A widely used tool for evaluating the potential costs, revenues, and profit from crop production is the enterprise budget. Crop enterprise budgets are typically customized to local production conditions. The Ag Risk and Farm Management Library [1] provides links to a variety of enterprise budgets and most United States state agricultural extension services have sample crop budgets available [2]. Budgets for non-traditional crops may be more difficult to find and may be based on smaller samples of actual production data.

Each enterprise budget represents a single point on a profit function (Equation 15.2). A specified quantity of product and a specified quantity of each included input are multiplied by specified prices, respectively, and summed to obtain estimates of revenue, cost, and net returns to excluded inputs and profits. Most published enterprise budgets are not intended to predict costs, revenues and profit for each or any producer. Instead, they are intended as a somewhat typical guideline and as a starting point for use by producers to adapt to their own production and market conditions. Enterprise budgets may embody generally recommended practices and input levels to produce the optimal yield of a selected crop in a selected location for a specific year or season. Farms vary widely in terms of area farmed, topography, soil type, crop mix, machinery complement (age, capacity, equipment type), labor availability, managerial expertise, weather and other factors. Management decisions are likely to deviate from initial plans as weather, markets, and other variables deviate from “normal” during the growing period. Lazarus [3] provides an example of an enterprise budget for a single season crop: corn for grain and for corn stover.

Several characteristics of enterprise budgets are notable. The revenue section of the budget lists each of the products of the crop that generate revenue, such as grain and stover. The cost section of the budget lists each input with quantities, prices, and cost. The cost section may separate costs of single use inputs (seed, fertilizer, chemicals, custom services, etc.) from costs of owning machinery and equipment and from costs of labor, management, and land. The single use inputs are typically cash expenses for farmers while the other inputs may be owned and contributed, shared with other crops, financed with borrowed money, or residual claimants on net revenue. The net returns section of the budget lists the balance after costs have been subtracted from revenue. Net returns equates to profit if all costs have been subtracted or it may represent a net return to inputs that have not been included as costs: typically management and land. In order to facilitate analysis of profit maximizing decisions, enterprise budgets should accurately portray the quantity and price or value of each product and of each input used to produce the crop.

Olson [4] provides a thorough overview of farm management issues and methods.

15.1.1 Stover as a Co-Product of Corn Grain

Cellulosic energy crops can be categorized as co-products or dedicated crops and as single season (e. g. corn) or perennial (e. g. switchgrass) or multiseason crops (e. g. trees). Corn stover is a single season, co-product crop. The revenue from a co-product must meet two conditions for economic feasibility. Firstly, the sum of revenues from all co-products of the crop must exceed the sum of costs of production. Secondly, the revenue from each co-product must exceed the additional costs of producing that co-product. In the example from Lazarus [3], the revenues from stover as a co-product of corn grain are $126 per acre (at $70 per ton) and marginal costs are $89 per acre, including $33 for fertilizer, $41 for machinery with labor, and $14 for transport, generating a net return of $37 per acre. The addition of a profitable co-product can increase the profitability and competitiveness of an existing crop.