Try your calculational skills on a small budget exercise. Is the following offer a good prospect? Complete a budget, then compare your answer with the budget below. A farmer’s neighbour has two paddocks of 10 ha each in good pasture that are surplus to requirements for the February–September period (inclusive).
They have been offered to the farmer for $150/ha. Should the farmer take up this offer and use them to finish store lambs that are sold off in small lots over the winter (June to September) to the local butchers market?
Data:
– Shorn lambs have been offered for the great price of $40 landed.
– The farmer can run 8 lambs per ha equivalent (initially the rate is high, but then it will get less).
– The farmer needs to buy 1.5 bales of lucerne (alfalfa) hay per head at $7 landed.
– The farmer needs to apply 50 kg urea/ha at $420/t on the ground.
– The farmer will need to drench twice on average at $0.05 per drench.
– The farmer expects 3% deaths.
– The farmer knows that he will get on average $90 per head at the sale yards.
– The transport will work out at $1 per head.
– There is a small cash problem and the farmer will need to borrow the purchase price of the lambs at 10% over February to July inclusive.
– The sales will then be able to cancel out the borrowings. What is your conclusion?