 11 3 7 7 8 13 13

Camp, Moore, Foster and Moore Microcomputer Applications for Students in Agriculture Osburn and Schneeberger Modern Agricultural Management (2nd Ed.) Futrell and Wisner (editors) Libbin and Catlett Records Castle, Becker and Nelson Kay Catania and Keefer Catania and Keefer Marketing for Farmers Farm and Ranch Financial Farm Business Management (3rd.) Farm Mangement: Planning, Control and Implementation (2nd Ed) The Marketplace The Marketplace: Teachers Guide

Curriculum Center Materials**


Steward Bacon, Boren Kirkwood, Berikholz, Plain and Rohrback


Farm Business Records and Financial Statements Microcomputer Applications is Agriculture Instructor's Guide in Agricultural Management and Economics

Publication Date

1989 1984 1988


10 9 4

Technical References

Doane's Agricultural Report Doane's Agricultural Computing Doane's Farm management Guide Facts and Figures for Farmers Farmers Tax Guide (Publication 225) A self-study Guide for Hedging with Livestock Futures A Self -Study Guide to Forward Pricing with Livestock Option Ten Strategies for Forward Pricing Livestock Using Livestock Futures & Options 1986 1989 1988 Weekly Monthly 1989 1989 3 3 3 3 2 14 14 14

Commodity Futures Trading

Options on Agricultural Futures Wheat, Corn, Oats, Soybeans, Soybean Oil and Soybean Meal Live Cattle, Feeder Cattle, Live Hogs, Pork Bellies and Lumber Wheat , Corn, Soybeans, Live Cattle and Hogs Sorghum Cotton Orange Juice Farm Budgets and Other Materials 13,14 13 14 16 15 17 18 19

*The books listed should be reviewed and evaluated by the teachers prior to selection. Books listed vary in their content and reading level. Some are appropriate for student and classroom use, while others may serve as teacher references. **Teachers should consult their sources of curriculum materials. The references listed are but a selected sample from the many materials available from Instructional Materials Centers.

Sources of References

No. 1 2 3 4 Publisher and Address Deere and Company, John Deere Road, Moline, IL 61265-8098 Department of Treasury, Internal Revenue Service, IRS Forms Distribution Center in you state Doane Information Services, 11701 Borman Drive, St. Luis MO 63146 Instructional Materials laboratory, No. 10 Industrial Education Building, University of Missouri Columbia, MO 65102 Interstate Publishers, Inc., PO Box 50, Danville, IL 61834-0050 Iowa State University Press, 2121 South State Avenue, Ames, IA 50010 Macmillan Publishing Co., 866 Third Avenue, New York, NY 10020 McGraw-Hill Book Co., 866 Third Avenue, New York, NY 10020 Mid-America Vocational Curriculum Consortium, 1500 West Seventh Avenue, Stillwater OK 74074 Oklahoma Curriculum and Instructional Materials Center, 1500 West Seventh Avenue, Stillwater, OK 74074-4364 Prentice Hall Inc., 200 Old Pappon Road, Old Pappon, NJ 07675 Stapes Publishing Company, 10-12 Chester Street, Champaign, IL 61802 Chicago Board of Trade, LaSalle at Jackson, Chicago, IL 61802 Chicago Mercantile Exchange, 30 South Wacker Drive, Chicago, IL 60606 Kansas City Board of Trade, 4800 West Main Street, Kansas City, MO 64112 Mid-America Commodity Exchange, LaSalle at Jackson, Chicago, IL 60604 New York Cotton Exchange, 4 World Trade Center, New York, NY 10005 New York Mercantile Exchange, Commodity Exchange Center, 4 World Trade Center, New York, NY 10048 Cooperative Extension Service in your state.

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100 Head Stocker Budget, Per Head Buy April 15- Sell October 15: Steers 380# IN - 682# Out SBOM and SILAGE

OPERATING INPUTS: STR CALVES CORN SILAGE PRAIRIE HAY SOYBEAN OIL MEAL SALT & MINERALS TRUCKING SALES COMMISSION VET MEDICINE UTILITIES ANNUAL OPERATING CAPITAL MACHINERY LABOR EQUIPMENT LABOR LIVESTOCK LABOR MACHINERY FUEL, LUBE, REPAIRS EQUIPMENT FUEL, LUBE, REPAIRS TOTAL OPERATING COST FIXED COSTS MACHINERY INTEREST AT 11.80% DERP. TAXES, INSUR EQUIPMENT INTEREST AT 11.80% DERP. TAXES, INSUR LIVESTOCK HORSE INTEREST AT 11.80% DERP. TAXES, INSUR LAND INTEREST AT 0.00% TAXES TOTAL FIXED COSTS PRODUCTION: STEERS (600-700) RETURNS ABOVE TOTAL OPERATING COSTS RETURNS ABOVE ALL COSTS EXCEPT OVERHEAD, RISK, AND MANAGEMENT PROCESSED BY DEPT. OF AGRI.ECON6/23/1989 UNITS CWT. 0.00 0.00 0.00 17.91 PRICE 78.00 QUANTITY 6.820 VALUE 531.96 __________ __________ __________ YOUR VALUE __________ UNITS CWT. TONS TONS LBS LBS HD HD HD HD DOL HR HR HR DOL DOL AMOUNT 11.51 VALUE 1.36 2.39 PRICE 86.000 22.000 27.000 0.150 0.090 2.700 4.350 4.500 0.250 0.118 4.500 4.500 4.500 QUANTITY 3.914 3.050 0.160 189.000 17.500 1.000 1.000 1.000 4.000 198.784 1.200 1.130 1.300 1.57 2.70 2.00 4.50 1.00 23.46 5.40 5.08 5.85 7.09 2.27 499.65 VALUE 33.60 67.10 4.32 YOUR VALUE __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ YOUR VALUE __________ __________


5.32 8.29

__________ __________

3.40 3.40

0.40 0.15

__________ __________ __________




__________ 1ST COMP


OPERATING INPUTS: CORN SEED ANHYDROUS PHOSPH (P205) POTASH (K20) INSECTICIDE HERBICIDE RNTRERTSPRD/ACRE ANNUAL OPERATING CAPITAL LABOR CHARGES MACHINERY FUEL, LUBE, REPAIRS TOTAL OPERATING COST FIXED COSTS MACHINERY INTEREST AT 11.80% DERP. TAXES, INSUR LAND INTEREST AT 0.00% TAXES TOTAL FIXED COSTS PRODUCTION: CORN PASTURE TOTAL RECEIPTS RETURNS ABOVE TOTAL OPERATING RETURNS ABOVE ALL COSTS EXCEPT OVERHEAD, RISK, AND MANAGEMENT INSECTICIDE IN PARATHION 6/21/1989 UNITS BU AUMS DOL DOL 0.00 0.00 47.47 PRICE 3.450 0.000 QUANTITY 95.000 0.300 __________ __________ __________ VALUE 327.75 0.00 327.75 196.25 148.78 YOUR VALUE __________ UNITS LBS LBS LBS LBS ACRE ACRE ACRE DOL HR ACRE VALUE PRICE 0.900 0.160 0.200 0.150 11.000 8.000 2.000 0.118 4.500 QUANTITY 25.000 160.000 60.000 40.000 1.000 1.000 1.000 49.790 2.770 VALUE 22.50 25.60 12.00 6.00 11.00 8.00 2.00 5.85 12.46 26.09 131.50 YOUR VALUE YOUR VALUE __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________


21.354 26.114

__________ __________

__________ __________ __________ 1ST COMP



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