Profit Crop

Farm income refers to profits and losses that are incurred through the operation of a farm or agricultural business. Profit crop is an agricultural crop that is grown to sell for profit. It is a crop grown in order to be sold rather than to be used by the people growing it. It is typically purchased by parties separate from a farm. The term is used to differentiate marketed crops from subsistence crops, which are those fed to the producer’s own livestock or grown as food for the producer’s family. The financial tools a farmer can use to analyze, plan and control his business include financial statements, profit and loss statements, and cash-flow statements. A farm income statement is a summary of income and expenses that occurred during a specified accounting period.

In earlier times profit crops were usually only a small (but vital) part of a farm’s total yield, while today, especially in developed countries, almost all crops are mainly grown for revenue. A profit and loss statement shows sources and amounts of income and operating expenses. Comparison of profit and loss statements over a period of years tells which resources have been most profitable and whether there has been an advance or decline in net income. In the least developed countries, profit crops are usually crops that attract demand in more developed nations and hence have some export value.

Profit Crop is a crop for direct sale in a market, as distinguished from a crop for use as livestock feed or for other purposes. Prices for major profit crops are set in commodity markets with global scope, with some local variation (termed as “basis”) based on freight costs and local supply and demand balance. It is a readily salable crop (such as cotton or tobacco) produced or gathered primarily for the market. A farmer might grow grains, legumes, and vegetables to feed his family and his livestock, but anything beyond that would be a profit crop.

A consequence of this is that a nation, region, or individual producer relying on such a crop may suffer low prices should a bumper crop elsewhere lead to excess supply on the global markets. It is a crop that is grown mainly to be sold, rather than used by the people who grew it or those living in the area it is grown in. This system has been criticized by traditional farmers. Coffee is an example of a product that has been susceptible to significant commodity futures price variations.