The Alabama Meat Goat Enterprise Budget is a livestock enterprise budgeting tool that reflects recommended management practices in Alabama. Budgets are resources that Alabama goat producers have in their arsenal. Budgets are beneficial for everyone, but they are especially useful for new producers with minimal experience. These financial tools are intended to reflect a future action, and in so doing, help producers evaluate both the available and necessary resources for their operation.
What is a budget?
When using a budget, it is important for producers to remember what it is and what it is not. A budget is a useful planning guide, which means it should be a reasonable estimate of what producers can expect in an enterprise. A budget is imperfect, not applicable to every situation, and does not act as a tax advisor. A budget is a forecast. Much like a weather forecast, they should not be treated as an exact prediction of the future.
A budget is only as accurate as the data and assumptions placed in the budget spreadsheet. For example, what are the estimated weight and price for market kids and cull nannies? Actual weights and prices will vary from your estimates for various reasons. There is a lot of variability from region to region, market to market, and even producer to producer.
Consider the following questions when developing a budget:
- What is your local market?
- Are you selling your livestock through a stockyard, or do you sell to individuals?
- Do your animals meet the necessary qualities to fill different niche markets presented by various holidays or events?
- Do you have populations in your local area that desire goat meat as part of their religious or cultural heritage?
The Alabama Meat Goat Enterprise Budget will begin with some basic assumptions about production and prices based on input from Alabama Extension and commodity experts. The best way, however, to improve the accuracy of your budget and to maximize its usefulness to your operation, is to use actual data (variable and fixed costs) from your farm.
Variable and Fixed Costs
While there are multiple examples of relevant information derived from an enterprise budget, the two most impactful are income above variable costs and income above total costs.
Often called cash costs, variable costs are only incurred when a producer is actively farming. For example, the feed is considered a variable cost. Producers should only purchase feed when they are actively producing. The amount they use is directly tied to the amount of production or number of animals. Total costs are variable costs plus fixed costs.
These costs will occur whether production is taking place or not. DIRTI 5 is an easy acronym to remember some of the more important fixed costs that need to be considered.
DIRTI 5 stands for:
Again, fixed costs are incurred whether you produce or not. All costs (variable and fixed) must be paid in the long run for an operation to be sustainable. Operations may continue, typically for one year, by covering just their variable costs. This means producers can pay the feed and fertilizer bill at the end of the year. Producers who do not have a positive income above variable expenses will not be sustainable. Producers can continue production in this scenario but will fail to build long-term wealth.
A budget like the Alabama Meat Goat Enterprise Budget is an important tool in the business arsenal of Alabama goat producers. It should be used in conjunction with business planning and recordkeeping to improve the sustainability of the farm. Please contact your local Alabama Extension county agribusiness agent or a state specialist if you have questions about budget development.