As a farmer, knowledge is power. You understand your business better than anyone, but to be truly successful and profitable over the long term, it is essential to understand your cost of production.
“Making smart decisions on dairy operations, related to both income and expenses, requires knowing the breakeven cost of production. This provides a valuable metric to monitor when the business’s success is compromised by bottlenecks,” said Virginia Ishler, Penn State Extension Dairy Team. “When changes are implemented, their impact on cost of production can be evaluated and adjusted to ensure the operation is on the right path.”
The Center for Dairy Excellence partners with the Penn State Extension to provide breakeven cost spreadsheets and other resources to guide farmers through the process of determining their cost of production. One of the first steps involves calculating their operation’s breakeven costs and making a realistic assessment to evaluate opportunities for improvement.
Over the past 10 years, our dairy operation has gone through a number of changes, expansions and transitions. Through all of these changes and transitions, it has been critical for us, and those working with us, to be able to clearly analyze our cost of production and cash flow. The tools that Penn State Extension have developed for us have allowed us to make critical decisions based on true numbers. These tools are extremely user-friendly and can be navigated quite easily. I cannot imagine a path forward for our farm without having the data so easily accessible and easy to understand.
While the future looks different for every farm, understanding your cost of production can help you alleviate financial stress and achieve long-term success. Learn more about cost of production, and download a breakeven cost form.