Unit Economics in Agriculture: The Hidden Math Behind Profitability

#Profitability in #Agriculture doesn’t just depend on what farmers' grow—but on how efficiently they grow it, and how smartly they sell it. That’s where unit economics, or the cost of producing one kilogram of output, becomes the key to understanding whether farming is sustainable or not.

Let’s take the case of #paddy, a major Kharif crop in India. On average, farmers spend about ₹35,000 per acre on production, and an additional ₹10,000 per acre on post-harvest handling, drying, storage, and marketing. This brings the total cost to ₹45,000 per acre. With a typical yield of 2,200 kg per acre, the cost of production per kg becomes:₹45,000 ÷ 2,200 kg = ₹20.45/kg, or ₹2,045 per quintal.

Now compare this to the Minimum Support Price (MSP) for the 2025–26 Kharif season: ₹2,369/quintal for common variety paddy and ₹2,389/quintal for Grade A paddy (For produce with up to 14% moisture; deductions apply if moisture exceeds this limit.)

This means that a farmer selling at MSP would realize:

₹2,369 – ₹2,045 = ₹324/quintal profit, or roughly ₹7,128 profit per acre, assuming sale at MSP with standard quality.

However, if the farmer sells in a local market below MSP due to lack of access, high moisture content, or urgent cash needs, they may receive ₹2,000–₹2,100/quintal, incurring a loss or breaking even despite having a decent harvest.

This scenario shows how narrow the profit margins are, and how sensitive profitability is to even small fluctuations in either costs or prices. To address this, farmers must:

* Track and control input and post-harvest costs

* Harvest and dry paddy properly to meet moisture standards

* Leverage #FPOs, #ENAM, or procurement centres to sell at or above MSP

* Understand and monitor their unit economics consistently

When farmers treat farming as a business and focus on the cost-per-kilogram model, they gain the power to make informed decisions on crop planning, marketing strategies, and investment priorities. Unit economics is not just a number—it’s a compass that points toward #profitability.