By Forsyth Thompson
When a client calls after harvest asking whether to sell, they need an answer while the price is still there. A good answer starts with one number: what each bushel cost them to grow. QuickBooks can't give you that number on its own, and it's worth being clear about why.
What the ledger knows, and what it doesn't
QuickBooks Online is very good at transactions. Seed and fertilizer invoices, fuel, repairs, interest and grain checks all land where they should, and with classes set up carefully you can split some of those costs by crop. What it has no way to record is the farm itself: acres planted, bushels harvested, bushels still in the bin and bushels fed to the farm's own cattle.
Cost per bushel needs both halves. You need to know what the crop cost, and how much of it there is. Without the production side there's no break-even, and the sell decision ends up resting on gut feel or last season's spreadsheet.
Direct costs are only part of the number
Most growers carry a break-even in their head, and it's usually built on direct costs. Jonathon Haralson of Empire Ag described a producer who felt ready to market his corn:
"His direct costs hit where he was thinking, so profitability-wise in his head, he thought 'we're in a great spot, I can market my corn.' But when we got to looking at it, it's a whole lot tighter right now than what he was expecting."
The producer's direct costs came to $3.15 a bushel. Adding $1.41 of indirect costs put him close to break-even at $4.30 corn.
Indirect costs like machinery, labor, interest and land don't belong to any one crop, so you have to share them out. A common way is per acre across every crop, applied the same way each year so the numbers compare from one season to the next.
The same cost lands differently on each crop
In our recent webinar series with Insightful Accountant, we used a fictional Nebraska farm to show how this plays out. Tom Brandt harvested 273,000 bushels of corn. He sold 110,000 at the elevator, fed 18,000 to his own cows and still has 145,000 in the bin, along with 22,000 bushels of soybeans.
On direct costs alone, Tom's corn breaks even at $2.87 a bushel and his soybeans at $5.00. Indirect costs push both numbers up, and this is where crop mix matters. Corn yields far more bushels an acre, so the same indirect cost per acre adds much less to each bushel of corn than to each bushel of beans. At $100 an acre, that's about 51 cents on corn at 195 bushels an acre, and about $1.67 on soybeans at 60.
| Illustrative | Corn | Soybeans |
|---|---|---|
| Break-even on direct costs | $2.87/bu | $5.00/bu |
| Add $100 an acre of indirect costs | +$0.51/bu | +$1.67/bu |
| Full break-even | $3.38/bu | $6.67/bu |
| Still in the bin | 145,000 bu | 22,000 bu |
Illustrative figures for a fictional operation. The $100 an acre indirect cost is an example only.
With a full break-even for each crop, you can sit down with the client and show them the margin on every bushel still in the bin at today's price, and what a 20 or 30 cent move would do to it. That's the conversation to have before they call the elevator.
What it takes to answer the sell question
You don't need every field mapped to get there. To give a client a break-even they can act on, you need four things in the file:
- Acres, yield and bushels on hand, by crop.
- Direct costs allocated to each crop.
- A consistent way of sharing out indirect costs.
- Break-even per bushel on direct and full costs, updated as prices move.
Where Figured fits
Figured sits alongside QuickBooks Online or Xero and holds the production side the ledger can't. Crop Trackers record acres, yields, sales and grain on hand for each crop, and the Allocator splits costs by crop or by field. Figured also puts a value on grain fed on farm, so the crop and the cattle both show their true numbers. Break-even is one of the ready-made formulas, and once you've set it up it works across every farm you look after.
Jonathon and Holly Haralson walk through how they do this for their own clients in How to Master Row Crop Finances, which you can watch on demand.
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 Empire Ag built its advisory practice around this, download our free guide, From Compliance to Advisory.
