Guest Post: Penciling Out Your Organic Profits with Breakevens
Price premiums. They’re a compelling reason to dedicate some or many of your acres to organic production. However, they’re not enough to ensure the success of your organic farm.
Just like any other business, making a profit depends on choosing the right inputs, crop rotations, and more.
To make those key decisions, we recommend calculating your organic breakevens. It’s simply a way to determine how much money you’ll have to earn in relation to how much you can spend and still “break even.”
Breakevens based on bushels
It’s most common to consider breakevens in terms of bushels.
You can calculate based on expenses: If you spend $900 to grow an acre of corn, and you expect to produce 180 bushels per acre, then your per bushel breakeven is $5.00 corn. Put another way, $5.00/bushel times180 bushels = $900.
Or you can run the numbers based on yield: When corn is going for $7.50/bushel, your breakeven is 120 bushels if you spend $900 to grow it. That is, $7.50/bushel times 120 bushels = $900.
It’s all about the numbers
It goes without saying that you need accurate data for your calculations. To that end:
Research Use actual or historical data to see what you’ve spent in past years. Tap into databases and other resources to find average yields in your region.
Grain marketing The organic market is currently more difficult to navigate than conventional. Consider an advisory service. They have experts who understand what impacts prices and can help you decide when to lock in contracts.
Objective review Consider asking a trusted friend or professional to review your breakevens – and ask them point out overly optimistic assumptions.
Plan for success
In organic farming, long term planning is key to success. Organic breakevens can show what your profitability will be on a per acres basis and also for your overall farm.
It’s worth noting that improved soil health, a benefit of organic practices, translates into higher yields over time. By studying your organic breakevens, you’ll also see you don’t need the highest yields to profit.
Less production doesn’t mean less money when you combine smart crop rotations and management with realistic numbers.
Need a hand with organic breakevens? AgriSecure can help
Many factors influence organic breakevens including, “Where is the nearest manure source?" and "How much will my fuel costs increase due to extra field passes for weed control?”
If you need help with your breakevens, call us. Our team has first-hand experience in organic production and has worked with organic farmers across the country.
Reach out today to learn how organic breakevens can boost your farm’s profits.