What is Your Break Even Price for
Tomatoes and Other Vegetables?
Corinne Alexander
Associate Professor
Purdue University
Michael Veldstra
Research Associate
Purdue University
Whole Farm Budget
Department of Agricultural Economics
Purdue University
Purpose of Budget
•  Assess profitability of current or potential
enterprises
•  Test new ideas and compare enterprises to
identify best ones
•  Estimate future needs for inputs, facilities,
storage, marketing
Department of Agricultural Economics
Purdue University
Budgeting
•  No One-size fits all
•  One piece of the picture
•  Different Practices
•  Different Costs
•  Different soil types
•  Many different variables affect break-even price
Budgeting
•  Many different examples of vegetable budgets
•  Know your own costs, not someone else’s
•  Separate costs for each vegetable as much as possible
•  How to allocate overhead?
Data you will need
•  Individual Crop Expenses
•  Production Records
•  Crop-specific expenses
•  Equipment & Building Costs
•  Investment Value
•  Amount allocated to each crop
•  Annual ownership cost
•  Labor Costs for each Crop
5 parts to a Vegetable Budget
1.  Gross Returns
2.  Variable Production Costs
3.  Fixed Production Costs
4.  Total Costs
5.  Summary of Returns
Gross Revenue
•  Gross Revenue=Price X Production
•  land unit(e.g. per acre, per 100 row ft.)
•  Production volume
•  Production by week vs. annual
•  Price records by market channel
•  a sales unit(e.g. per lb., per box)
•  Weekly vs. yearly average
Variable Production Costs
•  Seed, fertilizer, chemicals, etc.
•  Equipment, fuel & repairs
•  Hired labor
•  Interest on operating capital
•  May be helpful to separate pre-harvest and
harvest costs
•  Labor
•  Cash flow issues
Fixed Production Costs
•  Equipment Ownership
•  Building Ownership
•  Family Labor
•  Land
•  Management
Fixed Production Costs (Continued)
Allocated to each crop
•  For example, you have 6500 row feet per acre:
•  If your land rent is $200 per acre, the land
cost is $3.07 per 100 row feet
•  Machinery cost is $500 per acre, or $7.69 per
100 row feet
•  Family labor cost is $750 per acre, or $11.54
per 100 row feet
•  If these are your only two ownership costs
your total ownership cost would be $22.30 per
100 row feet
Break-Even Calculations
•  Break-Even Yield: At a given price, the yield
needed to cover all costs
•  Break-Even Yield = Cost/Price
•  Break-Even Price: For a given yield, the price
needed to cover all costs
•  Break-Even Price = Cost/Yield
Department of Agricultural Economics
Purdue University
Summary of Returns
•  Gross Revenue
•  Returns over variable costs
•  Gross revenue – variable costs
•  Net returns/Profit
•  Gross revenue – variable and fixed costs
Cost by Marketing Channel
Farmers market:
20 weeks/40 markets
Wholesale:
20 weeks
Transportation
$.25/mi, 3,200mi
$800
$.25/mi, 1,600mi
$400
Labor ($10/hr)
2 people @ 12hr/
wk,
$4800
1 person @ 4hr/
wk,
$800
Supplies (bags, sacks, other)
$20/wk
$400
$30/wk
$600
Total costs for season
$6000
$1800
Total costs allocated to
tomatoes(20% of total sales)
$1,200
$360
Marketing costs/lb sold
(760 lbs sold)
$1.58
(800 lbs sold)
$.45
http://www.extension.iastate.edu/agdm/wholefarm/html/
Department of Agricultural Economics
Purdue University
Profit By Marketing Channel
Example 1
Farmers’ Market
Wholesale
Expected selling price
$3.00
$2.10
Total costs
$1.96
$0.83
Estimated profit
$1.04
$1.27
Estimated mark-up
53%
153%
760 lb.
800 lb.
$790
$1,016
Lbs. sold
Estimated Profit
http://www.extension.iastate.edu/agdm/wholefarm/html/
Department of Agricultural Economics
Purdue University
Profit By Marketing Channel
Example 2
Farmers’ Market
Wholesale
Expected selling price
$3.50
$1.50
Total costs
$1.96
$0.83
Estimated profit
$1.54
$.67
Estimated mark-up
79%
81%
Lbs. sold
760 lb.
800 lb.
Estimated Profit
$1,170
$536
http://www.extension.iastate.edu/agdm/wholefarm/html/
Department of Agricultural Economics
Purdue University
Tomato Budget Interviews
•  Size of operations ranged from 200 plants to 10,000
plants (almost 2 acres)
•  Marketing channels- On farm, wholesale, farmers market,
CSA, restaurant
•  Tomato price ranged from $1.50 to $3 per lb
•  Small sample size
•  Each farm operated differently
•  Difficult to generalize
Department of Agricultural Economics
Purdue University
Variable Cost Estimates from Interviews
Costs Per 100 row ft.
Production Variable
Costs
Min
Max
Average
Fertilizer
$0.00
$5.06
$2.87
Plants
$1.77
$10.00
$6.26
Herbicides
$0.57
Insecticides
$0.37
$2.83
$1.28
Fungicides
$0.62
$3.54
$1.99
Twine
$0.57
$1.60
$1.04
Plastic Mulch/Drip Lines
$2.60
$4.00
$3.34
Irrigation
$0.47
$7.14
$3.81
Department of Agricultural Economics
Purdue University
Variable Cost Estimates from Interviews
Costs Per 100 row ft.
Harvest and
Marketing
Min
Max
Average
Plastic Disposal
$1.50
$3.54
$2.71
Fuel and Lube
$1.06
$1.49
$1.32
Marketing Costs
$0.15
$8.00
$4.82
Total
Variable
Costs
$30.01
Hoop House
• 
Initial Cost
$98.00
$160.00
$135.38
Maintenance
$11.80
$37.04
$18.71
Other costs include straw mulch, stakes (wooden or metal), fumigation, bees
Department of Agricultural Economics
Purdue University
Labor Estimates from Interviews
Hours per 100 row ft.
Labor
Transplanting
Min
Max
Average
0.13
0.17
0.16
Growing From Seed
4.29
Tying/Pruning
1.03
4.74
2.17
Weeding
0.09
1.03
0.52
Harvest/Packing/Washing
3.72
16.20
9.69
Paperwork
0.07
0.71
0.28
Other
0.25
2.48
1.17
Total
18.28
Department of Agricultural Economics
Purdue University
Veggie Compass
•  USDA and Ceres Trust: funded project to collect
labor data
•  Erin Silva, John Hendrickson, Rebecca
Claypool, Ashleigh Ardledge Keene at UW,
plus Jim Munsch and David Baker
•  On-farm labor data collection: daily or weekly
forms for major labor uses and crops
Source: Mitchell, Paul D. "Determining Your Profitability: Things to Consider and Tools to Help." University Of Wisconsin. 4 Oct. 2011
Department of Agricultural Economics
Purdue University
Veggie Compass
Field
FG &
Growing Harvest Harvest
433
204
637
Farm 1
1757
4537
6294
Farm 2
1031
2185
3216
Farm 3
%
% FG
Harvest
68%
32%
28%
72%
32%
68%
Farm 5
299
208
507
59%
41%
Farm 6
701
188
889
79%
21%
Department of Agricultural Economics
Purdue University
Veggie Compass
Planted Area
(100 row ft.)
Total
Harvest &
FG Hours
% of FG
% of
Harvest
Summer Sq
3030
147
15%
85%
Winter Sq
3920
140
71%
29%
Spinach
800
66
24%
76%
Broccoli
150895
1138
27%
73%
Lettuce
27595
560
18%
82%
Potatoes
4200
256.5
45%
55%
Peppers 28163
365
26%
74%
Tomatoes 27950
1348
51%
49%
Carrots
1900
206
46%
54%
Beans
5600
255
40%
60%
Onions
3600
105
56%
44%
Garlic
5360
186
35%
65%
Department of Agricultural Economics
Purdue University
Wholesale prices per cwt (100 pounds)
Chicago Terminal
Average weekly price 1/1/09 – 9/24/11
Crop
Package
Price
Lbs/pkg
$/100
lbs
Cucumber:
Kirby
1
1/9
bu
27.03
50
54.06
Cucumber:
Kirby
1
1/9
bu
24.55
50
49.10
Bell
Peppers
1
1/9
bu
17.05
29
58.79
Bell
Peppers
1
1/9
bu
17.05
29
58.79
Bell
Peppers
1
1/9
bu
17.36
29
59.86
Tomatoes,
Vine
Ripe
15
lb
flts
14.72
15
98.13
Tomatoes,
Mature
Green
25
lb
crtn
14.83
25
59.32
•  Cucumbers are about $55/cwt on average
•  Bell peppers are about $60/cwt on average
•  Tomatoes are about $60/cwt on average
Source: Mitchell, Paul D. "Determining Your Profitability: Things to Consider and Tools to Help." University Of Wisconsin. 4 Oct. 2011
Labor cost with a wage rate of $10/hour
$/100
lbs
Farm
1
Farm
2
Farm
3
Farm
4
Farm
6
Farm
7
Summer
Squash
98.39
13.77
10.36
3.40
619.74
Peppers
20.75
204.44
57.36
197.53
10.63
46.12
Tomatoes
52.58
92.95
326.40
18.28
25.34
60.60
•  Prices: Cucumbers $55, Peppers & Tomatoes $60
•  If these labor data are accurate, some of these farmers
could make a profit and sell at wholesale prices
Source: Mitchell, Paul D. "Determining Your Profitability: Things to Consider and Tools to Help." University Of Wisconsin. 4 Oct. 2011
Lessons from Veggie Compass and Purdue
Interviews
•  Lots of variation in labor use across farms
•  Lots of variation in cost of production &
profitability
•  Veggie Compass data shows some growers could
make a profit at wholesale prices, other growers
need to sell at retail prices
•  Growers need to estimate their own costs of
production including labor to get an accurate
estimate
Sources
Chase, C. 2008. Pricing for profit. Iowa State University Extension, Ames.
Chase, C. 2009. Developing Enterprise Budgets for Organic Crops. Iowa
State University Extension, Ames
Mitchell, Paul D. "Determining Your Profitability: Things to Consider and
Tools to Help." University Of Wisconsin. 4 Oct. 2011
Mitchell, Paul D. "Enterprise Budgeting." University Of Wisconsin. . Web.
20 Dec. 2011
Wright, B. 2005. Crop Budgets for Direct Marketers(A3811-9). UWExtension.
Cost Estimates from Interviews
Costs Per Acre
Production Variable
Costs
Fertilizer
Plants
Min
Max
Average
$0.00
$354.34
$200.58
$123.89
$700.00
$438.05
Herbicides
$40.00
Insecticides
$26.01
$198.23
$89.63
Fungicides
$43.34
$247.79
$139.00
Twine
$40.00
$112.00
$72.50
Plastic Mulch/Drip Lines
$182.04
$280.00
$233.76
Irrigation
$33.00
$500.00
$266.50
Department of Agricultural Economics
Purdue University
Cost Estimates from Interviews
Costs Per Acre
Harvest and
Marketing
Plastic Disposal
$105.00
$247.79
$189.84
Fuel and Lube
$74.34
$104.02
$92.49
Marketing Costs
$10.25
$560.00
$337.45
Total
$2100.70
Hoop House
Initial Cost
Maintenance
$6,860.00
$11,200.00
$9,476.79
$826.00
$2,592.59
$1,309.65
Department of Agricultural Economics
Purdue University
Labor Estimates from Interviews
Hours per Acre
Labor
Transplanting
Min
Max
Average
9.00
0.17
10.90
Growing From Seed
300.00
Tying/Pruning
72.00
332.00
151.73
Weeding
6.07
72.00
36.41
260.06
1134.00
678.05
Paperwork
5.00
49.56
19.94
Other
17.34
173.45
81.70
Harvest/Packing/Washing
Total
1278.73
Department of Agricultural Economics
Purdue University