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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.

 

Your 2012 Farm Toolbox

Jan 03, 2012

 

It's human nature to spend most of our time doing what we enjoy. As farmers, most of us prefer the "outdoors production" part of agriculture best; therefore, this is where we spend the bulk of our time. The results are evident based on the amazing yields we are able to achieve despite numerous challenges from weather, diseases, and insects. The extra effort we put into production pays big dividends.
Imagine the benefits, if the same attention was given toward all areas of your business. Challenge yourself to develop a list of needed improvements for your operation. Ask yourself; what resources do I need to improve the bottom line? In some cases, decision tools such as spreadsheets may produce better decisions. In other cases it may be worth hiring a third party to get you headed in the right direction. It's difficult to be good at everything. Applying your focus on what you're good at and allowing someone else to do the other stuff will not only make you more money, but it will also improve your quality of life.
 One example I’ve observed many farmers benefit from is using a simple cost of production spreadsheet in order to track expenses and income throughout the year. Timeliness and flexibility are the two primary benefits from this tool. Profit decisions are usually moving targets. If you're using a pencil and paper to analyze this information, it becomes impossible to analyze various scenarios in a timely manner.
Here is an example of a basic cost of production spreadsheet.

 

Farm Name
Joe Farmer
Total Prod. $
$1,644,075.00
Total Acres
1,500
Expense/Ac.
$1,096.05
Crop
CORN
Gross $ /Ac.
$1,202.50
Market Price Goal
$6.50
Cost/Bu. Prod.
$5.92
Yield Est. / Goal
185
 $ Margin Ac.
$106.45
Total Grain Production
277,500
ROI
9.7%
Total Expense
Bu. Needed
CROP EXPENSE LIST
Expense PER/AC.
OVERALL
PER/ AC.
Return to Management
$150.00
$225,000.00
23.08
Land Payment/Rent
$245.00
$367,500.00
37.69
Taxes
$25.00
$37,500.00
3.85
Interest
$15.00
$22,500.00
2.31
Insurance
$25.00
$37,500.00
3.85
Seed
$102.00
$153,000.00
15.69
Fertilizer
$86.22
$129,330.00
13.26
Nitrogen
$117.62
$176,430.00
18.10
Herbicide
$28.71
$43,065.00
4.42
Fungicide/Insecticide
$37.50
$56,250.00
5.77
Custom Spray 2 pass
$15.00
$22,500.00
2.31
Equipment/Fuel/ Labor
$173.00
$259,500.00
26.62
Grain Hauling
$37.50
$56,250.00
5.77
Drying Expense
$27.50
$41,250.00
4.23
Storage
$11.00
$16,500.00
1.69
Tile / Irrigation
$0.00
$0.00
0.00
Total Expenses / Ac.
$1,096.05
$1,644,075.00
168.62

 

 
 Only you know what's best for your operation. The key is not how big your toolbox is, but rather, the quality of the tools inside.
I'll continue to build decision tools around cost of production, equipment replacements, line item expense management, market tracking, charting breakeven at every yield level, margin management, and other areas where I receive questions.
Feel free to send me your specific margin management questions. Let me know what tools I could provide to best help your decisions for 2012.
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