Pick up any farm magazine or listen to any farm podcast and it won’t be long before the phrase “Costs of Production” comes up.  Knowing costs of production is an important piece of management information and vital in many farm management decisions.  Yet, as obvious as it sounds, pop open the hood and the messiness is revealed.  

Join Kevin Bernhardt, Extension Farm Management Specialist, and Katie Wantoch, Extension Farm Management Outreach Specialist, as they share financial tools and analysis methods to aid in answering these questions and making informed decisions.

Whether it is marketing decisions, best production practices, human resource management or technology adoption, a major piece of information for the farm business decision-maker is knowing the costs of production.  Two major questions in determining costs of production are how to calculate and which cost of production.

There are many tools farm managers can use to inform their decision-making.  One simple and effective tool for many farm management applications is breakeven costs of production.  This is particularly useful in marketing decisions as the breakeven cost of production is the price needed to cover costs.  If a profit goal is added to the breakeven cost of production, then the decision-maker knows what price will not only cover costs, but also a profit goal.

Cyclical lows tend to be a time of greater anxiety for many and include increased exit from the industry.  However, even in cyclical lows, some farms are making profits. For these farms, it is also a time of opportunity as capital asset prices for machinery, land, and cows are often lower as well. The question is: What do these successful farms look like at the end of cyclical highs that enable them to continue that success during cyclical lows?