Economics 230Name______
Lab 7Section: 1 3
Fall 2009Due October 16
Swine Investment Analysis
The purposes of this lab exercise are to:
(1) compare the profitability of the three types of swine facilities, and
(2) decide how many litters you can produce with the labor your have available
- Enterprise Budget for Farrow-Finish Swine.
Your Farmsim hog facilities will wear out after Year 5. To continue producing hogs in Year 6 and beyond you will need to invest in somenew facilities in Year 5. You can also wait until a later year, if you prefer. You will need to decide whether or not you want to continue toengage in hog production, and if so, under which production system and for how many litters per year. You have system (1) presently.
From your Farmsim printouts for years 1, 2, 3 and 4 find the average values for the following items over the last 4 years (you can also use the Trend Analysis option on the Farmsim main menu):
Pigs weaned per litter______Selling price for hogs ______Selling price for corn______
Unit: 1 sowPeriod: 1 year / System (1) / System (2) / System (3)Revenue
(round values to the nearest $) / (All values are for one sow for one year.)
Average pigs weaned/litter______x 2.2 litters/sow per year
Add 1.0 pig per sow per year for systems (2) and (3).
-Number of gilts retained / .53 / .53 / .53
=Number of pigs sold per sow
x Selling weight of 2.6 cwt.(260 pounds) = cwt. of market hogs sold
xAverage selling price, for hogs, $ per cwt.______
=Projected income from market hog sales (nearest $)
+Projected income from cull sow sales:
.48 sows sold per year @ $165
+ Nitrogen credit from swine manure: 200 lb. @ $.50 per pound
=Gross income per sow unit (market hogs + cull sows + N credit)
Expenses
(round values to the nearest $) / System (1)
per sow / System (2)
per sow / System (3)
per sow
Corn needed for feed
Corn cost (bushels x average selling price for corn $______/bu.) / 270 bu.
$ / 280 bu
$ / 280 bu.
$
Protein supplement needed
Supplement cost @ $.25 per lb. / 3,590 lb.
$ / 3,770 lb.
$ / 3,770 lb.
$
Livestock expense (health, supplies, etc.) / $68 / $50 / $50
Utilities,building repairs and marketing expenses / $160 / $160 / $160
Labor cost @ $12 per hour / 24 hours
$ / 18 hours
$ / 12 hours
$
Total Operating Costs
Initial investment cost per sow unit for new facilities / $1,400 / $2,000 / $2,800
Depreciation on initial investment
(use 20 years life, zero salvage value)
Interest @ 7.0% of average value invested per sow
(use average of initial investment and zero salvage value)
Property taxes and insurance: 2 % of the average investment value
Total Ownership Costs
Total of all costs (operating & ownership)
Profit per sow per year (Income – Costs)
Breakeven selling price per cwt. of market hogs sold needed to pay total costs(remember to subtract cull sow sales income first)
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II. Resources Available
Labor. Since hired labor is available, assume the maximum total farm labor supply is 6,000 hours (3,000 operator hours, 3,000 hired hours). Subtract the labor needed for your present enterprises. As a guide, use labor hours from your Year 4 Farm Business Analysis Report.
1.Labor available / 6,000 hours2.Labor needed for crops: / ______hours
3.Labor needed for cattle: ______head x ______hr./head / ______hours
4.General labor requirement / 800 hours
5.Labor available for hogs (1 - 2 - 3 - 4) / ______hours
System 1 / System 2 / System 3
- Labor required per sow
- Maximum sows possible (round off)
- Projected total profit from sows
x numberof sows possible) / ______hours / ______hours / ______hours
Which system has the largest profit per sow? ______
Which system has the largest total profit per year, considering the number of sows possible? ______
This shows the maximum sows possible with current labor. You may want to save some labor capacity for expanding crop or cattle production later, however.
III. Spring Operating Loan Estimate
Each spring the Farmsim lender asks you how much operating capital you want to borrow. You don’t want to be caught short of money (emergency loans have a 5% interest penalty), but you don’t want to pay interest on funds you don’t use either. Use the following table to help calculate your operating loan needs for Year 5.Livestock expenses are assumed to be covered from hog income.
Cash Needed
- Seed, fertilizer and pesticides for corn: ______acres @ $180
2. Seed, fertilizer and pesticides for silage: ______acres @ $210 / $______
3. Seed, fertilizer and pesticides for soybeans: ______acres @ $104 / $______
4. Machinery operating (fuel and repairs): ______total acres @$40
(spring operations only) / $______
5. Cash rent: ______cash rented acres @$______average rent bid x 50%
(only half the rent is due in the spring) / $______
6. Property taxes and insurance: $______x 50%
Check your Year 4 Net Farm Income Statement. Half is due in the spring. / $______
7.Hired labor: ______hours to hire @ $12 x 50%
(half used in the spring) / $______
- Total operating capital needed for spring of Year 5
- Cash on hand at the end of Year 4 (available for Year 5)
- Crop sales expected in the spring:______bu. soybeans @ $______
Remember to keep back at least 12,000 bushels of corn for the hogs and some for the cattle if you purchased any at the end of Year 4.
______head of cattle x _____ bu. per head* = ______bushels
Yr. 4 ending inventory ______- 12,000 - ______bu. for cattle = ______
bushels available to sell @ $______expected price (your guess) / $______
$______
- Operating loan needed (cash needed minus cash available)
*Corn requirements for cattle:Calves, corn & hay ration71 bu. per head
Calves, corn & silage ration57 bu. per head
Yearlings, corn & hay ration67 bu. per head
Yearlings, corn & silage ration58 bu. per head
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