By Suzanne Berry

MISSISSIPPI STATE -- Modern technological advances have provided today's farmers with many tools to enhance productivity and perhaps their bottom line, but one tool that could be the most important decision-making aid is a budget.

"A simple enterprise budget is the backbone of analysis for many farm situations and is the foundation for estimating expected income and expenses. Budgets are probably one of the most important tools used by farm managers and producers to evaluate alternative cropping scenarios," said David Laughlin, agricultural economist at Mississippi State University.

"Some producers can make simple budgets by doing the numbers in their head. They might be able to do a reasonably good job on cash income and expenses, but they often ignore things like equipment usage costs and repairs, interest, labor or land costs," Laughlin said.

A computerized budgeting process reduces the time necessary to develop useful budgets and improves the accuracy of income and cost estimates.

MSU's agricultural economists developed a free, user friendly, computerized budgeting tool that can be downloaded from the Internet. The Mississippi State Budget Generator v5.2 is a menu-driven Windows version designed to estimate annual costs and returns for a variety of individual crop enterprises and whole-farm plans using consistent calculation methods.

A budget allows people to explore alternative plans on paper to help decide the best way to maximize profits. MSU's agricultural economics department publishes hard-copy budgets for a variety of crops yearly and distributes these to county Extension agents, farmers, bankers, investors and others who have requested one in the past. MSU software generates these budgets.

Using this same software, producers can tailor a variety of budgets to their particular operation. Different report formats are useful for viewing information organized in slightly different ways. Ten different budget report formats are available for printing or viewing on-screen for each commodity. Four report formats are available for whole farm plans, and input listings and tables with calculations are available for printing.

The information derived from a budget includes estimated income and expenses for the farming operation. There are three types of budgets containing slightly different information which farm managers and other decision-makers may find useful.

The whole-farm budget is a detailed summary of the major physical and financial features of the entire farm business. An enterprise budget is a subset of the whole-farm budget that shows a particular set of production practices for a specific crop or enterprise. The third type, called a partial budget, can help producers analyze the effects of a change from the original or existing plan. This particular budget only considers revenue and expenses that will change with a defined change in the plan.

"Since the 1995 Farm Bill was enacted, producers have become more interested in making economically sound cropping decisions because the government no longer sets the rules for particular cropping patterns," Laughlin said. "Now cropping decisions are completely left up to each producer."

Laughlin said today's increasing costs and decreasing prices mean that farmers should learn to develop and use a budget that can help them become better decision-makers.

Locate the free software online at http://www.agecon.msstate.edu/laughlin/msbg.asp.

Contact: Dr. David Laughlin, (662) 325-7987