Presentation on theme: "Economics of Conservation Planning. Introduction §Fits into the 9 step process §Identify and evaluate onsite and offsite l Benefits l Costs §Time Value."— Presentation transcript:
Costs of Conservation §Two basic costs l Expenditures Up-front installation costs Operation and Maintenance cost l Lost Production cost is dependent upon current yield
Ag Business Environment §Interest Rates §Prices §Farm Program §Cost Share and Incentive Opportunities §Taxes §etc.
Ag Business Environment §Economic Prosperity l Reduce Taxes l Invest in long-term conservation §Economic Stress l Long-term conservation not feasible l Apply part of a system
Time and Money §$1 today = $1+interest tomorrow §Opportunity Costs l Interest paid on a loan l return given up on another investment
Time and Money §Interest l the amount earned or paid for the use of money §Number of Periods l time of the investment §Present Value l Principle - amount borrowed or invested today
Time and Money §Future Value l Principle + interest §Payment l reoccurring deposits or receipts representing either principal, or principal plus interest
Time and Money §One-time Values (Installation cost) l Occurs at a single point in time §Annuities (Benefits) l Occur over an extended period Constant, Decreasing, or increasing §Lag (deferred grazing) l Occurs at some point in the future
Time and Money §Annuity Table §Loan Amortization Worksheet §Amortization Table l Excel l Pocket Card
Time and Money §Future Value l PV(1+ i) n §Rule of 72 (double your money?) l 72 / i or 72 / n § Present Value l FV/(1+I) n
Evaluation Techniques §Partial Budgeting l Method of estimating how small changes will effect net income.
Evaluation Techniques §Break-even Analysis l Evaluate how much of an investment can be made based on expected returns.
Evaluation Techniques §Cost Effectiveness Method l Costs of alternatives that achieve the stated objective are compared.
Evaluation Techniques §Conservation Effects for Decision-making Allows you to consider all physical, sociological, and economic factors.
Evaluation Techniques §Economic Threshold l Compare treatment costs to lost revenue that will be incurred if left untreated.
Evaluation Techniques §Crop Budgets l Show the inputs required l Show estimated costs l Good when starting a new enterprise §eFOTG Section I l Economic Data - Other Resources l Missouri Farm Business Planning Handbook