By Steve Swigert
Are You Making Money?
Agricultural producers are being challenged to make a profit every year. To make money or be profitable, revenue needs to exceed the cost of producing that commodity. While the commodity being sold by producers in Oklahoma might vary from cattle to crops to vegetables, each of these commodities have a cost of being produced. To manage that cost, the first step is to determine total operating cost of producing that commodity and identify those costs that need to decrease without affecting productivity and profitability. Also, the revenue needs to be analyzed in the same manner to determine if there is enough to cover the cost of producing the commodity. Then opportunities can be explored to increase the revenue of that commodity. Most producers have multiple enterprises for their operation. This complicates the calculation of profitability and the cost of production for each enterprise, but there are ways to produce this information especially if you keep your financial information in a way that allows for the managing of this information. (i.e., Excel, Quicken, Quickbooks) Even if your information is not kept in this manner, producers must fill out their Schedule F (Profit or Loss from Farming) for IRS each year. This information can also be used to determine profitability and unit cost of production. If you need some help calculating your profitability, and the cost of production, please contact: Steve Swigert at sswigert@gpkubota.com