Summary and Implications
Stochastic budget analysis compares diversified hog and grain operations to a specialized cash grain operation based on fixed labor resource. Benefits to diversified farms include decreased fertilizer costs due to manure application, shared machinery costs, and more stable grain price/cost assurances. As modeled manure application covers nearly all fertilizer requirements of the grain operation, greatly reducing fertilizer costs. The diversified operation is able to have dual-purpose tractors, enabling them to spread the tractor costs over more hours. Lastly, combining a grain and hog operation allows both enterprises to improve price assurance by treating the grain operation as a cost center. Grain is priced to the hogs at cost of production, thereby protecting the hog operation from volatility in the corn market. The risk reduction benefit of diversification is overshadowed when the 2002 Farm Bill is included in the analysis.
Iowa State University
Borts, Laura; May, Gary; and Lawrence, John D.
"Diversified versus Specialized Swine and Grain Operations,"
Animal Industry Report:
AS 650, ASL R1959.
Available at: http://lib.dr.iastate.edu/ans_air/vol650/iss1/118