Tracking Production Expenses

A tool for crop selection and market evaluation

The goal is PROFIT !

• P = I – E• Profit = Income – Expenses• The big picture is an average of:

• P = I – E

• P = I – E• P = I – E

Estimating Income

• Don’t plant until you know your market• Talk to potential buyers about demand for

new products• Estimate farmers’ market weekly sales for

each crop or product• Put it together into a simple marketing

chart

Outlet: Saturday Farmers’ Market

Thursday Farmers’ Market

CSA Marin Organic

Berkeley Bowl

Bunched Greens

150 bunch/wk @ $1.50 X 30 weeks = 4500/$6750

100 bunch/wk @ $1.50 X 30 weeks = 3000/$4500

Total # bunches/Total Estimated $

Bunched Carrots

Salad mix

Oriental Eggplant ? ? ? ? ? ?

Total EstimatedSat FM Income

Total EstimatedThurs FM Income

Total EstimatedSales Income $

Estimating Production Expenses

• Production Operating Costs– Land preparation– Planting– Irrigation – Fertilization– Crop Protection– Support System – Pruning– Pest Management

Estimating Production Expenses

• Production Operating Costs, continued– Field Cleanup– Harvest– Post-harvest: clean, sort, pack – Packaging and labels– Equipment Operating Costs– Interest on Operating Capital

Estimating Production Expenses

• Cash Overhead (whole farm expenses)– Property Taxes– Insurance– Office Expense – Land Rent– Investment Repairs

• Non-Cash Overhead : depreciation

Production Operating Costs + Allocated Share of Overhead

(Whole Farm Costs)

= Total Crop Production Expenses

UC Cost of Production Studies

• Available for a variety of crops• A variety of regions, production scales• Some for organic production• Diversified crop study coming soon

• Some studies include excel spreadsheets for farmer self-entry and modification

• Studies chart profitability in relation to price and yield (Ranging Analysis)

• http://coststudies.ucdavis.edu/current.php

Estimating Marketable Yield

• Ask other growers• Ask your UC Cooperative Extension Farm

Advisor• Ask your supplier

• Check county agricultural commissioner’s annual crop reports

• http://www.cdfa.ca.gov/statistics/ to find average crop yields, 1998-2007

Estimated Wholesale Break-even

• Break-even yield– Number of marketable boxes per acre needed to pay

all costs = (total costs per acre)/(expected price per box)

– Break-even yield varies with price per box• Break-even price

– Price per box needed to pay all costs = (total cost per acre)/(expected number of marketable boxes per acre)

– Break-even price varies with yield per acre

After the Estimates

• Revise your marketing chart • Create a budget for each planned crop based on

your projected income and expenses– Budget land, inputs, labor – Include owners’ labor– University of Florida’s One hundred Foot Row

Budgets:• http://smallfarms.ifas.ufl.edu/planning_and_management/bud

gets.html

Recording Reality

• Create a crop journal for each crop – Record all inputs, activities and hours– Create a system for each worker to record time spent

on each crop• Some use pocket notebooks in the field

– Record yields, harvest dates, etc.• Keep a paper trail for every aspect of production,

not just finances• Check reality (from journal) against crop budget

and estimates

Planning for Profit

• Compare budget to reality for each crop• Evaluate new crops• Plan the next year with a little bit more

information