1 Revised 7/2002
1
Understanding and Using WSU Crop Enterprise Budgets1
Herbert R. Hinman
Washington State University Cooperative Extension develops crop enterprise budgets for many of the major crops grown throughout Washington State. The purposes of these budgets are to estimate the costs and returns from producing these crops for research and policy purposes and to provide producers and their credit providers with a tool to use in enterprise selection and financing.
To construct an enterprise budget, a group of progressive producers is assembled by the extension agent in the area. The agent and a farm management specialist from WSU work with this group to develop a consensus estimate of enterprise costs and returns. It is fully realized by those involved in this process that the resulting enterprise budget does not represent any one particular farm and must be modified by the individual producer to fit their situation. However, the resulting budget is a reasonable estimate for the area.
Producers reviewing these published budgets often state that their own costs are significantly lower than those presented in the WSU budgets. Furthermore, others outside the industry may question the cost estimates and “break-even” prices stating that “since some WSU budgets show producers are operating at a loss, how do they stay in business?” To adequately address these concerns and questions, one must understand both the difference between “economic” and “cash” budgets and also how an economic budget can be used to develop a cash budget.
WSU enterprise budgets are economic budgets. The budget shown in Table 1 is a published wheat budget for the 18- to 22-inch rainfall area of Columbia County, Washington. In developing this budget, it was assumed that the representative farm includes 1,500 acres with 750 acres in winter wheat, 500 acres in peas, and 250