Question 1

How do I calculate true cost-per-unit-yield for a lender or insurer?

Accepted Answer

Total Production Cost ÷ Total Yield = Cost Per Unit. Total Production Cost must include: seed/livestock purchase, land cost (rent or imputed ownership cost), labor (including your own at a market rate), water and utilities, equipment depreciation, fertilizer/feed, insurance, and marketing/transport. Many small farm operators undercount by omitting their own labor and equipment depreciation.

Question 2

What financial data do agricultural lenders typically require?

Accepted Answer

Lenders for agricultural loans (USDA FSA loans, commercial ag loans) typically require: 3 years of production records, a current year cash flow projection, breakeven price per unit for primary crops/products, and a debt service coverage ratio showing income above debt payments. This ledger produces the breakeven and margin data needed for that analysis.

Question 3

How should I account for equipment depreciation in farm cost calculations?

Accepted Answer

Use straight-line depreciation: (Equipment Purchase Price − Salvage Value) ÷ Useful Life in Years = Annual Depreciation. Allocate to specific enterprises by hours or acres of use. A tractor used 60% on corn and 40% on soybeans allocates 60% of its annual depreciation cost to the corn enterprise's cost calculation.

Small Farm Cost-Per-Yield Ledger

Field & Harvest Data

Input Costs

CROP YIELD LEDGER REPORT