One of the most surprising findings of our Wisconsin Dairy Producer Survey is that a lot of dairy farmers do not know what it costs them to produce a hundredweight of milk! Farmer friends, consider this post a word of encouragement to spend some time learning how to calculate your cost of production.
Here are a few tools for doing so. I also really encourage others to reply in the Comments section with how you approach calculating your cost of production.
For corn and soybeans: http://www.agweb.com/tools/calculators/
For dairy: http://msue.anr.msu.edu/news/milk_cost_of_production
For pastured poultry: https://joe.org/joe/2016october/rb4.php
For vegetables: http://www.veggiecompass.com/
Knowing your cost of production does not mean that it is your only guidepost for making decisions. One can surely go too far with the line of reasoning that says that “if it can’t be counted, it doesn’t count.” Money is not God. Assuming that the overall farm operation is fiscally sound, plenty of people make decisions for reasons other than money alone: they raise Jersey cows because they like their disposition. They maintain buffer strips between the stream and the cornfield so the water in the stream runs clear. They grow purple peppers because they look beautiful at the farm stand next to the green and red ones. They raise laying hens because it provides a meaningful learning experience for children. There is plenty to be said for finding joy and beauty and meaning in your work, beyond just the dollars and cents. But I do really want to encourage farmers to take a both/and approach to your farming operation: let’s strive for both profitable and meaningful farms, in order to sustain both our pocketbooks and our spirits.
I think the biggest value of calculating cost of production on a regular basis is to identify small adjustments that can make a big difference to the bottom line, without sacrificing other values. To those of you who are in the practice of calculating your cost of production: have you made any adjustments to your farming operation based on the numbers that you either appreciate or regret? What advice would you give to a farmer who is calculating his or her Cost of Production for the first time?