For a smallholder farmer, farming is more than just a tradition; it’s a business. But many farmers sell their produce based on what a middleman offers or what others are selling for, without truly knowing if they are making a profit. This is where understanding your variable costs becomes a game-changer. These are the expenses that fluctuate directly with your level of production—things like labour for planting and harvesting, fertilizer, herbicides, and fuel. Knowing these costs is the secret to making smarter decisions about when to sell and what to plant.
Knowing Your Costs Tells You When to Sell 💰
Many farmers are tempted to sell immediately after harvest, especially during a market glut when everyone is selling at once. This leads to very low prices. But when you’ve tracked your variable costs, you have a crucial piece of information: your cost per kilogram. This is your break-even number. For example, if it costs you ₦60 to produce one kilogram of cassava, you know that selling it for anything less than ₦60 means you are losing money.
Armed with this knowledge, you can make a strategic decision. If the current market price is ₦50 per kilogram, you know it’s not the right time to sell. Instead of accepting a loss, you can choose to store your produce and wait for prices to increase. This puts you in a position of power, allowing you to reject low offers and sell when the market is more favourable. It’s the difference between being a price-taker and a price-setter.
Your Costs Reveal the Best Planting Opportunities 🌱
Understanding your variable costs also helps you decide what to plant next. By keeping track of your expenses for different crops, you can compare their profitability. For example, you might find that while cassava is a staple, your variable costs for producing a ton of sweet potatoes are much lower. This means your profit margin on sweet potatoes might be higher, even if the selling price is similar.
This insight allows you to diversify and plant crops that offer a better return on your investment. It also helps you spot market opportunities. If a new processing factory opens that buys a specific variety of yam at a high price, you can quickly assess if planting that yam is more profitable than your usual crop. Knowing your costs provides the data you need to make these calculations and choose the most lucrative path.
At AyosifamHub, we believe every farmer should be an empowered business owner. By taking the time to track your variable costs, you gain the confidence to sell at a fair price and the wisdom to plant what will truly make you money. It’s time to stop guessing and start calculating your way to success.
