Calculating costs and returns of all aspects of the operation should be considered
Most farmers farm because it makes them happy, and if they make a buck, they are even happier. But sometimes the farmers forget to think about how much money it took to make that buck.
Calculating costs and returns plays an important role in livestock and crop operations. The costs of an operation can include a variety of different things, some of which are occasionally forgotten in record keeping. Input costs can be anything from running a water line to cattle to the cost of lights and utilities or the cost of feed or seed in general.
“It takes truly recognizing and valuing the costs to be successful in an operation,” said Reagan Bluel, a University of Missouri Extension Regional Dairy Specialist in Southwest Missouri.
Sometimes farmers, especially beginning farmers, forget to take into consideration the special tools and equipment that they don’t use very often but that they may need at some point in time. These one-time expenses are important contributors to the cost of an operation. Producers need to make sure that they keep records of all their costs and revenues in order to be successful in their operations.
It is also very important to make sure those records are in a safe place, organized and easily accessible. All producers keep up with costs and returns differently, and each method has its own benefits. What matters is that costs and returns can be organized in a way that allows that producer to understand them.
“There are many spreadsheets that help producers make good decisions about crop economics,” said Ryan Neal, Benton County Agriculture Extension Agent.
A producer can search online for “costs and returns” on any type of crop or animal, and the search engine will pull up many different spreadsheets that help farmers calculate costs and returns. Most state and county extension services’ websites also provide information about the costs and returns associated with many different types of agricultural operations.
Alexander Farms in Northeast Arkansas produces rice and provides a real-life example of costs and returns in an operation. The farm produces rice, along with soybean and other row crops. The family closely tracks the costs required to grow their rice, and they carefully record the returns on their investments.
Arkansas is the nation’s top rice producing state, a fact that is a source of pride for rice producers like Will Alexander, whose family owns Alexander Farms. On average, said Alexander, the cheapest that a producer in Arkansas can raise a rice crop is about $650 per acre. Most years, one acre planted in rice will average between 180 to 200 bushels.
Recently, said Alexander, ricer growers can average about $950 per acre of gross income. With the some of the $300 per acre in net income, crop production inputs, land rent and equipment payments will be made.
Alexander said right now, the family farm uses a bookkeeper who helps the family understand and keep up with all of the costs and returns for the season in a custom data system. However the family plans to adopt a new system next season.
“Next year we are planning on using data logging with iPads to instantly see the cost and to keep up with the progress of planting, crop care and harvest data,” Alexander said.
