For a lot of your row crop clients, this is the stretch of the year that matters most. This year's crop is going into the bin and needs to be sold well, and next season's plan is taking shape at the same time. Both decisions rest on the same numbers, and soon the questions will start: “Which crop made me the most money this year?”, “Should I sell now or hold?” and “What are we planting next year?”
Being asked those questions is a good sign. It means the client wants you in the decision. For a long time, though, they've been hard questions to answer quickly or accurately from a general ledger, and plenty of advisors have understandably kept their distance. Harvest is when that changes. Yields are known and most of the season's costs are in the books, so with the right setup you can have the answer ready and take it to your clients before they call. What most farm files are still missing is the link between the two.
Four numbers sit behind almost every post-harvest decision:
A cash-basis P&L does its job well. It shows money in and money out for the whole farm. QuickBooks Online just doesn't know about acres or bushels, so it can't tell you what a bushel of corn cost to grow. It also can't see grain that's still in the bin, or corn that went to the farm's own cattle.
We worked through exactly this in our recent webinar series with Insightful Accountant. Mitchell Parks and Dr. Christine Gervais of Cultivate Consulting introduced Tom Brandt, a fictional farmer in Hall County, Nebraska. Tom grows 1,400 acres of corn and 1,000 acres of soybeans, runs 150 cows and hauls grain for his neighbors, all through one QuickBooks Online file. His question was a simple one: “Were my corn or my soybeans more profitable?”
His P&L said he'd lost $253,400, but it couldn't say where, and it was missing a lot. Tom had $818,900 of corn and beans still sitting in his bins. He'd also fed 18,000 bushels of corn to his own cows without it ever showing up as crop revenue. When Mitchell split Tom's income and costs by crop, both crops had made money.
| Per acre | Corn | Soybeans |
|---|---|---|
| Yield | 195 bu | 60 bu |
| Revenue | $800 | $612 |
| Direct costs | $560 | $300 |
| Gross margin | $240 | $312 |
| Break-even on direct costs | $2.87/bu | $5.00/bu |
Illustrative figures for a fictional operation. Corn valued at $4.10/bu and soybeans at $10.20/bu. Corn revenue includes the 18,000 bushels fed to cattle.
Soybeans earned Tom $72 more an acre than corn. Corn still brought in more gross margin overall, because he grew 400 more acres of it. With those two numbers on the table, the conversation Mitchell and Christine suggested is an easy one to have: “Here's what your corn made per acre versus your beans. Which one do you want to grow more of next year?”
Most producers have a break-even in mind, and it's usually built on direct costs. Jonathon Haralson of Empire Ag shared a conversation with a grower who felt good about marketing his corn, until they added in everything else:
“He was setting at $3.15 with direct costs, but that $1.41 in indirect shifted everything. When we're at $4.30 corn instead of $3.15, we're essentially at break-even today.”
That grower needed the full number before he sold. Some of your clients with grain in the bin this fall may be in the same position.
You don't need to rebuild every client file to get started. Once a client's QuickBooks Online or Xero file is connected to Figured, here's a simple routine for your first few row crop clients:
Because Figured sits alongside QuickBooks Online or Xero, gross margin, cost per bushel and break-even come from the same numbers you already reconcile. Build the structure once and it opens on every farm you work with, so each new client starts from the same setup.
Learn more: Figured for Crop Advisors
Mitchell Parks and Erin Arick have helped partners like JC Ag and Empire Ag get started, and they're happy to talk it through for you and your farm clients too. Book a conversation with Mitchell or Erin.
Or to see how one firm has built its practice around this, download our free guide, From Compliance to Advisory, written with Jonathon and Holly Haralson of Empire Ag.