Knowing how much it costs to produce your product is one of the most important pieces of information for a farmer, rancher, or agribusiness manager. The cost of production provides the foundation for calculating breakeven prices, which impact marketing plans and sales decisions. One effective tool for these calculations is the enterprise budget.
Enterprise budgets are detailed plans that estimate the costs of producing a specific agricultural product or service. An enterprise budget can be created for each crop, livestock, or service that a grower plans to produce during the year. Examples include corn, cotton, peanuts, feeder calves, hay, blueberries, tomatoes, cabbage, and many others. An enterprise budget is typically created on a per-acre, per-head, per-pound, or per-service basis. They are also created for one growing season or production cycle.
One of the first steps in creating an enterprise budget is to estimate costs. There are two types of costs, variable and fixed. Variable costs are use-related and will vary based on the level of production and the amount of input a grower plans to use. Variable costs can include seed, fertilizer, fuel, repairs & maintenance on machinery, labor, pesticides, or feed, depending upon the enterprise being evaluated. Fixed costs are time-based and do not change regardless of the production level. Fixed costs include land ownership costs, interest, depreciation on machinery and equipment, insurance, and taxes.
Once variable and fixed costs are estimated, a grower can calculate their breakeven price. The breakeven price is the price at which costs are covered, and profit is zero. Breakeven price equals total cost (variable + fixed costs) divided by expected yield, as shown in the equation below. The expected yield tends to come from historical data for that farm. Growers can also calculate a breakeven price that covers only their variable costs, the only difference being that you would use variable cost in the equation below instead of total cost..
Growers who estimate their breakeven price know the minimum price they need to get for their product to cover their costs. It is advised that growers lock in prices above breakeven as part of their marketing plan and sales decisions to give them a higher chance of making a profit.
The land-grant universities throughout our coverage area have enterprise budgets that can be used as a template for growers. These enterprise budgets are representative of the region where they were developed, and individual farm numbers will vary. Producers are highly encouraged to use the budgets as a template and adjust the numbers to reflect their production plans for the upcoming season. This will provide a more accurate estimate of their own cost of production and breakeven prices.
Authors: Hudu Abukari, Kevin Kim, Ayoung Kim, and Brian Mills
Agricultural and forest land are essential components of the rural economy throughout the southern United States. These lands support crop and livestock production, timber, recreational uses, and long-term investment opportunities. As regional demand for agricultural land continues to evolve, understanding who is buying land and how land-use patterns are shifting is increasingly important for producers, lenders, Extension agents, and policymakers.
In our previous Southern Ag Today article, we showed that individuals and general partnerships (GPs) remain the most active participants in the farmland market in terms of transaction frequency. However, there was an increase in the number of non-individual/non-GP buyers, particularly financial and real estate developers. In this publication, we dig deeper into more specific land types and buyer trends across southern states.
The majority of land transactions involve recreational/timberland, which accounted for 77% of all agricultural land purchases between 2019 and early 2023. Timberland dominates the rural landscape in many parts of the South, and its large share of transactions reflects its availability and investment appeal. In contrast, cropland represented only 11% of agricultural land transactions, while pasture made up the remaining portion in terms of transactions. This difference highlights a key challenge in many southern markets: cropland and pasture turnover is relatively low, while timber and mixed timber-recreational tracts are far more commonly available.
Types of Buyers Participating in Different Agricultural Land Market
Buyers of agricultural property generally fall into four categories: (1) Individuals and general partnerships (GPs); (2) Non-individual/non-GP agricultural businesses; (3) Financial and real estate businesses; and (4) Other industries. A closer look shows distinct differences in buyer behavior across cropland, pasture, and recreational/timberland.
Cropland
Pasture
Recreational/Timberland
Overall Market Shifts and Implications
The most significant trend is the growing presence of financial and real estate businesses, particularly in cropland and recreation/timberland.
Cropland has the most diversified buyer pool, and shows the most notable shift toward investor participation displacing individuals and agriculture businesses. From 2019 to 2023, the presence of financial and real estate investors rose from 13% to nearly 30%.
Pasture remains the most stable and producer-driven category, reflecting the long-term nature of livestock operations and the prevalence of family ranching across the southern region.
Recreational and Timberland buyers are still dominated by individuals, but the less traditional buyers have made modest gains in market share. Notably, the share of financial and real estate developers has doubled over the period.
These trends bring some opportunities, such as new capital entering rural land markets, increased land valuation, and potential for diversified land uses. However, possible challenges should be considered, including higher land prices, greater competition for limited cropland, and potential barriers for small, beginning, and socially disadvantaged farmers.
Monitoring these patterns can help Extension professionals, rural leaders, lenders, and policymakers respond proactively to ensure that land markets remain accessible and supportive of agricultural communities.
While I have heard discussions around the topic, I have never been one to believe that an “optimal” cow size exists. Every farm is unique and operates in a different production and market environment. Whenever this question comes up, I simply reply that I don’t really care what cows weigh, as long as they are weaning enough pounds of calf each year to be profitable. But even that is a fluid discussion as it is impacted by the market. For example, a cow does not have to wean as large of a calf to be profitable in 2025 as she would have in 2022. The reality is that producers make culling decisions each year based on the best information they have at the time.
While record keeping has never been high on the list of things that cow-calf operations enjoy, it is extremely important and should be used to drive these decisions. Well managed cow-calf operations track weaning weights on individual calves and tie each calf back to its dam. By doing that, productivity can be measured for each individual cow. On the other hand, it is nearly impossible to track production costs on an individual cow basis. Producers with good financial records likely have a solid understanding of what it costs them to maintain the average cow in their herds.
This distinction is important when one considers how to use production records to make culling decisions. Larger cows tend to wean larger calves, but they are also more expensive to own. While it is not easy to observe, they will consume more hay, feed, pasture, and mineral as they maintain their larger bodies and one can make a case that vet / medicine, yardage, transportation and other expenses will be higher for larger cows too. The simple point being that if one is making culling decisions based on calf weaning weights alone, they are likely to be disproportionately culling more of their smaller cows. By doing this over time, the average size of their cows increases, and their costs trend upward.
Several years ago, I put together an Extension presentation aimed at illustrating this point and encouraging producers to consider cow size in their culling decisions. I used a simple budget approach and estimated cost adjustments for various sized cows. I even included a higher cull value on those larger cows, which is relevant to the discussion. Using this approach, it appeared that an operation needed to wean about 50 more lbs of calf for every additional 100 lbs of mature cow they were maintaining.
While I am not suggesting this approach was perfect, I do think it did a good job illustrating the concept. Basing culling decisions solely on weaning weight can be misleading – especially when the herd has cows of varying size. While I don’t think there is an “optimal” sized cow, I know those larger cows must be weaning larger calves to earn their keep. And the only way to do that is to consider calf weaning weights in relation to the weight of the cows.
Contract broiler growers must make business management decisions like any other farmer. However, the scope of those decisions is very different compared to farmers growing and marketing grain, for instance. Broiler growers raising birds on contract for integrated poultry companies have contractually limited abilities to implement production management changes, and since they essentially have one “customer”, they have no chance at varying marketing strategies. Even so, some management choices may positively or negatively influence pay rates they get from the broiler company, and things that influence livability can certainly impact pounds delivered to the plant. Therefore, there may be some opportunities, like row crops or livestock farming, where a grower can choose to focus on production or pay rate improvements to potentially increase revenue. The question is whether one strategy is better than the other.
It should be reiterated that a contract broiler grower’s business operates under a simple gross revenue (GR) equation of pounds delivered to the company plant multiplied by the pay rate per pound. If we designate pounds as “L” and pay rate as “P”, the equation is simply L x P = GR. Under current typical competitive contract scenarios, a grower’s pay rate for any individual flock is a function of feed conversion ratio and corresponding flock cost compared to other farms finished and caught in the same week by the company. How well a farm’s cost compares to the average cost that week determines the pay rate. Given the limited abilities to positively impact either pounds or pay rate, the question is which might have a greater chance at positively influencing their GR? In Part 1 of our look at Broiler Revenue, we examined the variability of broiler gross revenue by looking at the two metrics of pay rate in dollars per hundred pounds delivered ($/CWT) and broiler production in pounds broken down to per square foot of housing (lbs./SF) in a nominal fashion on two similar farms across 17 flocks. From that nominal case study, we saw that although there was evidence that either could negatively or positively affect revenue, for many flocks, changes in lbs./SF seemed to override the expected effect of an increase or decrease in pay rate.
The next step looks at the same two farms and attempts to further decipher how the extent of the changes in lbs./SF and $/CWT for each flock impacts GR when compared to the farms’ own averages over the period, further trying to decide if one or the other has the most impact. By simply graphing the percent change from farm average (0%) of each of these metrics (Fig. 1a &1b), we again see what suggest lbs./SF may have a slightly more significant impact on the overall GR equation for many flocks, as often its increasing or decreasing column is the largest of the two and goes in the direction of GR. The problem is that these percentages are likely not directly comparable. In 21 of the 34 flocks, both production and pay rate moved in the same direction as the revenue line. It remains difficult to know which made the most difference to revenue because adding the % change for both does not always equate to the corresponding percentage change in revenue. In fact, it usually doesn’t. This is likely a result of the varying competitive situation that exists for every flock.
Pay rates are certainly not irrelevant, and avoiding extreme discounts is important. A close look at flock #6 for Farm A and flock #5 for Farm B is warranted. Pay rate had a significant impact on these two flocks for both farms, but Farm A got the worse end of the deal. These flocks were the lowest revenue flock for each farm, as both suffered a similar catastrophic disease outbreak (not HPAI), evidenced by the drastic decrease in production. This also resulted in significant decreases in pay rates for both as they were unable to compete positively in the tournament pay system for these flocks. However, for Farm A, the pay rate decrease was greater. This could be attributed to simple chance in the tournament pay settlement structure that week, as mentioned above. But when combined with an almost equal loss in production, the result for Farm A was 17% less revenue in dollars per house than Farm B’s bad flock ($6,879 vs. $8,283). Thus, the significantly lower pay rate cost Farm A more when combined with the lost pounds. In many cases, since there is no governmental disaster support system for such losses, the farm that suffers from such a disease outbreak receives no additional revenue support from the company either. They simply suffer the loss of birds and revenue along with the company.
Clearly, if either farm could consistently perform better in the tournament and increase their pay rate, they would generate more gross revenue, even if pounds didn’t change. However, be it for efficiency or outdated technology issues, they may be limited in their opportunity to compete for better tournament pay. In such cases, more pounds may be their only opportunity for more revenue. To examine this a little further, we can look at which improves gross revenue more for those negative revenue flocks – improving lbs./SF or increasing $/CWT. If we were to wave a magic wand over these two farms and increase the $/CWT on the negative flocks up to the farm averages, Farm A would gain $9,715, and Farm B would gain $8,514 in revenue. However, if we were to raise lbs./SF for each of those negative flocks up to farm average, Farm A would gain $11,350, and Farm B would gain $11,685. For both farms, increasing lbs./SF on poor flocks impacts revenue more, even at decreased pay rates. In the next installment, we look at what implementing changes to pay structures across the board could do to growers’ actual revenue dollars.
Figures 1 A & B: In the figures below, the 0% lines represent each farm’s average revenue, production, and pay rate across the 17 flocks. Above or below that line represents the percent change above or below farm average.
Steven Klose, Tiffany Lashmet, and Jordan Shockley
Managing a farm or ranch is hard to say the very least. Running your own business of any kind is difficult, but the nature of production agriculture is particularly challenging. Long production cycles seem to magnify every decision, while the feedback loop between decision and outcome is delayed and unclear. Operating in a competitive environment with little-to-no market power or influence, ag producers are price takers when it comes to purchasing inputs and price takers when it comes to selling commodities. When it comes to the production process, you could say… weather takers. Layer on top of this the pressure many producers feel of maintaining the family’s legacy, and it’s easy to get to the point of questioning “how much more can I take?”
It is not lost on us and our team of Southern Ag Today authors that offering management advice on Monday mornings is a little like a football fan offering quarterback advice from the comfort of the recliner. We try to keep the tips, data, tools, and other information as relevant as possible, and one of our measuring sticks for topics is whether or not our producer audience actually has the time to do anything with the information. Because we know your job is busy and overwhelming, we can confidently say you have no choice but to make time for today’s management topic.
Stress. It can weigh heavy, affecting your emotional, physical, and mental health.
Among the endless list of things to manage, the stress of it all feels like another not-so-manageable thing you have to deal with. Too often, your physical and mental well-being take a back seat to everything else that must be done. Remember, this is very much like the oxygen mask on the airplane. Your health, both physical and mental, must be priority number one. You take good care of your equipment and livestock. Don’t ignore yourself. You are the most important asset on the farm/ranch.
Recently, I had a small leak in the seam on the side of my water heater. It was small. The problem wasn’t urgent. The drain pan & drain line were working as they should. And, of course I was busy. For longer than I care to admit, each day/week held more important tasks than finding a plumber. I’m sure you know how this ends. There came a day when the water heater burst. In that moment, I was managing the consequences of not managing my priorities. Overwhelming stress and your health can be like that.
We want to encourage you. Don’t ignore your health, especially if you have been putting off some nagging mental or physical issue. There’s no better time than now to address it. Of course, with the extra pressures of this time of year, if the mental stress has already pushed you too far, please check out some of the immediate mental health resources available. Farm Hope and AgriStress Helpline are two programs available in Texas. The 988 Suicide & Crisis Lifeline is available nationwide. To find local help in your state, check out the National Agricultural Law Center’s compilation of Stress & Mental Health resources here: https://nationalaglawcenter.org/center-publications/family/mentalhealth/
As 2025 comes to a close, we wish you a Happy Holiday Season and the best of Health and Prosperity in 2026.
Klose, Steven, Tiffany Lashemt, and Jordan Shockley. “Management Priority #1.” Southern Ag Today 5(51.1). December 15, 2025. Permalink
