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Agricultural Microeconomics Lesson 1: Unit Overview

Agricultural Microeconomics Lesson 1: Unit Overview. This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution- NonCommercial - ShareAlike 3.0 Unported License.

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Agricultural Microeconomics Lesson 1: Unit Overview

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  1. Agricultural MicroeconomicsLesson 1: Unit Overview This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

  2. The Future of Farming “Innovations that are guided by smallholder farmers, adapted to local circumstances, and sustainable for the economy and environment will be necessary to ensure food security in the future.” ~ Bill Gates

  3. Overview of Unit • Week One – Learn the basics • The economics of running a small farm • Week Two – Analyze an innovation • Developing a financial analysis spreadsheet model • Week Three – Putting it all together • Developing a business case • Week Four – Class Presentations

  4. Week One: The Basics • Piedmont Farm case study – A grass-fed beef operation • Revenue and pricing considerations • Cost and expense considerations • Government subsidies • Tax incentives • Financing options

  5. Week Two: Financial Analysis • Cost / benefit analysis of a new innovation. • Computer spreadsheet modeling • Cash flow analysis • Price sensitivity analysis • Investment analysis • Advanced spreadsheet modeling (graphing and other tools)

  6. Week Three: Business Case • The importance of a business case • Elements of a successful business case • Preparation of a business case • Economic and financial analysis • Presentation of a sample business case to class

  7. Piedmont Farm • 150 acre grass-fed beef farm in central North Carolina • 75 head of cattle • Holistic and sustainable management of land • Family owned and operated

  8. Discussion Question #1 Market price sensitivity – What happens to the retail price of beef if Piedmont Farm increases the price per pound sold to grocery stores? How might customers react to the change in price?

  9. Discussion Question #2 Changes in Supply - If more grass-fed beef is available from other farms, what happens to Piedmont Farm’s revenue? What might the owners do to reduce the impact to Piedmont farm?

  10. Discussion Question #3 Competition - How do Piedmont Farm’s prices compare with what you can find in a conventional grocery store? If the farm’s prices increase, will it still have the same amount of revenue (in other words, would it still sell the same amount of beef?). Why or why not?

  11. Discussion Question #4 Type of Operation – What might happen if the farm went back to traditional grain-fed beef in the winter months? What would this do to the farm’s revenue from the sale of beef? What would happen to costs?

  12. Discussion Question #5 Scale of Operation – What happens to the farm’s operating costs if it increases the number of cattle on the ranch? How much more acreage does it need? How much more hay? How much more labor?

  13. Discussion Question #6 Fixed Costs – What happens if the farm’s sales (revenue) decrease? Which expenses can it change?

  14. Discussion Question #7 Owner’s Salary – Is the net farm income enough to cover the owner’s salary? Why or why not? How would you make changes?

  15. Discussion Question #8 New Equipment – What would happen if the farm needed to replace a piece of farm equipment? What would you do to cover the costs of this new expense?

  16. Next Class: Pricing and Revenue Considerations This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

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