Partial Budgets

Decision $1$: Changing Crops

You are considering whether soybeans is the best option for your operation. You are considering the

option of growing edible green peas. Use revenue and cost projections from the $2024$ Sask Crop Planning

Guide to outline the change in revenues and expenses that this switch $($soybeans out, edible green peas

in$)$ would have on the farm business.

Decision $2$: Purchase Swather versus Custom Swathing

You can also purchase a $2021$ Massey swather$/$windrower for $$235,000$ instead of paying your neighbour

$$15$ per acre to swath your $2500$ acres of wheat and Canola. You do not expect this purchase to affect

your wheat yields, but you do think more timely swathing of your canola will save $3$ bu$/$ac$.$ You expect to

use this swather for $10$ years, after which you expect it to be worth $$80,000.$

You typically have $1400$ ac of Canola on your farm, with the rest being a mix of wheat and other crops.

Use the Sask Custom Rate Guide for repair costs. Use $8\%$ interest rate for Interest on Invested Capital.

You esfimate that your fuel and labour costs $($if you were to not use your neighbour$)$ would be $$6$ per

acre.

$2.$ Calculate the parfial budget for each of the two decisions outlined above. Clearly outline the

relevant costs and income changes associated with each decision, along with the net change in

profitability for each decision.

$3.$ Would you recommend switching from soybeans to edible green peas? What would yield for the

green peas have to be to make you indifferent between these two crop choices?

$4.$ Would you recommend purchasing the swather? Why or why not? How many acres would you

need to cover $($at this cost of a machine$)$ to make you indifferent between owning your own and

hiring your neighbour?