Variable expenses can hold flat for two or three years and still tell an incomplete story. Below the surface, other costs keep moving — and the farms that don't have full visibility are making crop, land, and marketing decisions from a number that may already be wrong.

You sit down, open up your farm client’s most recent variance report, and see that variable expenses are holding steady. Cost of production must be holding steady too.

Or is it?

There’s a layer of cost movement that doesn’t show up in the variable expense line — and advisors who aren’t tracking it could be giving their clients a partial picture at the moment they're making the decisions that matter most.

The Numbers That Get Reported and the Ones That Don't

On most American farms, in-season tracking focuses on variable expenses: seed, chem, fertilizer, fuel. These are the numbers that show up clearly in any conversation about budgeting. When they’re flat across two or three years, it can feel like everything’s stable.

Except...

"Even if they are flat, that does not mean that the cost of production is not changing across the balance of the farm,” said Jarod Creed, owner of JC AG Financial Services, in our recent webinar. “A lot of those things can just come from CapEx purchases, payments rolling off, less interest — a variety of different things that are still happening behind the scenes that have a bottom-line impact on the true cost of production."

The advisor who's only tracking variable expenses is likely working with a partial dataset — which leads to decisions being made on an incomplete picture.

Learn more: When a Farm Budget Isn’t Really a Plan: And What it Should Look Like Instead

The Situation Unfolding Across US Agriculture

During the last strong grain cycle, a lot of farmers invested in new equipment. Those payments have been running through the books ever since. Now the market looks different, cost of production appears stable, and those payments are starting to roll off.

On a variable-expense-only view, it may look like cost of production is in decline. But that reading misses what’s really going on.

"Does that mean you're trying to replace that expense with another acquisition, or are you truly going to see your cost of production move lower, looking for other opportunities down the road?" said Jarod.

That question is hard to answer without the full picture.

The Stakes of Getting it Wrong

JC Ag works with over 110 farms across the US. Jarod has seen firsthand what happens when farms work with incomplete figures. During COVID, there were farms that believed they had a reliable handle on their cost of production — but were materially off.

"There were even some tough conversations with some farms that thought they had a grasp on their true cost of production, but were actually 20, 30, or 35% off from reality. And that was an eye opener," said Jarod.

Decisions made off the back of these numbers were being made with a false baseline. Those who had it so far off struggled during the difficult economic environment that followed. Those who had that complete picture could make smart decisions that set their business up for success.

“To this day, I firmly believe that there was a lot of generational wealth built in a couple-year stretch that wouldn’t have been made without knowing this information in front of us,” added Jarod.

Learn more: Scaling to 110+ US Farm Clients on Referrals Alone

Where Incomplete Data Shows Up in Decisions

A partial cost-of-production picture has consequences that can run well past the variance report.

Crop rotation. Knowing which fields and crops are actually delivering margin requires more than variable cost data. Field-level profitability, tracked over multiple seasons, can look very different depending on how indirect costs are allocated. When that allocation isn't happening, rotation decisions get made on yield and input cost alone, which can overstate margins.

Land acquisitions. Whether to buy or rent additional ground comes down to what cost of production will look like after the transaction. Without a complete cost baseline, the analysis is built on a number that may already be wrong — and a decision that looks viable on incomplete data can quietly move in the wrong direction for years without showing up.

Marketing decisions. Grain marketing strategy is built on knowing your breakevens. A farm carrying understated cost of production can appear to have margin that doesn't exist. Decisions about when to sell, how much to price, and what risk to carry are all downstream of that breakeven number. A sophisticated marketing plan built on a stale cost-of-production figure is still a guess.

Learn more: Why Traditional Accounting Tools Are Failing US Farm Clients

How to Track the Full Picture

The difference between a partial picture and a complete one is about what’s being captured, how consistently, and how easy it is to access the data.

JC Ag accesses everything: pulling 12-18-month baselines for every new client and ensuring every purchase, every swipe of a credit card, is reconciled within 48-72 hours, allocated to the crop and field level.

If you want to learn more about JC Ag’s processes, and how Jarod and Jeff built a practice that runs consistently across so many clients, you can read all about it in our recent guide: Scaling a Farm Financial Advisory Practice.

Or, to learn more about the framework that underpins this methodology, download the Modern Farm Financial Planning Framework Guide.