ADANE H IRPA
300
• Feed costs: Concentrates, grass and hay, mineral/supplements, grain, water, etc. • Other variable costs: Medicines/vaccines, breeding fees, supplies, marketing, transportation, utilities, labor, stock replacement, etc. Fixed costs related to the production of sheep and goats include: housing, beginning stock cost, land rent, depreciation, taxes, interest, etc. Farmers and pastoralists should know the prices of inputs and outputs in order to compute costs and returns. The price of inputs and outputs differ from place to place. While analyzing the profitability of sheep and goats, farmers and pastoralists should use the farm gate price for inputs as well as outputs. Farm gate price is the monetary value of the item at the production point. For example, the cost of concentrate purchased for Ethiopian Birr (ETB) 25 in town with a transportation cost of ETB 6 is 25 + 6, which is equal to ETB 31 at the farm gate. The minimum price or the lowest price accepted by a farmer or a pastoralist is the price level which covers the entire cost of production until the sheep and goats are ready to sell. A selling price that is lower than the cost of production means a loss for the business. The minimum price can be calculated in two ways: 1. The minimum price for the entire farming period, by taking into account the initial capital, fixed costs and the cost of raising the animals.
Minimum price per animal =
initial capital ( Birr ) + fixed cos ts ( Birr ) + production cos t ( Birr ) total number of animals for sale
2. The price for one production process, for instance in the case of fattening, includes all costs from buying the animals to selling them.
Minimum price per animal =
Pr oduction cos t ( Birr ) Total number of animals for sale
There are four main types of budgets available to help farmers or pastoralists in the decision-making process. Each budget is specific in its application, but each uses the same principles. The main budgets are:
• • • •
Whole farm or ranch budget Enterprise budget Partial budget Cash flow budget
11.2.2.1. Whole farm or ranch budget The whole farm or ranch budget is a detailed listing of resources of the entire business along with a plan to use these resources to achieve long-term goals. The whole farm or ranch budget sets the direction the business will take and helps the manager achieve long-term goals.
Ethiopia Sheep and Goat Productivity Improvement Program