Cost of Production & Your Farm
The Agri-Food Management Institute, Grain Farmers of Ontario and Grant Ag held a two-day “Women in Grains” workshop in New Liskeard. The workshop focused on better understanding the financials, such as cost of production, and marketing the end product from the farm. A major focus was determining cost of production on a crop-by-crop basis. While this seminar focused on the grain industry, knowing your cost of production on any type of operation is key to running a successful farm business.
What are the most successful farmers doing differently?
Never stop learning
Keep finances up-to-date to help make business decisions
Seek the help of advisors/consultants
Write down their business plan, follow it and review it annually
Know their cost of production and what it means for their profits
Conduct a risk assessment and manage risks
Develop a budget and financial plan
Why do you want to know your cost of production?
Can help you to assess the impact of production and marketing decisions on your operation
Can help you better manage input costs
Can allow you to determine break-even or target market prices
Can allow you to develop a marketing strategy or plan
Overall, knowing your cost of production can help you to establish your on-farm profitability and allow you to make better business decisions. With the right tools, it can take you as little as a half an hour to calculate your total cost of production!
Calculating Cost of Production:
The idea is simple: you want to compare your expenses with what you hope to produce, resulting in the dollar amount it takes to produce one unit.
Click here for a sample grains cost of production worksheet! This can be modified for any commodity, and you can always talk to a financial advisor for assistance in determining your cost of production.