1. Using partial budgets……
To answer all sorts of questions you or others may have…
Craig Chase, Field Specialist
Farm & Ag Business Management

2. Partial Budget
A partial budget allows you to analyze a portion of your farm to determine if minor adjustments should be made.
For example, should you:
Add an enterprise
Change your product mix or production practices
Custom hire or purchase machinery
Change marketing outlets
Purchase transplants or grow from seed…

3. Partial Budget
Partial budgets allows you to compare two alternatives side-by-side.
The analysis tells you one of the alternatives is comparatively better than the other.

4. Partial Budget Components
There are seven components to a partial budget: increased revenue, reduced cost, reduced revenue, increased cost, total positive effects, total negative effects, and net change.

5. Partial Budget Example
Change Product Mix from Green Beans to Salad Greens
Positive Effects
Negative Effects
Increases in revenue (1)
Decreases in revenue (3)
Sales of salad greens $150.00
Sales of green beans
Decreases in cost (2)
Increases in cost (4)
18.25 hrs $10/hr $182.50
2.8 hrs of $10/hr
Input & packaging costs
Input and packaging costs
Total decrease in costs
Total increase in costs
Total positive effects (5) $359.16
Total negative effects (6) $396.53
Net change (7) $37.37

6. Partial Budget Exercise #1
Change Marketing Outlet from Farmers’ Market to Institutional Market
Positive Effects
Negative Effects
Increases in revenue (1)
Decreases in revenue (3)
Institutional market sales $3,600
Farmers’ market sales $4,500
Decreases in cost (2)
Increases in cost (4)
Farmers’ market labor costs $1,200
Institutional market labor costs $800
Farmers’ mkt. supply, trans. costs 400
Inst’l mkt. supply, trans. cost
Total decrease in costs $1,600
Total increase in costs $1,000
Total positive effects (5) $5,200
Total negative effects (6) $5,500
Net change (7) $300

7. Partial Budget Exercise #2
Analyze the purchase of a new 1-row potato harvester ($2,000, 7-yr life)
Positive Effects
Negative Effects
Increases in revenue (1)
Decreases in revenue (3)
Decreases in cost (2)
Increases in cost (4)
Labor (100 hrs) $1,000
Labor (2 hrs) $ 20
Depreciation cost
Taxes, housing, insurance (1%)
Repairs and maintenance (2%)
Total decrease in costs $1,000
Total increase in costs $366
Total positive effects (5) $1,000
Total negative effects (6) $366
Net change (7) $634 (per acre)

8. Partial Budget Exercise #3
Analyze the change in cattle production practices
Positive Effects
Negative Effects
Increases in revenue (1) $1,150
Decreases in revenue (3) $1,080
Decreases in cost (2)
Increases in cost (4)
Conventional feed $400
Natural feed $500
Conventional housing
Natural housing
Total decrease in costs $480
Total increase in costs $585
Total positive effects (5) $1,630
Total negative effects (6) $1,665
Net change (7) $35

9. Limitations
As always, the decisions you make are only as good as the numbers you used to make them. Some numbers are better than none; more is better…
Partial budgets compare two alternatives, neither which may be the best alternative available to you.
Partial budgets (all types of budgets) look at only $, other factors come into play as well in your decisions (health, environment, etc.)

10. Questions….. Any questions or comments?
Thank You for This Opportunity!
Craig A. Chase
Leopold Center for Sustainable Agriculture
Marketing and Food System Initiative Program Leader
Iowa State University Extension and Outreach
Local Food and Farm Program Coordinator
Local Food Systems and Alternative Enterprise Analysis
209B Curtiss Hall
Ames, IA
(515)