# The normal calving percentage is 80 per cent

EXAMINATION

PAST PAPERS QUESTION FOR ECON223

Question

1.

A farmer has 200-cow

self-replacing herd. The normal calving percentage is 80 per cent. The

mortality rate is 5 per cent on all animals. Male calves are sold as weaners.

Twenty (20) cull cows are sold each year. The farmer wants you to work out how

many heifers to carry through the system so that he can replace the cull cows.

Complete the livestock reconciliation

statement below and report the number of replacement heifers that the farmer

requires here.

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Category

of livestock

Start

of year

purchases

Transfer

in

births

Total

sources

No.

No.

No.

from

No.

No.

Cows

Repl.

Heifers

Weaner

heifers

Weaner

steers

calves

total

Category

of livestock

deaths

Transfers

out

sales

End

of year

Total

uses

No.

No.

To

No.

No

No

Cows

Repl.

Heifers

Weaner

heifers

Weaner

steer

Calves

total

Question 2.

Place your answers in the table

provided.

Produce a Gross Margin budget using the

following information.

The farm has 105 cows in a steady state herd;

however, a number of heifers are purchased from outside the farm each year to

add to genetic diversity. The farm sells 33 heifers each year for $250 per

head. The farm owns five bulls.

Each year 10 heifers are bought for $280

per head. One bull is purchased for $1500 to replace the one old one that was

sold for $800. Seventeen cull cows are sold for $320 per head and 43 steers are

sold for $270 per head. Animal treatments occur in May and September at the

rate of $2.50 per treatment per cow and $3.20 per bull. The cost of treating

the 90 calves is half of the amount for cows. Other variable costs are $12 per

cow.

Supplementary feed is valued at $160 per

tonne for 25 tonnes each year. Marketing and transport costs $5 per head and

this is only charged on animals sold from the farm. Industry levies are $4 per

head per year for each animal sold.

Rates and insurance cost $1,200 per

year. The interest cost is 7 per cent per annum. Management labour is $4,000

per year and casual labour for this activity is $1,500. Depreciation on pumps

and irrigation equipment is $115 per year. The vet fees are $600 on average

each year.

Income

Expenses

Gross

Margin

Gross

Margin per head

Question 3.

Place your answers in the table

provided.

Complete the table below for a feed

price of $380 per tonne and a weaner price of $1.10 per kilogram. Indicate the

optimal range of feed use. State how you would choose the optimal range.

Input

Feed Kg/hd

Output

weaner kg/hd

Cost $/hd

Revenue $/hd

Net income

$/hd

Marginal input

cost (MIC)

Value of

marginal product (VMP)

360

140

370

152

380

160

390

165

400

168

410

170

420

171

Describe

how you would choose the optimal range here.

Question 4.

Place your answers in the table provided

at the end of the question

Develop a partial budget for a change in

weaner cattle production.

This question has two parts (Parts A and

B).

Proposed change: Replace a 90 cow herd

producing 39 steers and 40 heifers to be sold at 18 months with a 85 cow herd

producing 74 weaners for sale at 9 months. Assume that one bull will be sold.

Information

Steer price $380 per head

Heifer price $410 per head

Weaner price $2.70 per kilogram

Average weaner weight 200 kilograms

Bull $3750 per head

Cows $520 per head

Health

Weaners $15 per head

Heifers $18 per head

Steers

$17 per head

Feed

costs

Cows $80 per head per year

Heifers $65 per head per year

Steers $62 per head per year

Bulls $110 per head per year

Weaners $45 per head per year

Labour $60 per head (all age groups)

Interest rate 8 % per annum

4.

Part A.

Complete the partial budget for the

change in enterprise and show the profit/loss expected as a result of the

change. Use the gains and losses table provided.

Losses

Gains

Extra

costs

Total

A………………

Costs

save

Total

B………………

Revenue

forgone

Total

C……………………..

Additional

revenue

Total

D……………………….

Net

gain

4

part B.

Calculate

the break-even weight for weaners. Show your calculations here.

Question

5

Place your answers in the table provided

at the end of the question

A farmer expects to have three

activities on her property over the coming year with the following total gross

margins (TGMs):

Yearling – expected TGM $55,500

Merino ewes- expected TGM $ 23,000

Barley – expected TGM $ 17,000

She also expects to obtain $4,200 for helping

a neighbour with shed hand duties during shearing and $2,000 for part-time work

at a restaurant on Fridays and Saturdays.

Expenses for the year are expected to be

as follows:

Administration

$2,500

Permanent

labour $20,000

Fuel

and oil

$3,000

Repairs

and maintenance on machinery and structure

$2,200

Rates $1,000

Interest

$12,000

The

value of her labour

$35,000

Opening and closing values for assets

and liabilities are:

Assets opening closing

Land and improvement $400,000 $450,000

Livestock

$80,000 $80,000

Plant and machinery $40,000 $36,000

Other assets

$4,000

$4,000

Liabilities

Long term loan

$200,000 $180,000

Other liabilities

$25,000 $0

Using the information above, calculate

the following measures of farm performance and state what they mean (i.e.

meaning: return to management for their own and the bank’s capital investment):

Measure

Value

($)

or (%)

Meaning

Net

farm income

Operating

return

Business

return

Equity

ratio

Return

total assets

Return

on equity

Question

6.

Place your answers in the table provided

at the end of the question

1. Use the following table to produce a

risk efficient frontier below. Clearly label each axis. (7/20)

2. Identify the stocking rate that you

would suggest to a risk averse farmer. (3/20)

3. Explain why you would recommend this

stocking rate. (5/20)

4. Indicate the most appropriate

stocking rate for a risk-neutral farmer. (5/20)

Stocking

rate

Gross

margin

Standard

deviation

1

22

2

2

32

7

3

43

12

4

52

18

5

63

24

6

67

30

7

68

37

8

69

42

9

67

50

Explain

your answers here:

Question

7.

Place your answers in the table provided

at the end of the question

A producer has 380 ha of cropping land.

He is faced with the problem of what summer crop to grow in this area. The two

crops he feels are worth considering are sorghum and sunflowers. He considers

two factors (events) are beyond his control. These factors are rainfall and

commodity prices.

Rainfall Conditions

He assesses that the probability of good

rainfall is 0.6 and the probability of bad rainfall is 0.4. If the rainfall is

bad, he also has to consider a harvest/do not harvest decision. The cost of

harvesting both crops irrespective of yield is $40/ha. The crops have no value

to the producer if they are not harvested.

Sale

Prices

The probabilities of good and bad prices

for both crops are set out below:

probabilities

Price

per tone

Sorghum sunflowers

sorghum sunflowers

Good

price

0.7 0.6

$160 $380

Bad

price

0.3 0.4

$110 $240

Costs

of Cropping

The costs of cropping (includes

cultivation, seed, fertiliser and sprays but excludes harvesting) are estimated

as:

crop

Cost/ha

sorghum

$120

sunflowers

$140

Yields

The farmer estimates the following yield

variation given rainfall conditions:

Rainfall

conditions

Yield

(tonnes/ha)

Sorghum sunflowers

Good

bad

2.8 1.9

2.1 0.8

Assume you are a consultant to the

producer with the problem of choosing which crop to grow and that you know the

producer is risk preferring. Use a decision tree diagram to choose whether

Sorghum or Sunflower should be planted. Briefly explain your conclusion to the

producer.

A) Decision

Tree

B) Decision

tree

Question

8

Place your answers

in the table provided at the end of the question

Linear

Programming

Complete the

linear programming matrix at the end of the question with the appropriate

coefficients and signs for the following information

Labour

Requirements steers ewes lambs oats

turnips barleys millet

Winter

(hrs) 1.22 0.20 0.12 0.30 0.10 1.00 0.70

Spring

(hrs) 1.20 0.30 0.15 0.20 0.30 0.80 1.10

Summer

(hrs) 1.12 0.20 0.13 0.30 1.30 1.30 1.50

Autumn

(hrs) 1.14 0.40 0.30 0.20 0.20 0.20

Feed

demand

steers

ewes

lambs

Winter (kg) 900 192 36

Spring (kg) 800 190 57

Summer (kg) 830 190 95

Autumn (kg) 790 200

Feed supply oats turnips barley millet

Winter (kg) 840 110 460

Spring (kg) 280 580 500

Summer (kg) 675 175 2700

Autumn (kg) 470 163

Gross

margins steers ewes lambs oats turnips barley millet

$ 74.05 23.20 54.32 -43.45 -48.36 -39.60 -36.74

The manager has

800 hours of family labour available in summer, autumn and winter; however, in

spring only 750 hours is available. In the district casual labour is worth $14

per hour.

Tasks

1.Fill in the

tableau with the values from the above information: be sure to include the

correct signs, gross margins and supply values. You are not required to

complete a demand column.

2.Complete the constraints for a 2-year crop

rotation between oats and barley in the homestead paddock (300 ha).

3.Complete the constraint for turnip and

millet production in the South Hill paddock (200ha).

4.Complete the constraint for a maximum

of 40 steers.

5.Complete the constraint for a 75 per cent

lambing ratio.

6.Complete the constraint for a minimum

200 head of sheep.

7.Show how a maximum of 5 tonnes of feed wheat

could be made available in winter at $160 per tonne.

Question

9

Place

your answers in the table provided at the end of the question

Cash Flow Budgeting

Using the following information complete the

cash flow budget for the months of January, February and March. Be sure to

include GST in the rows provided. GST at the end of December 2006 was negative

$2500. The cumulative balance in December was $20,234.

Month

Jan

Feb

Mar

Income

Steers

$35,000

Wheat

sales

$82,500

Salary for

silo work

$2,000

$2,000

$2,000

Expenses

Replacement

bull

$1,600

Animal

health

$206

Calf

transfers

$3,300

Chemical

$8,320

Rates

$1,300

Fuel

and oil

$12,850

School

fees

$2,800

telephone

$300

wages

$2,689

$2,689

$2,689

electricity

$400

Fencing

materials

$5,000

R

& M machinery

$550

$550

$550

stationary

$7

$7

$7

R

& M building

$142

$142

$142

Bank

chargers

$130

Cash

flow budget 6006 -2007

Dec-06

Jan-07

Feb-07

Mar-07

income

GST

Total income

expenses

GST

GST Liability

Net cash flow

Cumulative

balance