Enterprise budgets are prepared as a reference for the farmer and are a record of the anticipated costs and returns for a particular set of production practices for the crop(s) considered. Farmers, lenders and others use these budgets as a means to evaluate the economics of production. Of course, producers will need to adjust the figures given for the cost inputs for their operation. Enterprise budgets are prepared by the Clemson University Department of Applied Economics and Statistics can be accessed here:
Variable costs are those that are incurred each year the crop is produced and are basically the out-of-pocket expenses for seed, chemicals, fertilizer, labor, machinery and interest. These may vary from year to year, field to field and farm to farm. This is why producers must be aware of their average expense figures for each cost component.
Fixed costs are those incurred even if a crop is not planted. Such things as depreciation and taxes on equipment are fixed costs. Farmers may choose to ignore the fixed cost component for a year or so when planning the farm's crop mix. However, over a period of several years, producers need to be able to cover total costs to maintain an economically viable cropping system. Farmers are also urged to consider various market risk management scenarios to try to capture the highest profit possible.