This article was reprinted with permission from The Organic Farmer’s Business Handbook. This book is available on our website at the Online Store.

One of the most important books on my farm is the Crop Journal. This is just a basic pocket folder with loose-leaf pages inside, one page for each crop or enterprise, arranged alphabetically. Anytime a task is performed on a crop, it is recorded on the appropriate page in the Crop Journal. It’s simple and quick to do once you get in the habit. Years ago, my crew chief was startled when I mentioned how few farmers do this. She said, “It’s so easy!”

All information necessary for later budgeting (and future planning) is written down in the Crop Journal. Preparing soil, seeding, cultivating, and harvest are all recorded. A sample page at the end of the season is shown in table 3-2.

Information is recorded contemporaneously, or, in plain language, as it happens. I usually do it at the end of each day. It doesn’t take long, especially once you get into the habit. I have certain employees carry a pen, some paper, and a watch as part of their job. I find that my employees like the added responsibility of tracking crop production details and the focus on the economic side of farming. When keeping track of time, employees are reminded that farming is production work, and that the farm earns money by the piece, not by the hour. Managerially, I tend to organize work in blocks—everyone weeding carrots in the morning, trellising tomatoes in the afternoon. Notice that the information in the Crop Journal is only recorded, and not yet tabulated. The math of each crop’s budget comes later, but the information needed for it is documented as it occurs. The once elusive component of labor now can be easily calculated for individual crop budgets. I often don’t bother with listing prices for material inputs such as seed or fertilizers in the journal because I already have my paid bills as a record for those expenses.

I pay particular attention to rates: How long does it take to seed one bed? How many bushels are harvested per hour, or per bed? Rates involve at least two different parameters, such as quantity/area, quantity/time, and time/area. These rates can be extrapolated to larger amounts, and they are very useful for planning and crop budgeting. Many of the hour amounts that I listed on the carrot page are from rates for a larger area. That’s because when I plan to cultivate my ¼ acre of carrots by tractor, I plan to use the tractor for other crops as well. It is more efficient to bundle tasks than to repeat steps for each crop given the setup, travel, and takedown time with each tractor implement.

I also keep a page labeled standards in my Crop Journal for rates of farm tasks that are done repeatedly. Updated often, this information is a perfect way to give employees an idea of what is expected, and to help you as a manager plan what to tackle on any given day. Some examples of production tasks are: bunching cilantro (150–200 bunches/hour), picking spinach (3–4 cases/hour), and filling 3-inch pots (60 trays/hour). The standards page is very useful information, and hard to find elsewhere.

An important thing about record keeping in the Crop Journal is that it shows information for each crop in hindsight. The numbers from this year will yield pertinent information at the end of the year, and for years to come. (The data can also be used to project future budgets of possible new enterprises.) The chronological log of each input for a given crop can now be used to accurately track expenses in the Profit = Income – Expenses equation.

A simple crop budget
Accurate tracking of income uses simple systems: invoices, farmers market inventory sheets, farm stand inventory sheets, and a CSA log of each share. Expenses are monitored by the paid bills/checkbook register and the Crop Journal. The business maxim Profit = Income – Expenses can now be calculated for each individual crop or enterprise—not just the overall average for the entire farm. Here is where the rubber meets the road of profitability. Once you have this information, you can uncover the true costs of production for each crop and see what kind of profit you made (or didn’t make) at current prices.
There were a lot of surprises for me when I first did this in-depth analysis. For years, I had gross sales of around $5,000 per acre average. Some crops bombed; others did well. I eked out a meager profit year to year but knew I was working too hard for the net return I was getting. Concurrent with the big exhale at the season’s end, I yearned to know the true costs of production for each crop. Only by tracking all the variables did I finally get the information I needed.

I began by constructing simple crop budgets that didn’t allocate fixed expenses for telephone, advertising, taxes, mortgage interest, insurance, electricity, and people accidentally driving over irrigation pipes. These expenses are spread out over the whole farm operation and can be viewed as constants. Lacking such fixed expenses, of course, my bare-bones crop budgets didn’t tell me exactly my true costs of production, but they did allow me to compare crops side by side to rate their relative profitability. Such ratings gave me incredibly useful information that I could use to improve my bottom line. I could stop growing the crops on the bottom half of the profitability scale, and instantly my overall farm profit would rise. I could also examine each crop’s Profit = Income – Expenses equation and see if I could tweak the profit by either raising prices or decreasing costs—or both. The world of possible profits unfolded before my eyes.

Table 3-3 shows a streamlined version of a crop budget for carrots. I took information primarily from my Crop Journal, with materials costs verified from paid bills. The labor rate is $12.55/hour; the tractor with implement rate, $5.00/hour. (These rates, and other costs, are covered in detail in the next chapter.)
That net profit of $3,932 per ¼ acre really opened my eyes. That would be a net of $15,728 per acre! Whereas before I was averaging gross sales of $5,000 per acre, here was a crop netting more than $15,000 per acre. Yikes! I never would have thought those profits were possible until I took the time to figure it out. I started to understand that real farming takes place from the neck up.

Keep in mind that fixed expenses were not accounted for yet, but things sure were looking positive. If I could grow a mix of crops that were this profitable, a mere 2 acres would net me $30,000 before subtracting overhead. I didn’t need to grow large amounts of any one crop as long as all the crops I raised were moneymakers. And if demand was huge for any one single profitable crop, I could focus my efforts on growing more of that one crop to saturate the market.

But how did the $15,000-per-acre return for carrots compare with returns for all the other crops I grew? Way above the rest? In the middle of the pack? I needed to know other crops’ profitability to see where each stood relative to the others. I took my current top sellers and created a crop budget for each. After I calculated the carrot budget, much information was already at hand for use in subsequent crop budgets. Many growing tasks are similar, reducing the amount of time necessary to construct other budgets. I spent a few hours in front of my Crop Journal, checkbook, seed catalog, and calculator, and voilà! I now had a list of all the top sellers in order of their profitability per acre. It didn’t matter how much acreage each crop claimed. Some were only 1⁄12 acre, some 1⁄8 acre, but extremely high on the profitability index. Small area crops are easily marginalized, but not after we measure their stature as net income generators. Piecing together 2 acres of small but very profitable crops nets you more than one barely profitable crop on the same piece of land. And remember, a high sales price doesn’t guarantee a high net return. Gross sales and net profit are unrelated! Well, almost unrelated. Remember, farm for profit, not production.

Excerpted from The Organic Farmer’s Business Handbook. Available at our Online Store.