Cost Benefit Analysis is essential for farm budgeting and planning enabling farmers to effectively compare and determine the profitability of various commodities; thereby creating an opportunity to identify and venture into farming as an enterprise based on current data. Cost Benefit Analysis, also known as Gross Margin Analysis is a tool for determining agricultural enterprises profitability by assessing the gross revenues from an enterprise less the variable costs incurred.
Such information aids a Farmer or Entrepreneur understand how to determine their crops and products mix depending on profitability(Market), input costs, land availability and labor intensity as some of the major cost drivers during the farming venture.
Plainly saying; It is important that (during Planning) before selecting an enterprise to venture into, you do a Cost Benefit Analysis to assess it’s Profitability as per the form you plan to market it in. For example Maize can be Marketed(Sold) as Grains, Fresh Cob, Flour, Pop Corns etc….Here’s how you could go about it!.
Case Maize Production:
| PROJECTED INCOME PER ACRE | |||||
| Sn | Form | Unit | Quantity | Price | INCOME |
| 1 | Grains | Kgs | 1,080 Kgs | 1,200/= | 1,296,000/= |
| 2 | Fresh Cobs | Pcs | 15,000 Pcs | 100/= | 1,500,000/= |
| 3 | Maize Flour | Kgs | 750 Kgs | 1,800/= | 1,350,000/= |
| 4 | Maize Bran | Kgs | 100 Kgs | 1,000/= | 100,000/= |
| PRODUCTION COSTS PER ACRE | |||||
| Particulars | COST | ||||
| 1 | Seed | 80,000/= | |||
| 2 | Pesticide | 50,000/= | |||
| 3 | Fertilizer | ||||
| DAP | 150,000/= | ||||
| NPK | 150,000/= | ||||
| 4 | Land Hiring | 100,000/= | |||
| 5 | Labour | ||||
| Bush Clearing | 80,000/= | ||||
| Land Opening | 120,000/= | ||||
| Harrowing | 80,000/= | ||||
| Planting | 100,000/= | ||||
| First Weeding | 80,000/= | ||||
| Second Weeding | 80,000/= | ||||
| Harvesting | 100,000/= | ||||
| Total Costs | 1,170,000/= | ||||
| Net Profit | |||||
| S/n | Form | Projected Income | Profit | ||
| 1 | Grains | 1,296,000/= | 126,000/= | ||
| 2 | Fresh Cobs | 1,500,000/= | 330,000/= | ||
| 3 | Maize Flour | 1,350,000/= | 280,000/= | ||
| 4 | Maize Bran | 100,000/= | |||
| These are Projections and are Case by Case so your findings may vary! This is a guide. |
