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Having a better understanding of break-even costs

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An ag economist says it’s a good idea for farmers to stress-test their break-even production costs.

Matt Erickson, an ag economic and policy advisor with Farm Credit Services of America, says it’s important to run through some hypothetical scenarios. “For instance, let’s say that we have, a 5% increase in cost or maybe our yields are expected to decline by 2 or 3 percent,” he says.  “We can sensitize our balance sheets and our numbers to see what our new break-even could be.”

He tells Brownfield when it comes to margins, operations need to build in some wiggle room, and that means having a complete understanding of costs and revenue.

Having a better understanding of break-even costs