Graduate Thesis Or Dissertation
 

Information and analysis techniques for making crop selection decisions

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  • Twenty managers of large diversified irrigated farms in the Willamette Valley area of Oregon were interviewed about the economic information and analysis techniques they use when making crop selection decisions. Two community college farm management instructors, two agricultural lenders, and two certified public accountants working with farmers were interviewed about how they think farmers make crop selection decisions, how they think farmers should make these decisions and the information and services they provide to help farmers make crop selection decisions. Crop selection was agreed to be one of the most important decisions in the overall management of the farm. Profit was the primary management objective but diversification, crop rotation, labor schedule, soil suitability, and equipment requirements were also considered important factors in the decision. Production cost, commodity price, and yield information would be most useful if available by the end of September or early October to make decisions on fall crops and by the end of March to decide on spring crops. Microeconomic marginal analysis, linear programming, and E-V analysis using Quadratic programming, although theoretically appropriate, have limited usefulness to farmers when making actual crop selection decisions. These techniques were not being used by the farmers interviewed even though some of them had business or economics training at the undergraduate or graduate level. These techniques are highly sensitive to parameter specifications and, in many cases, are inap­propriately sophisticated when the availability and reliability of yield, price, and cost information is considered. In addition to price and yield variation, crop production costs were found to vary approximately 10-20% from year to year. Resulting from these combined variances, per acre crop gross margins were found to vary 1OO% or more. Enterprise budgeting was found to be the only analysis technique commonly used. Ninety-five percent of the farmers interviewed tried to estimate the profit per acre they expected from each crop before planting, but only sixty percent wrote down these calculations. Ninety percent indicated that their past cost records were important in estimating costs, but only thirty-five percent kept records of their production costs for each crop. Lenders and accountants were found to provide very little assistance in making crop selection decisions. The community college farm management instructors teach enterprise cost accounting and encourage its use in analyzing crop selection decisions. An information and analysis system for crop selection decisions was proposed and tested in two case studies. This system stresses keeping enterprise cost records and using these records with other information to construct crop budget projections for each crop. The "Croplan" program for the HP 41C programmable calculator was used to analyze the riskiness of each crop. The program evaluates a triangular probability distribution for uncertain yields and prices given the highest likely, most likely, and lowest likely levels. Expected gross income per acre, expected margin per acre, and a break even probability are calculated. The farmer then ranks his crops in order or desirability based on expected margin and break even probability. The crop plan is then developed manually based on this ranking, subjec­tively satisfying other constraints or the crop budgets can be used as input for linear programming or other sophisticated techniques. There is a need for more basic record keeping and enterprise cost analysis by farmers to generate accurate and reliable cost data. The improved record keeping will have a threefold benefit. First, a better understanding of relative profitability of each crop will aid crop selection decisions. Second, better cost control may be achieved through detailed analysis of the costs associated with each crop. Third, reliable records of historic cost, price and yield information will facilitate more valid use of sophisticated analysis techniques such as linear programming, or E-V analysis in the future.
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