The data requirements for an assessment of the profitability
of alternative farm management systems are the
technical rates of substitution of one enter rise for
another, and their price ratios. In a mixed arable system
it is necessary to determine relative yields of cash crops,
stocking rates and stock performance, and to assess the
requirements of these enterprises for variable and fixed
resources. While the basis of analysis would usually be
average yields and current or expected prices, it is often
desirable to explore the effect of variation in the critical
parameters.
Three methods of analysis are available, partial budgeting,
including gross margins analysis, full comparative
budgeting, and mathematical programming.
This paper is limited to a brief review of the relative
profitability of cash crops under current prices, using gross margins as the basis of analysis. In most situations, gross
margins per acre are of first importance, although, where
operating capital or labour are most limiting, then it will
be more appropriate to do the analysis iIi terms of gross
margin per unit of capital or labour. These coefficients are
usually more difficult to determine.[Show full abstract]
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