Bishop, C., Extension Educator, University Of Nevada Cooperative Extension
Emm, S., Extension Educator, University Of Nevada Cooperative Extension
Landis, M., Research Analyst, University Center for Economic Development

ABSTRACT

Business planning tools based on costs and returns to establish and produce an agricultural product are extremely important in increasing the number of beginning specialized or ‘niche’ farmers in Nevada. Mentoring for financial education using these tools is an intricate part of the Nevada Beginning Farmer and Rancher Project, also known as Herds & Harvest. Enterprise budgets were introduced at three topical workshops; a retrospective pre-post survey measured knowledge gain.  Following workshops, mentor faculty members met one-on-one with producers to create budgets based on specific business start-up scenarios. These are currently the only interactive budgets available to Nevada producers.  

Introduction

University of Nevada Cooperative Extension was awarded a Beginning Farmer and Rancher Development Project from USDA, National Institute of Food and Agriculture in August 2011, which was renamed Herds & Harvest.  The long-term goal of the project is to enhance the sustainability of Nevada’s beginning farmers and ranchers (BFRs) through education, mentoring, and outreach activities.  Successful implementation of this project increases ownership and the skills necessary to operate and sustain an agricultural operation. A mentoring environment under this project is based on the successful utilization of business planning tools.

Although the average size of a farm in Nevada is 1,873 acres, the median size farm is 51 acres, indicating a large number of small farm operations. The 2007 USDA Census of Agriculture shows that since 1978 the number of farms in Nevada is increasing while the average size of farms is decreasing.  Nevada has seen an increase in the number of individuals beginning small scale and high value crop operations; direct sales of farm and ranch products have been experiencing large growth rates in Nevada since 1997 especially in the urban counties (Fadali, 2007). This reflects a trend toward more specialized or ‘niche’ agricultural products, many of which are produced in a multiple crop environment. 

Moreover, many of these smaller niche farmers are fulfilling consumer demand by utilizing alternative market outlets such as cooperatives, Community Supported Agriculture (CSA), and farmer’s markets.Both first time producers and traditional producers are taking part in this trend.  Regardless of experience, small scale niche enterprises require different economic decision making than has been used for more homogenous traditional production. 

Enterprise budgets are often used in economic decision making for individual crops or livestock operations. There are many examples of enterprise budgets available from Cooperative Extension throughout the nation. Enterprise budgets traditionally analyze profit for operations with only a single product.  This can be useful when comparing two distinct production types (i.e. corn or soybeans) or methods (i.e. conventional corn vs. organic corn).  Enterprise budgets provide explicit cost detail that can be used to increase margins via cost management, which is often more effective for conventional production where pricing is driven by the marketplace.

In contrast, small niche farmers produce more differentiated products and often have more leeway in price setting.  In both Community Supported Agriculture and farmers’ markets, consumer demand is driven by a basket of goods rather than a single product.  For this reason, a budget that includes all products within the basket is more useful as a decision making tool. Each crop is a relatively small portion of the total operation and it is often not cost effective to track operational costs for each crop independently.  However, reporting per unit measures such as production costs per square foot still provides the producer with useful decision making tools. It is essential to calculate accurate costs of production, as high-value crops may also have higher production costs (Gatzke, 2008).

Methods

Enterprise budgets were introduced to producers under the Herds & Harvest program in collaboration with a particular topic. There were a total of five workshops (32 statewide classes - Interactive Video) comprised of three topics; Field Crops: Old and New (2),Processing and Selling Locally Grown Meat (2) & So You Want to Be a Produce Farmer.  There were 212 total participants the first program year. Participants at workshops were instructed in the basic components of an enterprise budget through a power point presentation, which was then followed by a hands-on example. 

 

            Figure 1. Working with audiences on the interactive spreadsheet.

 

A small whole-farm budget on a spreadsheet program was used interactively with inputs from the attending audience to demonstrate how net profits could change by altering the price of fixed assets, reducing or increasing the amount of variable inputs, or increasing or lowering the price of goods sold.  This interactive portion showed how economic values could be changed in order to analyze management decisions before investing time or capital to a potentially unsustainable enterprise. As these values changed, the instructor went back to the costs and returns portion of the spreadsheet to reveal the change in net profit.  This generated audience interest in creating personalized budgets with a mentor. 

The one-on-one mentoring process started with setting a meeting for a block of time to create the budget.  Meetings were usually held at the farm or office of the producer to allow access to production or financial records.  This also created a sense of familiarity and comfort to enable interactions when dealing with the sensitive issue of finances.

Most producers had several enterprises that were being undertaken that could have been the focus of the enterprise budget process. Consultation with the producer determined which operation or group of operations was of highest priority.  As the agricultural operation was explained to the mentor, it helped to determine what financial information was needed.   By going through the process step by step, it clarified to the producer what was needed and in what order.  The producer could then use the template we created together to create further budgets on their own for the rest of their enterprises. 

Results

The evaluation impact of the budgeting tool is integrated into the overall Herds & Harvest program.  The Herds & Harvest evaluation design employs a multi-method, multi-year approach, consisting of questionnaires, interviews, retrospective and mail-out surveys. The logic model was the guiding principal behind this design approach of measuring short, medium and long-term outcomes (Arnold, 2002).  The Dillman (2007) tailored design method was also used in designing the evaluation format.  Data obtained from assessments is analyzed using statistical analysis software for quantitative data and description and thematic (interrelation development) for qualitative data.

Workshop assessments and evaluations included pre and post questions on financial education to determine knowledge gain for short-term outcomes.  Retrospective surveys administered immediately following the workshops in the first year revealed statistically significant increases (p<.05) in knowledge and skill acquisition for almost all of the topics queried, based upon a paired t-test comparison of mean pre-test and post-test scores.These questions were measured on a 5 point scale.  There was a 50% overall completion rate of evaluations from participants. Each row represents a different workshop class. 

 

ªDifferences between pre-test and post-test scores statistically significant at p<0.05  Cronbach’s Alpha = .924

 

Over 65% of the first-year participants reported they would make changes or take actions in their agricultural practices based upon workshop education. In the second year of the program, a telephone interview will be conducted with first year participants to determine if these changes have been implemented, showing medium-term impacts. 

Discussion

The interactive part of the Herds & Harvest program presentations created interest among workshops attendees in obtaining a copy of the spreadsheet used in the presentation and in requests for one-on-one mentoring in order to create a budget modified specifically to their enterprise. At the start of this project, Nevada had minimal enterprise budgets on record for high-value crops and no budgets available for small acreage operations. For the most part, budgets were limited to large acreage hay or cow/calf operations.  Additionally, none of the online budgets were interactive.  The majority of the workshop attendees were not familiar with enterprise budgets or their purpose.  While they had a vague understanding that they should know their break even costs, they had no budgeting tool available at home.   

Enterprise budgets can be detailed and time-consuming to construct. Also, data for enterprise budgets are often difficult to find, especially if creating a budget for an enterprise that has never been produced in a given area (Riggs, 2007).  Some budgets were able to be completed in a four hour block of time while others required multiple meetings, depending on the complexity of the operation and the knowledge level of the producer regarding the costs/returns of the operation. Of the 28 individualized enterprise budgets completed in the first year, the operations have included: one acre whole farm CSA fall basket budgets, a small slaughterhouse facility, pastured meat goats, sheep for wool, cut flowers, eggs, mixed use greenhouse and others.  Producers ranged from high school youth learning what would be involved in an agricultural business to couples who have quit traditional jobs and ‘gone back to the land’ to retirees wanting to supplement their incomes by catering to a niche market they have identified. We have completed budgets in both urban and rural environments; some farms are in the middle of urban areas, others are hours from the closest large town.

Working with producers on the one-on-one enterprise budgeting process offered many benefits to the county agent. Some of the benefits were to establish base budgets for future use and keep abreast of current trends and pricing. It allowed insight to enterprises that were previously unknown by extension personnel.  It also allowed the agent to build relationships with their producers. Building trust and relationships with Nevada’s agriculture community has been the key determinant in the success of the overall project (Emm 2013). Herds & Harvest was the first project under Nevada’s new Tomorrow’s Table initiative which seeks to assist Nevadans new to horticulture or agriculture or who are interested in diversifying their current farming and ranching activities. This initiative also brought Nevada’s Cooperative Extension agricultural team together to align efforts throughout the state. Tomorrow’s Table currently has a producer participant list of 3,018 Nevada producers.

When producers were asked about what they liked best about the educational programs, the availability of help in developing enterprise budgets was one of the five top responses. Working through the enterprise budgeting process offered many benefits to producers, including the process itself.  Organizing production information into an economic decision making tool often brought to light operational strengths and weaknesses without any additional analysis.  The added benefit of considering income and expenses in terms of per unit measures revealed production efficiencies. It also highlighted the necessity of putting aside capital for replacement equipment and paying for your own labor, two items frequently forgotten by producers.

Following completion of the budget, some Nevada producers had a personalized decision making tool for financial analysis to be able to utilize USDA programs such as applying for loans with FSA or applying for other financing opportunities including NRCS cost share programs. For some producers, completing a budget showed that a given enterprise was not economically feasible and producers, while disappointed, were thankful that they had 'made the mistake on paper'. The process also provided a Cooperative Extension faculty member to give sound researched-based advice, establish producer's relationships with other agency personnel and create networks within the agricultural community.

References

Arnold, M. (2002). Be “logical” about program evaluation: Begin with learning assessment. Journal of Extension, 41 (3). Retrieved from: http://www.joe.org/joe/2002june/a4.php

Dillman, D. (2007). Mail and internet surveys: The tailored design method (2nd ed., updated). New Jersey: John Wiley & Sons, Inc.

Emm, S., Bishop C. & Powell, P. (2013).  Implementing the Nevada Beginning Farmer and Rancher Project. Journal of the NACAA,6 (1). Retrieved from: http://www.nacaa.com/journal/index.php?jid=217

Fadali, E., Harris T & Curtis, K. (2007). Potential for Agritourism in Nevada. University of Nevada Cooperative Extension Fact Sheet 07-31.

Gatzke, H. & Curtis, K. (2008). Starting a Horticultural Business: Primary Considerations. University of Nevada Cooperative Extension Fact Sheet 08-43.

Riggs, W., Curtis, K & Harris, T. (2005). Importance & Use of Enterprise Budgets in Agricultural Operations. University of Nevada Cooperative Extension Special Publication 05-12.

U.S. Department of Agriculture. (2007). Census of Agriculture. National Agricultural Statistics Service, Washington, D.C. 

 

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