Principles of Partial Budgeting Partial budgets estimate the economic effect of minor adjustments in some part of the farm business. With partial budgeting, the manager assumes that many aspects of the business are fixed in the short-term. He or she uses partial budgets to evaluate changes in resources that are not fixed. The net economic effect of a change will be the sum of the positive economic effects minus the sum of the negative effects. The decision is made around March 1 and is based on expected yields and prices of wheat and stockers.
Prices are a main determinant in the decision and are estimated for the future.
By combining known figures with estimates of future yields and prices, the farm manager can compare alternative plans of action for profitability. The data on prices and yields are based on representative budgets for wheat and stockers for northwestern Oklahoma. Listed below are price and yield estimates for the applicable period. This budget is prepared on a per-head basis with a stocking rate, for an additional 60 days, of one steer per acre of wheat. These categories are used to estimate the effects of a proposed change in business organization.