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Free Content A comparison of whole farm budgets versus farm accounts and suggestions for future planning of farm expansion and economic management

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For the farming family, planners, banks and other lending institutions it is crucial to know how reliable whole- farm budgets are, and what the pitfalls are. We explore how well whole- farm budgets match with the accounts in the first years after investment in a new cowshed. We explain what causes the discrepancies and suggest how budgeting can be improved. We follow a panel of 36 dairy farms in Norway over a period of three to five years. All farms have undertaken large investments in cowsheds. We merge the interview data with a database on herd data, whole- farm budgets and accounts data. There are significant discrepancies between whole- farm budgets and accounts, particularly when it comes to fixed costs, investments and debt. Milk production well beyond budgets, deviation from estimated building cost, unplanned investments and poor budgeting practices are some of the reasons for the discrepancies. Farmers struggle with transition problems when the new cowshed is put into use. Recommendations to improve the process of farm expansion and managing the economy after the expansion are provided.
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Keywords: beyond budgeting; dairy farming; farm expansion; fixed costs; transition problems

Document Type: Research Article

Publication date: September 1, 2017

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