Enhancing On-Line Agribusiness Instruction through the use of Spreadsheet Based Feasibility Templates

Phil Kenkel and Rodney HolcombOklahoma State University

WERA 72 Annual Meeting ‐June 30th – July 1st, 2014Santa Clara, California

On-Line Courses

• New opportunities in efficiency, flexibility and delivery

• Opportunity to expand the student pool• In some studies on-line students out

performed their peers in face-to-face classes• Creates new challenges in communicating and

interacting with students

Specialized Courses Create Additional Challenges

• Cooperative Class: challenge of explaining the complex financial model and the inter-related decisions involving profit distribution, cooperative cash flow and owners return

• Bio-energy- economic issues with various platforms, incentives and sustainability issues

• Capstone class- intensive investigation of a realistic agribusiness example

Individual and Group Projects in On-line Courses

• Integrates concepts and adds experiential learning

• One example is feasibility assessment– Market analysis– Input output relationships– Capital structure– Pro forma financial statements– Plant and equipment cost estimation– Project appraisal techniques

Challenges of Projects in On-line Courses

• Initiating the project early in the semester• Guiding the students through complex skills

sets• Identifying problems/questions and

responding• Communicating missing components, data or

structures

Spreadsheet Based Feasibility Templates

• Developed at Oklahoma State for extension purposes to facilitate and supplement feasibility studies

• Provide a complete set of pro-forma financial statements and return on investment analysis

• Greatly reduce time in project analysis and ensure that financial projections are internally consistent

Examples of Feasibility Templates

• Alfalfa dehydration• Biodiesel production• Cotton ginning• Cellulosic ethanol • Commercial bakery• Flour mill • Beef packing plant• Multi-species meat processing plant• Machinery cooperative• Sweet sorghum ethanol • Winery

Basic Format

• Input page: price, volume, utilities, maintenance, insurance, taxes, capital structure, personnel benefit costs, etc.

• Equipment and facility page• Personnel page• Intermediate calculation pages• Income statement, cash flow, balance sheets• Return on investment and owners return

Control and Integrity of Format

• Password protected formulas for financial calculations

• Some conversion factors or investment-output relationships are fixed to prevent “blue sky” scenarios

• User has a wide variety of inputs and can do extensive sensitivity analysis

Integrating Templates into On-Line Courses

• On-line undergraduate cooperative course• On-line undergraduate capstone course• On-line Masters Bioenergy Feasibility and

Bioenergy Sustainability courses

Cooperative Course

• Template used in homework assignments covering financial statements, capital structure, profit distribution and taxation

• “Start Your Own Cooperative Project”• Allows the student to understand inter-related decisions

concerning cash patronage, qualified stock patronage, non-qualified stock patronage, unallocated reserves and equity revolvement

• Students see how profits are generated, retained, and distributed and how equity is created and returned.

• Understand the balancing act between the cooperative cash flow and the member’s return

Evolution of Cooperative Feasibility Template

• Generic template used in face-to-face class and instructor worked with teams to customize the template for their example

• Specialized templates developed for on-line class• Cattle feed yard, Equine sports medicine, Grain

elevator, Farm supply, Local food market, Multi-species slaughter, Student book store, Rural medical services, and Student housing

Success of Specialized Templates

• Structures built in to keep projects realistic– Cattle feed yard costs based on ration, feed

conversion and death loss– Retail cooperatives building cost related to sales

per square foot– Grain elevator and farm supply based on crop

acreage in market area and market share• Teams spent more time on cooperative

structure and decisions

Bioenergy

• Templates used to provide overview of feasibility factors for various platforms and the impact of price relationships and incentives

• Biodiesel-illustrates input-out price relationship and scale economies

• Cellulosic ethanol illustrates feedstock logistics cost

• Sweet sorghum ethanol can illustrate co-generation economics

Project Modeling Concepts

• Lang factor (ratio of total project cost to cost of major equipment)

• Happel method: detailed estimates of equipment cost, installation materials and labor, overhead, engineering and contingency costs all built off of major components and type of processing

Enabling Group Projects

• Less intimidating- students have a starting point and can organize what they need to do

• Instructor can stay abreast of project by reviewing intermediate versions of the template

• Students can organize interactions and share “in-progress” versions among the team members

• All of the team can work off the final version in preparing the written report

• Efficient for the instructor to review and grade

Summary

• On-line courses can be flexible, efficient and expand the student pool

• Integrating group or individual projects into an on-line class is challenging

• Feasibility templates have proved a successful tool for conveying specific concepts and as a vehicle to facilitate group projects

• The templates are available free of charge from Oklahoma State University