Variable costs are expenses that vary with the level of production, i.e. seed, fertilizer, feed, veterinary expenses, etc. Fixed costs are incurred regardless of the amount of output, i.e. ownership costs for machinery, land, improvements, etc. Enterprise budgets show the contribution to profits of each production activity. They allow us to compare the profitability of various agricultural enterprises. We will construct budgets representing intensively grazed cattle and compare them to crop costs and returns.
Pasture establishment is the first cost that comes to mind.
This expense can vary widely, depending on species being seeded and method of establishment. Water and fence costs are the two that many producers see as the biggest hurdles. Water costs will vary tremendously depending with each application. If no ponds or wells are available, and if a water district is not accessible, costs can be quite high. But if possible, water provided to every paddock is the ideal situation.