The Power of Knowing Your Breakeven

Landon Friesen @landon707 on Twitter

• What is your cost of production?

o This isn’t unique to farming. It is important in all types of businesses.

 Coors light has to know what they have in each 12 pack otherwise they won’t be around to make more.

 Just like in our introduction…..If you aren’t farming for profit you won’t be farming for long

o If someone asked you break even how accurate will your answer be?

 Your number needs to be flexible and include all expenses supported by the farm. (family living)

 It will start off abstract or a wild ass guess

• Early predictions will be estimates as all parts can change

• Fuel, time, extra passes, interest hikes, sales, hired labor

 Change the information as it becomes fact is key. It will seem like less work throughout the year if you make more little changes rather than sitting down for hours. Especially during the busy growing season. Some of the top producers we talk with have scheduled time each week to focus on this part.

• After you lock in inputs

• After you make field passes

• After you make grain sales

 Make you more confident in your sales

• Early season sales are made to be above the rough target or sell into an overall profit model.

• Later in the processes you can be more accurate in recording the margins generated from sales

• Again, be careful chasing the peaks in the markets. Remember farmers never go out of business selling for a profit

 Will help with acquisition/expansion scenarios

• Time to upgrade combines?

• Should I rent that extra 160 acres?

• Can I buy the land from my land lord?

 Effects some of your costs of production

• your interest rates – detail pays

• Negotiations with land lords and sales people

• Summarize

o Having the knowledge of what your breakeven is can make you a more confident producer. Livestock to crops one really should know what they can sell the finished product for to cover expenses and make profit. This allows a producer to be more confident in making quick decisions which could result in higher levels of profit. Get detailed and keep it updated throughout the year. Don’t be afraid to share it with others to help catch areas that may be overlooked.

• Challenge

o Where are you keeping your breakeven information now? Are you prepared to say yes when the crush plant or processing plant calls with a cash bid? How could you make sure your information is more accurate or more detailed? Who else knows what your breakeven is? Take time to focus on the answers to those questions to help drive you to be a more profitable farmer.

• Conference Update

https://www.farm4profit.com/uploads/8/6/6/6/86663378/farm4profit_farm_business_award.pdf

https://www.harvestprofit.com/