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

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 $1.50 X 30 weeks = 4500/$ $1.50 X 30 weeks = 3000/$4500 Total # bunches/ Total Estimated $ Bunched Carrots Salad mix Oriental Eggplant ?????? Total Estimated Sat FM Income Total Estimated Thurs FM Income Total Estimated Sales 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)

Estimating Marketable Yield Ask other growers Ask your UC Cooperative Extension Farm Advisor Ask your supplier Check county agricultural commissioner’s annual crop reports to find average crop yields, http://

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: gets.htmlhttp://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