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percent of American households operate without a detailed, accurate written outline of income and expenses (a budget). By failing to plan, we are planning to fail, and there will always be “too much month left at the end of the money”.

Everyone needs a written budget. Creating a budget guards you from being blindsided by an unexpected expense or a forgotten bill. It also serves as a tangible reminder that you cannot afford to take out another loan or you do need to eat leftover spaghetti tonight rather than eating out at the local restaurant.

Budgets are constricting at first, but after a time they actually provide greater freedom. A correctly prepared budget is not a form of torture. On the contrary a proper, simple, written plan will actually give you more free time, and the money with which to enjoy it. Budgets can help build your confidence.

Sometimes it is said that management is not important on small farms. This notion is widely prevalent under those situations where the farms operate on a low level of technology. In the case of small farms, farm organization cannot be changed as much as on a large farm, but the choice in respect of farm practices and methods of production, cropping intensity, etc. offer worthwhile alternatives. Japan's method of improving agriculture based on the principles of farm management clearly demonstrates that a small farm by itself should not be a hindrance to increased production and higher income. Small farms may have different problems, but the principles of the efficient use of available resources to obtain the maximum economic returns and family satisfaction remain the same in both the cases. The principles of farm management, since they deal with the allocation of resources, apply to small and large farms equally.

Farm planning means taking decisions in advance. It stimulates thinking, broadens understanding and challenges the farmer to move forward. It is a forwardlooking approach.

The farm plan helps a farmer to decide how to combine new ideas and old ones to his best advantage. By identifying his credit and supply needs, the farm plan helps him to arrange for the timely supplies of credit, seeds, fertilizers, etc. A specific farm plan setting fort his expected output, expenses and income, serves as a sound basis on which a credit institution can give him production credit, based on his productive capability

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rather than on his net financial assets. It is out of his income and not through the sale of assets that the cultivator has to pay off his loan. Thus the farm plan or the budget is to the farmer what the blueprint of the architect is to a building contractor. It shows what is to be done and how it is to be done. It furnishes an organized and logical approach to his problems and helps him to work out the solution.

Several basic budgets are available to help managers in the decision-making process. Each budget is specific in its application, but each uses the same principles.

The whole-farm or ranch budget is a detailed listing of resources of the entire business, along with a plan to use these resources to achieve long-term goals. The whole-farm or ranch budget sets the direction the business will take and helps the manager achieve long-term goals.

The enterprise budget is a physical and financial plan for a specific crop or livestock enterprise. The enterprise budget estimates expenses and receipts for a specified period of time using a specified set of production practices. Colorado State University has developed representative enterprise budgets for the major crop and livestock enterprises in the state. These budgets are available to producers and can be used as a basis of major budgeting and planning procedures.

The enterprise budgets are the input-output relationship for individual enterprises. An enterprise budget includes all the variable resources required per unit (a hectare/animal/tree, etc.) of an enterprise and its cost, the expected output, gross returns, etc. Enterprise budgets provide useful information regarding the resources requirements and the relative profitability of different enterprises. Thus these budgets, considered in the framework of farm resources, are the alternatives from among which the most profitable ones are to be selected. In this context, the enterprise budgets need to be prepared at different levels of technology, as (a) the existing level of technology; and (b) the improved or recommended level of technology.

A comparison of the enterprise budgets at the existing and improved levels of technology provides the scope or the potential of making farm improvements. The enterprise budgets lack in one important aspect that these do not consider the complementary and supplementary relationships amongst themselves which are quite

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common among farm enterprises at low level of production, but they simply assume to be competitive to one another right from the beginning. But these relationships are taken care of in complete planning and budgeting.

Another kind of budget, the partial budget, helps the manager evaluate the economic effect of minor adjustments in some portion of the business. Many aspects of business are fixed, in the short run. Partial budget can evaluate changes in resource uses that are not fixed.

Many changes that do not require a complete reorganization are possible on a farm or ranch. Given a fixed set of resources, the manager can employ these resources in more than one way in response to changes in product price levels, cropping patterns or carrying capacity.

The typical partial budget usually consists of a seven-point plan. The seven components are additional costs, reduced returns, reduced costs, additional returns, totals of the first two and the second two, and a net difference.

The difference between positive and negative economic effects is an estimate of the net effect of making the proposed change. A positive difference indicates the potential increase in net returns if the change is made. Conversely, a negative difference is an estimate of the reduction in net returns if the change is adopted. Look at the Table 1 that illustrates how a partial budget can be used to analyze the decision to purchase replacements for a cow-calf herd rather than raise them. Analyze the table and suggest if the change profitable.

Additional returns			Additional costs
Sell raised heifer calf: 500 lb. @	$6 000		Purchase bred heifer	$1,200
$1.20
Reduced costs			Reduced returns
Pasture maintenance	$20
Grain fed	$40
Supplement and mineral	$45		None	0
Hay fed	$120
Health, utilities and other costs	$25
Labor	$50
Subtotal	$930		Subtotal	$1,200
Net change
Table 1. The sample partial budget

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The cash flow budget is an estimate of all cash receipts and all cash expenditures that are expected to occur during a certain time period. Estimates can be made monthly, bimonthly or quarterly, and can include nonfarm income and expenditures as well as farm items. Cash flow budgeting looks only at money movement, not at net income or profitability.

A cash flow budget is a useful management tool because it:

forces you to think through your farming plans for the year,

tests your farming plans, such as if you will produce enough income to meet all your cash needs,

projects how much operating credit you will need and when,

projects when loans can be repaid,

provides a guide against which you can compare your actual cash flows,

helps you communicate your farming plans and credit needs to your lender.

A cash flow budget only indicates whether or not the farm business will produce enough cash income to meet all demands for cash. It does not estimate net income or profit. Remember that net farm income also includes non-cash items such as depreciation and changes in crop and livestock inventories, and that net farm income can be positive even when net cash flow is negative.

A cash flow budget also can be very helpful in evaluating major capital investments or changes in the farm business. Examples are purchasing land, building new hog facilities, or expanding a beef cow herd. Often it will be necessary to develop two budgets: one for a typical business year after the investment or change in the business is complete, and one for the intermediate or transition period.

For example, suppose a beef cow-calf producer decides to expand the herd by holding back heifer calves. The expenses will increase because there will be more cattle in the herd, but income will be reduced temporarily because fewer heifer calves will be sold.

1.Answer the following questions:

1)What is a budget?

2)Why is farm plan necessary for a farmer?

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3)What kinds of budget are mentioned in this text? What are the differences between them?

4)What resources does the enterprise budget include?

5)What seven components does the typical partial budget consist of?

6)Why is a cash flow budget so useful and important?

2.Fill the blanks according to the text:

1)______ also serves as tangible reminder for you.

2)A proper simple written budget will give you more ____ .

3)The principles of _____ apply to small and large farms equally.

4)Farm planning means taking decision in ___ .

5)A specific farm plan serves as a basis on which ____ can give a farm production credit.

6)Several basic budgets help managers in ____ process.

7)The whole-farm budget helps achieve ____ goals.

8)The enterprise budget is a physical and financial plan for_____ enterprise.

9)____ helps the manager evaluate the economic effect of minor adjustments.

10)A positive difference indicate the potential incomes ____ if the change is made.

11)Cash flow budgeting looks only at ____ movement.

3.Give the definitions of the following terms:

Budget, confidence, cropping intensity, credit institution, blueprint, profitability, to evaluate, cash expenditure, depreciation.

4.Find the correct English translation of the Russian economic terms:

травма, благосостояние, коллеги, корректировка, наличные средства,

консультант, остаток, переговоры, установка.

VI. Look through the text. Translate the words in bold type and give their

definitions. Explain the title of the text.

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Text III. Retiring as a millionaire

Is it possible for an agribusiness manager or worker to retire as a millionaire? It is very possible. Although nothing in life is guaranteed, things certainly will not happen unless you make them happen. If you think you can, you can. If you think you cannot, you cannot. Either way, you are correct. Your attitude determines your altitude. The concept of the four following plans hinges on a 12 percent interest rate.

A farmer does not simply plant a seed and let it grow hoping for an abundant harvest. He or she has to work on it. Depending on their cropping method and the region of the country the crop has to be cultivated, fertilized, sprayed for pesticides, and watered either naturally or by irrigation. The same is true for dairy and livestock animals. Monthly, weekly—and for dairy, daily—care has to be taken. The same is true with the retirement plans. They have to be worked at. You do not simply start something and let it grow without nurturing it. Knowledge of the following factors will help you reach the millionaire retirement goal.

Every plan is simply a mathematical process based on a 12 percent return on your investments. It is an achievable production goal. Ten pigs per litter, 100 bushels of corn per acre, and 18,000 pounds of milk per cow are viable production goals. They are challenges, but they can be achieved, just as the 12 percent interest can be achieved. It may not be achieved every year, but including very good and very bad years, this is our goal.

For a person who is able to save $2,000 per year for forty-three years a 1 percent increase in the interest rate would amount to S316,946.

There are many types of investment strategies. However, we believe the novice investor will also select mutual funds.

Mutual funds were invented to provide investment expertise for ordinary people. A mutual fund company makes investments solely on behalf of others. All the profits (or losses) go to the fund's shareholders. In existence in the United States since 1924, there are over 3,400 different mutual funds holding over $2 trillion for about 70 million shareholders. This amount rises yearly.

What you get from a mutual fund, at a relatively low cost, is professional management of your money by people who devote their full time and attention to

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investment decisions. Even a professional sometimes gets poor results, but the average fund does better than you probably can do for yourself, according to studies by Marshall Blume, chairman of the finance department at the University of Pennsylvania's Wharton School. With a mutual fund, you get a portfolio that usually consists of fifty or more stocks or other securities.

The term risk management means the use of various ways to deal with potential personal or financial loss. To practice risk management means that an individual acknowledges the existence of potential losses and their magnitudes, and uses various methods to control them. Even though mutual funds are more risky than some investments, they are less risky than others. In reality, mutual funds involve risk management since so many different stocks and securities are managed by a professional financial team. Even then, do not forget the old saying, "Nothing in life is guaranteed except death and taxes."

There are several types of investment, from low-risk bank savings (CDs) to high-risk commodities. Of course, stocks are also risky. Mark Twain summed it up well when he said, "October. This is one of the peculiarly dangerous months in which to speculate in stocks—the others are July, January, September, April, November, May, March, June, December, August, and February”. Mutuals are inbetween in risk.

The mentioned retirement plans are tax-deferred savings plans. Tax-deferred savings allow an individual to postpone taxes while building an investment. Examples of tax-deferred savings include Individual Retirement Accounts (IRAs), available to everyone who has earned income and contributions limited to $2,000 per year; 401(k) tax-sheltered plans, which are available to government employees and the self-employed; and 403(b) tax-sheltered plans, which are available to teachers and hospital employees. Contributions are allowed for a percentage of your income. In some situations, you can put up to 20 percent of your income into a 403(b). A relatively new IRA is the Roth IRA. With the Roth IRA, tax is paid on the front end, but neither the gains nor the amount you withdraw is fixed. Withdrawals from such plans are designed to occur at retirement. As you withdraw your money, you pay taxes on your withdrawals according to your tax bracket. Actually, you can get it

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anytime, but you will pay taxes and heavy penalties on money withdrawn from these

plans prior to age 59.

1.Answer the following questions:

1)How do you understand the phrase:” Nothing in life is guaranteed except death and taxes.”

2)What were mutual funds invented for?

3)What are the advantages of mutual funds?

4)What does the term “risk management” mean?

5)What is the purpose of tax-deferred savings? Provide their examples.

2.Explain the following numbers from this text: 18,000; $2000; 43; 3,400; 70 million; 50; 20%.

3.Write a short essay on the topic “Your attitude determines your altitude”.

4.Write down the annotation of this text.

VII. Write down the keywords. Make an English summary of the text.

Text IV. Составление бюджета

Искусство составления бюджета сельхозпредприятия заключается в том,

что основные статьи расходов и поступлений должны быть учтены, но не расписаны до деталей. Оптимальный вариант – когда бюджет и прогнозный баланс состоят из 12–13 статей. В бюджете должны быть отражены основные статьи поступлений и расходов – такие как семена, СЗР, удобрения, ГСМ,

заработная плата, запасные части, СЗЖ, корма, аренда ОС, услуги сторонних организаций, общехозяйственные расходы, налоги и прочее. Их лучше расписать как поступления от растениеводства, животноводства, коммерческой уборки и т. д. Расписывая расходы, чаще всего забывают о расходах на средства защиты животных (СЗЖ). Прогнозный баланс строится на основе бюджета по обобщенным статьям: денежные средства, дебиторская и кредиторская задолженности, авансы, основные средства, собственные средства.

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Прогноз лучше всего делать на месяц, такой прогноз не будет сковывать действия менеджмента компании. Можно, конечно, спланировать и на год вперед, но в планах на год должно быть отражено общее направление движения компании, т. е. затратная часть из расчета поступлений от реализации продукции с разбивкой по основным статьям затрат. По такому плану удобно отследить, чтобы не было существенных перерасходов денежных средств за плановые периоды. При планировании производственных показателей нужно быть пессимистом, так как никто не застрахован от плохой погоды и вероятность исполнения бюджета не может превышать 70%, но особенно нужно быть пессимистом при прогнозе цены и объема продукции.

Нет смысла в плане расписывать до наименований, например, средства защиты растений, потому что в любой момент один препарат может быть заменен другим, то же касается содержания и использования основных производственных средств. Главное – правильно оценить общие затраты по каждой статье, а не стремиться разложить их до последней составляющей, да еще в разрезе различных производств. Например, в машинно-тракторном парке хозяйства 10 тракторов (помимо другого транспорта), трактора можно учесть как в растениеводстве, так и в животноводстве и во вспомогательном производстве. Но это нерационально, важно оценить затраты на поддержание работоспособности всех 10 тракторов независимо от того, где они задействованы. Затраты расписывать до конкретных наименований запчастей на конкретный трактор неразумно, так как нельзя предвидеть, что сломается в этом сезоне. Просто нужно уложиться в существующий лимит затрат на все 10

тракторов или попытаться сэкономить. Бюджеты, расписанные с мельчайшими подробностями, исполняются в лучшем случае на 20–30%. И самое главное – при такой детализации теряется смысл составления бюджета, так как контроль его исполнения практически невозможен.

Есть смысл составлять прогнозный бюджет, чтобы его выполнять, но ориентироваться нужно на конечный финансовый результат, а не на план затрат. И если ситуация кардинально изменилась, то нужно быть готовым от чего-то отказаться.

VIII. Prepare the presentation on the state of agribusiness in Russia.

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UNIT 5

FARM COSTS

I.Find the translation of the given words. Write them down.

"as-is" value	fixed costs	market value	rollover purchase
advance payment	installment	medicare tax	salvage value
annuities	lease	mortgage	self-employment tax
custom hire	lessee	obsolescence	trade-in
dependent	lessor	operating costs	variable expenses
depreciation	list price	productive assets	warranty
economic life	machine life	property tax	wear
income tax	maintenance	purchase price	with holding allowance
FICA tax	marginal tax rate system	remaining value

II.Comment on the Figure 1 and make assumptions of the most important

farm costs.

Figure 1. Missouri budget for irrigated corn

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