Where Were Your 2016 Breakeven Costs?

By Dennis Stein

By now, farms are have processed and submitted 2016 financial information to a tax professional and submitted a tax return. But sadly, only a very few farms took the time to use this financial information to calculate their farms actual breakeven values for the commodities that they produced in 2016. It’s not that doing these calculations will change anything you did in 2016. However, knowing your 2016 costs may be useful information to aid in making decisions for this year’s corn or soybean planting intention.

Many farms take the time to build models and often estimate what their projected breakeven or net returns for this year’s crop may be. In fact, many lenders have asked farms to submit a cash-flow projection for 2017 to encourage producers to take a harder look at how their current crop mix works.

In 2016 it would appear that some farms in the Thumb area had the good fortune to have production breakeven costs fall into the profitable range. Other farms may have shown shortfalls for some crops where the price and yield did not generate the desired income to cover all of the costs.

Building you own farms crop enterprise budgets from 2016 give you a foundation to generate some 2017 estimated budgets to help identify needed prices and yields to cover breakeven costs.

You can find some crop budget templates and cash flow templates that have been developed for use with Excel that can be downloaded from the Michigan State University Extension Farm Information Resource Management page or the Farm Management web page.

If a farm follows up calculation of their 2016 breakeven with a farm business financial analysis, that is a strong foundation. From this foundation you should be able to move into 2017 crop production season with a positive outlook and a basic plan that can be monitored during the year to meet your farm’s goals.

Source:msu.edu