Understanding the Cost of Production for Your Farm
- Joshua Brock
- Sep 30
- 10 min read
Key Factors and Strategies for Managing Farm Expenses
This is the fourth in a series of articles expanding on the original, “From Seed to Success: How KPIs Can Transform Your Market Garden”. With each article in the “Farm KPIs” series, we dive deeper into a specific metric (crops, livestock, financial, etc.) by defining what it is, why it’s important, how to track it, and how to put the data into practical use.
The other articles in the series include:
Starting a farm can be both exciting and overwhelming at the same time. Breathing in the fresh air and the smell of fertile soil, the hope we all feel for the season ahead when planting, and the dreams of a (hopefully) successful harvest at season’s end. But behind every successful farm is a keen understanding of some specific, key metrics, and one in particular is the cost of production.
If you're a new farmer, it’s important to get familiar with what that means, how it affects your bottom line, and how to manage it smartly. If you've been doing this for a while, maybe we can give you a fresh point of view or insights you hadn't thought of. We’ve broken this article into a few sections:
What Is The Cost of Production?
The cost of production is the total cost of everything you spend to produce your crops or raise your livestock. Some of these costs will be the same, like land and electricity, but some of these costs will be very different. We've broken them down so you can see some examples of these costs:
Crop Cost of Production:
Seeds or start plants
Fertilizer
Fuel and equipment repairs
Inputs, treatments, and amendments
Labor (even your own time - more on that below in “Common Mistakes”)
Water and electricity
Land rent or loan payments
Packaging and transportation
Business software (accounting, marketing, management, etc.)
Livestock Cost of Production:
Starter livestock
Feed
Fencing
Treatments and care
Veterinarian costs
Labor (even your own time - more on that below in “Common Mistakes”)
Water and electricity
Land rent or loan payments
Packaging and transportation
Business software (accounting, marketing, management, etc.)
As you break these costs down, there are two components of cost: variable costs and fixed costs. Variable costs are those expenses that change with the number of units grown or made (e.g., feed, seed, labor, operating expenses, etc.). Fixed costs are those that do not change from month to month and occur no matter how many units you grow or make (e.g., equipment, land expenses, facility costs, insurance, etc.).
When you add them all up, you get your cost of production. If you then take the cost of production and divide it by how much you produce (units, pounds, etc), you will get your cost per unit. For example, if it costs you $5,000 to grow 10,000 pounds of tomatoes, your cost of production is $0.50 per pound ($5,000/10,000 = $.50).
Knowing this number helps you set your prices, make decisions, and figure out if you’re making money—or just working hard for nothing.
10 Common Crops & Their Average Cost of Production*
Why It Matters
A lot of farmers, most especially new farmers, focus on yield: “How many eggs can my hens lay?” or “How many pounds of hops can I harvest?” But yield only tells part of the story. If it costs you more to produce something than you earn from selling it, you’re not running a sustainable business—you’re losing money.
Understanding your cost of production is the foundation of a profitable farm. It gives you clarity, helps you make smarter choices, and keeps you from falling into common financial traps.
It Helps You Set the Right Price
Without knowing your costs, you might price your products based on what the neighbor is charging—or what feels “fair.” That’s risky. Your neighbor may have different inputs, land costs, or labor availability. If you don’t price above your costs, you could be working hard and still coming up short.
Knowing your cost per unit lets you say, “I need to sell this for at least $X to break even—and ideally for $Y to make a profit.” That’s crucial to know, and as they say, “knowledge is power”.
It Shows You What’s Working—and What’s Not
Maybe you’re growing four different vegetables, but one crop eats up half your fertilizer, requires constant weeding, and sells slowly. Once you run the numbers, you might find it’s costing you more than it’s worth. Knowing this lets you shift focus to what’s actually profitable. (Here's a free profit and loss spreadsheet to help to find out where you stand.)
It Helps You Avoid Cash Flow Surprises
Many new farmers find themselves short on money mid-season because they underestimated early costs like seed, compost, or equipment maintenance. Tracking production costs gives you a more accurate picture of when expenses hit and how much you’ll need, so you’re not blindsided later. (This is why there is the CSA model, which gives farmers capital upfront from your customers. It also gives the customer something to look forward to!)
It Guides Smart Investment
Thinking about buying a walk-behind tractor or installing drip irrigation? If you know your costs, you can run the math: Will this investment reduce labor or inputs enough to pay for itself in a season or two? The cost of production helps you make informed decisions, not emotional ones or ones with your “gut”.
It Makes You More Competitive
If you’re selling to restaurants, grocers, or distributors, they’ll want consistency in price and quantity. Being able to clearly explain your pricing—and even show how your cost of production backs it up—builds trust and professionalism. That can open doors to more reliable markets.
It Sets You Up for Growth
When you know your numbers, you’re not just farming—you’re running a business (that happens to be a farm). That mindset helps you scale more smoothly, apply for grants or farm loans, and build a farm that supports your goals, whether that’s feeding your family or feeding your community.
Common Mistakes New Farmers Make
We all make mistakes, and for those of us who farm, many of us have made some doozies over the years. It’s part of life and not unexpected given the complexity and fluidity of farming. Two days are truly never the same.
Here are a few pitfalls to watch for:
Not tracking expenses closely. Many farmers underestimate what they’re spending, especially on things like fuel, repairs, or their own labor.
Ignoring time as a cost. Your time is valuable. Even if you don’t write yourself a paycheck, you should track your hours and assign them a dollar value.
Underpricing products. Without knowing your costs, it’s easy to underprice just to make a sale. But this eats into your profits—or worse, leads to losses.
Overinvesting too soon. Buying too much land, equipment, or livestock early on can stretch your finances thin before you build a stable income.
Strategies to Manage Farm Expenses
Being profitable isn’t just about making more—it’s often about spending less, smarter.
Apologies for being cliché, but if you don’t manage your expenses, they’ll manage you and the farm right out of business.
That being said, we have a few strategy suggestions to offer on how to manage expenses.
Start Small and Grow Smart
Don’t feel like you have to have it all from day one. Test markets, refine your production system, and grow slowly. This keeps risk manageable and helps you learn before scaling up.
Track Every Expense
Use a simple spreadsheet, a notebook, or farm software (we know a pretty darn good one!) to log every expense. Break it down by categories (e.g., eggs vs. veggies) so you can see what’s making money and what’s not.
How Farmbrite Can Help
Farmbrite’s Crop Breakeven and Livestock Breakeven reports track the amount you’ve spent on expenses for the animal or plant, along with the income you’ve generated. Although similar to a Profit & Loss statement, this report also accounts for the value of inventory items used in feedings, inputs, and treatments (crops).
Farmbrite has been helping farms keep track of their cost of production with farm management software since 2012. Give Farmbrite a try to see if we can help you.
Buy Used or Share Equipment
New equipment is expensive. Used tools, equipment sharing, or even bartering with neighbors can save thousands without sacrificing productivity, especially when getting started.
Improve Efficiency
Can you reduce passes through the field? Cut down on wasted feed? Automate a simple task? Even small efficiency improvements can add up to big savings.
Join a Cooperative or Network
Buying inputs in bulk with others or marketing together can reduce costs and give you better prices. You’ll also benefit from shared knowledge and support.
Invest in Soil Health
It may sound counterintuitive, but investing in soil health (through compost, cover cropping, or reduced tillage) can cut fertilizer costs and boost long-term productivity.
6 Ways to Increase Farm Profitability
Cutting costs is one way to improve your bottom line, but to really thrive, you also want to increase the money you bring in for the work you’re already doing. That means finding ways to get more value out of what you produce, better understanding your market, and sometimes adding new income streams.
Here are some time-tested strategies to help new farmers boost profitability.
Sell Direct-to-Consumer
Instead of selling your products to a middleman or wholesale buyer—who then marks them up and sells to customers—consider selling directly to your local community. Options include:
Farmers markets
Community Supported Agriculture (CSA) programs
Farm stands
Online pre-orders with local pickup
Selling direct can double (or even triple) what you earn per unit. For example, you might get $1.50/lb for tomatoes wholesale, but $3/lb at a farmers' market. That extra margin makes a big difference.
Add Value to Raw Products
Value-added products let you take a basic item and turn it into something more desirable—and more profitable. Think of it as doing a little extra to earn a lot more.
Examples include:
Milk → Cheese or yogurt
Tomatoes → Salsa
Berries → Jam or dried fruit
Hops → Hop shoots to restaurants or specialty markets
Beeswax → Candles or salves
Value-added products often command higher prices and have longer shelf lives, reducing waste and improving income. Just be sure to check local regulations and licensing requirements before getting started.
How Farmbrite Can Help
Farmbrite’s Inventory Recipes feature enables you to combine various individual items and create a finished product, often a value-added one. This can be true for your outputs as well, where you might combine your crop harvest or animal yields with other inputs to create value-added products. Whether you are making a premix feed for livestock or a fertilizer blend for your crops, you can create recipes to simplify and streamline the process, making your next batch in no time.
Diversify Your Income Streams
Single-crop or single-product farms are vulnerable. If prices drop or a crop fails, you take a big hit. Adding diversity to your offerings spreads the risk and creates multiple paths to profit.
Some ideas include:
Selling eggs, honey, or cut flowers alongside vegetables
Raising small livestock (like chickens or goats) for meat or dairy
Offering farm tours, classes, or seasonal events (agritourism)
Renting space for events or photographers
Creating a subscription box or “farm sampler” with rotating items
Start small, test what works, and build slowly.
Know and Serve Your Market
You can grow the best salad mix in town, but if local shoppers are asking for kale and carrots, you may struggle to sell it. Spend some time understanding:
Who your customers are
What they want to buy
When and how they want to buy it (e.g., weekly, monthly, online, in-person)
How much they’re willing to pay
Even small adjustments—like packaging your eggs in half dozens, offering recipes with your CSA, or using a mobile payment app—can improve sales and customer satisfaction.
How Farmbrite Can Help
Farmbrite’s Market Reports and your Market Dashboard give you deeper insights into not just what products you’ve been selling, but who you’ve been selling them to. You have reports for top customers and top products to help prioritize your operations and to further develop your farm market strategy.
Build a Strong Brand
Your farm’s story, values, and personality matter. People don’t just buy food, they buy trust and connection. By sharing your story through social media, newsletters, or signage, you give customers a reason to support you, even if your prices are a little higher.
To help strengthen your brand:
Be consistent with your farm name, logo, and messaging
Take good photos of your farm and products
Talk about your practices: “pasture-raised,” “certified naturally grown,” “regenerative”
Share behind-the-scenes moments or introduce your animals (people love that!)
A strong, trusted brand turns occasional buyers into loyal repeat customers.
Use Your Data
Finally, don’t overlook the power of your own farm records. Track what’s selling, what’s sitting, what crops grow best in your soil, and what products bring the best margins. Review your sales regularly and look for trends or areas to improve.
The more you learn about your operation, the easier it becomes to make smart, profitable decisions. In the end, profitability isn’t about growing as much as possible—it’s about growing smart. By combining better pricing, creative offerings, and stronger market knowledge, you can build a farm business that’s not just productive but also financially sustainable.
Go Forth Boldly
Farming is hard work, but smart business practices make it more rewarding and sustainable. Understanding and managing the cost of crop production is one of the most important steps you can take to turn your passion for farming into a reliable income.
Start small, track everything, and look for ways to do more with less. With time and attention, you’ll find what works—and you’ll be better positioned to grow a farm that lasts.
To get you started, we invite you to download and use this free Crop Cost of Production Spreadsheet to get you started. If you’re looking for a complete farm management system, crop management software, or livestock management software to help you, we invite you to give Farmbrite a try for free for 14 days. If you have any questions, you can always reach out to us - we’re here to help!
Joshua, his wife Jenn, and their dog Rooster, live in PA. Joshua is the owner and operator of Hoffman Appalachian Farm where they grow Certified Naturally Grown hops. Joshua has over twelve years of experience in growing crops, including growing in an organic system. In his spare time he enjoys trail running, backpacking, and cycling.
* Sources:
USDA Economic Research Service (ERS)
Commodity Costs and Returns: https://www.ers.usda.gov/data-products/commodity-costs-and-returns/
Corn, Soybeans, and Wheat production cost data by state/region.
University of California Cooperative Extension (UCCE)
Sample Cost Studies: https://coststudies.ucdavis.edu
Almonds, Grapes, Strawberries, Lettuce, and Broccoli
Michigan State University Extension
Apple Cost of Production Report: https://www.canr.msu.edu
Potato Grower Reports
Average production cost estimates: $1,500–$2,000/acre; yield ≈ 35,000–40,000 lbs/acre → ~$0.15/lb
How Farmbrite Can Help
Farmbrite’s Farm Management Software features enable you to track and manage your farm from anywhere. Give us a try today to see if crop software or livestock software is right for your farm.