Agriculture At Home: Jefferson County Ag Update
June 27, 2022
Good farm records are important in any aspect of agriculture. When it comes to taxes and other requirements, it is important to have those records available. But what about internal records? While QuickBooks and other software can produce good information and analytics for your business, having a set of internal records can help you make decisions about what to grow, and how much.
Consider creating enterprise budgets for each thing you produce on your farm. While this may seem like a daunting task, especially for vegetable growers, this type of information can be extremely helpful. Keep record of every expense that goes into each product. These can be divided out into variable expenses and fixed expenses. Your variable expenses will change with the amount of production you have. For example, an acre of bell peppers will require much more fertilizer than 100 square feet. Fixed expenses however, can become much more complicated. If you own a tractor that you use across multiple enterprises, make sure to figure out how much time you use that tractor in each enterprise, and use that percentage of time to allocate a percentage of the cost of that tractor to each enterprise. Make sure to get as detailed as possible (or that you have time for) to make sure your budgets are all encompassing.
Using something like Microsoft Excel to do this work can also be very helpful. Automating your budget with formulas and references can make your budget work a lot easier for you. Templates for budgets like this are available online, and good sources include Clemson, Washington State, North Carolina State and Oklahoma State Cooperative Extension services.
But why go through all this trouble? With the rising costs of production and rate of inflation, it is more critical than ever to keep track of your money. Enterprise budgets can also help you determine your pricing and give you an outlook on the financial health of your farm. If you are limited on space, a well-rounded enterprise budget can help you determine your break-even price for your product, ensuring that you do not lose money on an enterprise. If price is something you cannot change, an enterprise budget will help you determines your break-even quantity instead. Microsoft Excel tools and add-ins like Goal Seek and Solver can help make these calculations a breeze.
Of course, having numbers like these are no substitute for market forces and interaction with your customer. It is never a good idea to lose money on certain products, but it may be necessary in the overall picture of your operation. Knowing how each enterprise performs can help you determine if you can make up for a loss in one product with profit from another. A great example of this is eggs. In our area, most farmers market booths sell eggs. Through an enterprise budget, you may see that eggs are more expensive to produce than what the market price will accept. By using an enterprise budget alone, you’d be prompted to sell your layers and invest that money in something else. However, knowing your customer and the market also shows you that 80% of your customers buy a dozen eggs and something else at your stand. If eggs are what brings people to your stand, keep producing eggs, and look at your other items that your customer has a higher willingness to pay to make up that loss.
Enterprise budgets are a good way to figure out if new ideas are worth testing out as well. If a break-even price or quantity are not out of the picture for you, the venture may be worth trying out next season.