Partial budget worksheet:

1. You are a retired landowner whose Conservation Reserve Program (CRP) contract for 100 acres will expire next year. You can renew your contract for another ten years and receive a payment of $130 per acre each year, but you wonder if it would be more profitable to put it into hay production and have it custom farmed.

Provisions:

a. Your expected yield if you grow hay is 5 tons per acre, and the long-run expected selling price is $100 per ton, at the farm.

b. Variable costs of production are about $120 per acre every 4 years to re-establish the seeding, plus fertilizer costs of $160 per acre each year.

c. You can hire a custom operator to harvest and store the hay crop for you for $30 per ton.

d. If you take the land out of the CRP program, you will no longer have to spend $800 per year to control weeds, but you will give up the $130 per acre annual payment from the USDA.

Find added income, added costs, reduced costs, and reduced income then compute the net change using A+B-C-D=net income and then comput the breakeven yield in tons per acre.

Proposed Change Let CRP contract expire and produce hay as a cash crop A. Added Income C. Added Costs B. Reduced Costs D. Reduced Income Net Change = A + B-C-D= pWot Corlk ehen gielbeta the two potenial tons per acre