Determining Profitability of Alternative Crops

Is the crop economically feasible (profitable)? The most comprehensive way to determine if an alternative crop is economically feasible is to complete an enterprise budget. The enterprise budget is a projection of the manager’s estimates, and is a tool to estimate net profit by estimating revenues and subtracting operating and ownership costs associated with a particular crop. To create an enterprise budget, data must be compiled and entered into four spreadsheets: 1) an investment summary to show all real property used in the enterprise, 2) establishment costs (for perennial crops to capitalize start-up losses), 3) costs and returns to show annual income and expenses, and 4) a monthly cash flow to show monthly income and expenses. By familiarizing producers with these documents, Extension personnel can assist producers in gaining knowledge of tools that can be applied to other operations and can also be useful in obtaining loans or other assistance.