Agriculture Reference
In-Depth Information
ing labor) and profi t over total acreage both can be used in
conjunction with business and management records to
monitor the effects of any changes that may have occurred
over time and motivate management decisions.
enable producers to further enhance profi tability by maxi-
mizing the benefi ts associated with capital investments.
Tax Benefi ts
Many landowners and producers in the U.S. take advan-
tage of the tax benefi ts associated with production farming.
Agricultural Transfer Taxes can be waived if the intent of
land purchase is for agricultural use. Agricultural Use
Assessment will appraise the value of the land according
to its use and not according to the current market value,
which allows farms to benefi t from lower taxes because of
the lower value placed on agricultural land compared to
nonagricultural property. In order for this to take place, the
land must meet the requirement of a minimum size
of land in acres and generate a minimum gross income
that varies over time. It is noteworthy to mention that
sales tax is waived for some farm-related purchases, equip-
ment rental, and supplies used for agricultural production.
Operating expenses from goat production, like any other
agricultural enterprises, can be considered to be a tax
writeoff to offset the ordinary income tax. Expenses such
as education, membership in breed associations, equip-
ment, buildings, fencing, and animal depreciations can
also be deducted from income taxes. The tax incentives
are more for farms that operate as businesses and have
shown a profi t for a certain number of years (usually 5
years) or have shown a profi t in 3 of 5 years of operation.
Land appreciation is another major contributing factor
in increasing a farmer's net worth. Real estate values
continue to increase; therefore, purchase of land to
raise livestock can be a valuable investment (Schoenian,
2008 ).
Sample Enterprise Budgets
A simple budget illustration based on a 100 doe production
system for meat, a 500 doe dairy enterprise, and an animal
unit (AU) basis for fi ber goat enterprises are shown in
Tables 18.1, 18.2, and 18.3, respectively. To construct a
budget, the enterprise should be described and assump-
tions should be made (see assumptions under each table).
Kidding rate, weaning rate, price of feed, and price of
market goats for meat, milk, or fi ber enterprise may be
different across locations and time. Changes in any of
these factors can change net income. The fi xed costs
associated with the operation, including the cost of land,
buildings, and fencing, can be accounted for as capital
investments. These budgets are intended to be used as
simple guides and should be adjusted to one's specifi c
operational practices (additional goat kid, milk, or fi ber
sales, etc.) and marketing strategies. Management and
capital investment intensities are higher for dairy than for
meat and fi ber operations. Therefore, more scrutiny is
required in making the decision to start a dairy goat
operation.
As illustrated, feed cost is one of the highest operation
expenses. Due to rising energy prices for hay and grain
production, feed costs can account for more than 60%
of total variable costs for any given operation. The use of
extensive grazing systems with natural pastureland and
rangeland and/or grazing on improved pastures with proper
management, where appropriate, may reduce feed costs
as well as parasite burden and therefore the cost of
deworming.
The second highest cost is labor, which can vary from
25-35% of operating costs. The budget analysis must
include labor costs—hired help and hourly wages provided
by the owner or hired management. In a majority of cases
in the U.S., owners do not include the management cost in
their budget and depend on the non-monetary incentives
that farming provides.
With the current global economy, making profi t in an
agricultural enterprise, especially those involving goats
can be challenging. However, through informed decisions
that effectively control production costs and maximize
market opportunities and revenue (producing and selling
products during peak demand), goat production can be
profi table. The section on tax benefi ts will illustrate how
awareness of local, regional, and national legislation can
PARTIAL BUDGET ANALYSIS FOR
SUBSISTENCE GOAT FARMING
A majority of goats are raised under subsistence farming
in developing and underdeveloped countries where social
values may surpass economic values. More than 90% of
the world's goats are in developing countries. Goats are
increasingly important in these countries as subsistence
food producers. Production systems range from goats
being a part of nomadic multi-species herds on arid desert
rangelands or in agropastoral production systems, to goats
being the primary animal enterprise in smallholder farming
systems (Glimp, 1995).
Economic analysis is also a useful tool for subsistence
farming, just as it is for other types of production systems;
the information gained can be used for planning purposes
and may lead to cost-saving changes in management prac-
tices. However, components of the budget analysis and
