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Ask a Margins Expert

RSS By: Chris Barron

Chris BarronHave a margins question? Through this blog, you will gain insight into improving your bottom line, as a margins expert answers questions and provides farm business advice.

 

"It's Planning Season"

Jan 16, 2012

 

As a farmer, I'm always amused by the questions from people living in urban areas that really know little about agriculture. One of my favorite questions usually comes after planting or harvest season, "so what are you doing now that the crops are in?" They see the physical part of farming but have no clue of the details which go into operating a successful farming business. The best response I've found for this question is that we really have 3 seasons in production agriculture; Planning Season, Planting Season, and Harvest Season.
We all put forth a tremendous amount of time and dedication during planting and harvest season. Only you know how much time and dedication is implemented into the planning efforts for your business. I would suggest that the planning season has as much potential to generate profits as the planting or harvest season.
Here's a brief list of planning and management tasks which directly affect your profitability.
Risk management planning ….…Marketing / Insurance
Input planning……………………….. Invoice Reviews / Product Value Assessments
Business planning………………….. Cash Flow / Balance Sheet /Growth Planning
Equipment planning ……………… Equipment trades / Updates /Technology
Education opportunities…….…… Business Seminars / Technology Updates
Agronomic planning ……………... Herbicides / Seed / Fertility / Precision Tools
Relationship management.…… Landowners / Lenders / Partners / Employees
If you could improve on these areas and lower the cost of production by as little as 2%, the payback is significant. For example, assume your cost of production is $800 per acre for corn. If you have 1,000 acres, 2% equals an additional $16,000 to the bottom line! Likewise, assuming a 2% improvement in your marketing and yield on the same 1,000 acres (180 bu. corn *$ 5.55 =$999 /ac. income) you would generate an additional $19,000! In other words, just a 2% improvement in your business could have the potential of generating $35 per acre or a $35,000 boost in your profitability!
A little planning can go a long way toward improving your margins! The next time someone asks you what you are doing in the off-season, what will your answer be?
Please send your questions regarding any of the above planning and management topics.
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