# 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.
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

Question 3.
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.
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
Weaner price \$2.70 per kilogram
Average weaner weight 200 kilograms
Health
Steers

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……………………..

revenue

Total
D……………………….

Net
gain

4
part B.

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

Question
5
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:
\$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

return

Equity
ratio

Return
total assets

Return
on equity

Question
6.
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

Question
7.
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

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

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
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.
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
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
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

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