The desire to be a small-diversified farm, brings us to a point where we need to make an important decision. Using organic farming practices, which has a large labor intensive factor, will limit our garlic production to about an acre. The planting and harvesting activities needed for more than one acre of garlic are beyond our capability. Any more production will not be sustainable for us due to the large amount of labor hours needed at the garlic harvest and for garlic planting.
Our farm has 4 acres of good tillage available for cash crop production. Garlic production on a three-year rotation requires 3 acres of tillage; one acre for the garlic and 2 more acres for cover cropping. An alternative is to have an additional acre planted with a new cash crop and go to a 4 year rotation. The added cash crop will need to have off-set planting and harvesting times so as not to over-lap with the garlic activities.
One promising cash crop is fingerling potatoes which are planted in the early-spring and harvested in the late-summer to early fall. Potatoes have long been grown in Potter County, the home of Camp Potato and Potato City. In any give year, we would have one acre in garlic production, one acre in fingerling production and 2 acres planted in cover crops. A 4 year crop rotation is given in the below table:
|Year 1||Late Spring||Oats and Field Peas or Hairy Vetch|
|Late Summer||Winter Rye|
|Year 2||Mid Spring||Fingerling Potatoes|
|Late Summer||Winter Rye|
|Year 3||Mid Spring||Oats and Field Peas or Hairy Vetch|
|Mid Summer||Buckwheat and Mustard|
|Fall||Garlic and Shallot|
|Year 4||Late Summer||Extended Bare Fallow|
|Fall||Oilseed Radish and Winter Rye|
Because these decisions have important impacts, we need to analyze alternatives in a methodical way. Partial budgeting is a planning and decision-making method used to compare the costs and benefits of alternatives choices faced by a farm business . The following analysis is presented to help us understand and compare the costs and benefits of this alternative.
1. State the proposed change.
Add a new cash crop of fingerling potatoes. Assume one-acre of production.
2. List the added returns.
Identify any possible means of generating new revenue streams assuming a 1 to 10 yield:
1 acre of potato production = 14,000 pounds. 14,000 pounds minus 1,400 pound seed reserve minus 1,400 pounds of non-marketable produce = 11,200 pounds of marketable produce.
Assuming a market price of $2 (wholesale) to $3 (retail) per pound for organic fingerling potatoes:
11,200 pounds of marketable produce times $2.50 = $28,000 of gross income potential.
3. List the reduced costs.
In this step, identify areas where the choice might lower expenses.
The only savings one can associated with this decision is the decrease in the expenses for any non-crop farming activities such as pasture use on the acre instead of planting it with a potato crop. Assume that this acre remains inactivate and has only minimal mowing maintenance performed a couple of times each year.
|Mowing Labor:||4 hrs||$10.00||$40|
4. List the added costs.
Once again, identify all of the general areas in which costs will be increased.
|Seed:||1,400 #||$0||(see note1)|
|Soil Amendments:||(see note 2)||–||$501|
|Tillage Labor:||2 hrs||$35||$70|
|Planting Labor:||46 hrs||$10||$460|
|Weeding Labor:||60 hrs||$10||$600|
|Hilling Labor:||40 hrs||$10||$400|
|Pest Control Labor:||40 hrs||$10||$400|
|Harvest Labor:||40 hrs||$10||$400|
|Sorting Labor:||40 hrs||$10||$400|
|Packaging Labor:||40 hrs||$10||$400|
|Total Variable Costs:||$3601|
|High Wheel Cultivator||(note 3)|
|Johnny’s Broadfork||(note 3)|
|Potato Plow Attachment||(note 3)|
|5” Stirrup Hoe||(note 3)||$0|
|Root Cellar Potato Storage:||10’ by 10’||–||$2500|
|Garden Bedder 48”||1||$500||$500|
|Total Initial Investment:||$3930|
Note 1): Seed cost is $230 for 60 pound of seed potatoes in the year 1. Each year thereafter, we plan to sell half of the yield and replanting the remaining half to incrementally increase our production up to the one acre. Assuming this, we will achieve our goal in three years.
Note 2): Assumed to be similar to soil fertility recommendations garlic planting.
Note 3): Already available equipment being used for garlic production. Assume Marketing and produce hauling can be piggy-back with garlic activities for little or no extra cost.
5. List the reduced returns.
No garlic revenues will be decreased or eliminated as a result of choosing a particular alternative.
The lost interest on our initial investment of $3930 is $157 (at a 4% Rate of Return).
6. Summarize the net effects.
We have identified the individual positive (steps 2 and 3) and negative (steps 4 and 5) aspects of this alternative, to determine a total cost and total benefit of the alternative:
$28,000 + $52 – ($3601 + $157) = $24,294
The net benefit is positive, indicating that the alternative has economic advantages.
7. Consider non-economic and other factors.
Non-economic considerations must be taken into account when considering an alternative. The main positive is having the family farm labor more evenly spread throughout the year:
• Potato planting is in Mid-April through early-May.
• Garlic harvest is mid-July to early-August
• Potato harvest is August though September
• Garlic planting is late-September to mid-November
Also, having a second cash crop provides more diversification: Garlic (Allium sativum) is in the Onion family and potatoes (Solanum tuberosum) are in the nightshade family.
A negative is the need for increase in specialized knowledge. Potatoes have a number of pests and diseases. Several insects can cause severe problems in potatoes, including Colorado potato beetles, flea beetles, aphids, leafhoppers, wireworms, and corn borers. Several potato diseases can cause severe crop losses if not properly managed. These include early blight, late blight, common and powdery scab, blackleg, leaf roll and mosaic viruses, rhizoctonia, verticillum wilt, fusarium dry rot, and bacterial soft rot. A long-term crop-rotation can help minimize these potential problems.
Our business plan is to incremental increase the production rate: “Start small and grow gradually over time is a key to a successful farm business”. By beginning with 60 pounds of seed potatoes in the year 1, we can learn and correct our farming practices at this early stage. Each year thereafter, we plan to sell half of the yield and replanting the remaining half to incrementally increase our production up to the one acre. This method allows establishing our markets gradually and evaluating customer culinary preferences over time. A drawback of this business plan is that we will not bring to fruition the full economic return until after three years when we achieve our production goal. We feel it is advisable for us to follow our incremental farm plan to mitigate the risks over time.
 “Partial Budgeting for Agricultural Businesses” Prepared by Sarah Roth, extension associate with Dairy Alliance, and Jeffrey Hyde, assistant professor of Agricultural economics, Penn State College of Agricultural Sciences, Agricultural Research and Cooperative Extension.