Agricultural Consulting Procedures (AAC2)
From engagement to deliverable
AAC2 covers the process: intake, data collection, analysis, verification, and reporting. Strong answers show a repeatable procedure rather than intuition.
Concepts to master
- Engagement letter elements: parties, purpose, scope, assumptions, fee basis, schedule, confidentiality, and limits of liability.
- Data hierarchy: audited financials > internally prepared statements > producer estimates. Prefer multiple years (typically 3–5) to see trends.
- Enterprise analysis: whole-farm vs. enterprise budgets; allocating shared costs (machinery, labor, overhead) on defensible drivers such as acres, hours, or revenue.
- Partial budgeting: four boxes - added returns, reduced costs, added costs, reduced returns. Useful for "should I change this practice?" questions.
- Break-even and sensitivity: compute break-even yield or price, then stress the key variable.
- Verification: reconcile acreage to FSA records, cross-check yield to scale tickets or crop insurance, confirm debt to lender statements.
Traps in questions
- Confusing cash flow with profitability (principal payments and depreciation).
- Ignoring opportunity cost of family labor, land, or equity.
- Using a single year of data to justify a multi-year decision.
- Treating enterprise results as if shared costs were free.
Rule of thumb
State the assumption, show the math, then test what happens if the assumption is 20% wrong.
Worked example
A producer asks whether to add a second commodity. Build the enterprise budget with only avoidable costs, allocate shared machinery by field hours, compute break-even yield at the forward contract price, and run a sensitivity at ±20% yield. Present the result as a range, not a single number.