Sep 21, 2014
Home| Tools| Blogs| Discussions| Sign UpLogin

Perspective: His PGR Is Great, but Look at His PA

February 8, 2012
By: John Phipps, Farm Journal Columnist
 
 

Imagine if farmers had something similar to baseball cards, with career stats compiled for all sorts of skills. Now consider that baseball has gone from ho-hum batting averages to sophisticated ratios like on-base-percentage-with-two-outs-against-lefties. Maybe farmers should have new stats as well. I’m here to help.

Income Allocated Acres (IAA): Farmers often state they are farming, say, "5,000 acres," but add with a mumble, "along with Dad and two brothers." This stat deflates misleading claims. Multiply farm size by income portion claimed on those acres. If your share of the income is 10%, your IAA farm size is 500 acres.

Probable Acres (PAx): Multiply each acre by the probability you will still be farming it x years from now; the sum of individual tract products is your total farm PAx. For land that is owned, unencumbered and associated with a strong marriage, the number could be as high as 100%. For other tenure provisions, it would decline. Factors include landowner age, relationship and financial condition; competition levels and history of success; and contract terms. If you own 200 acres with a modest mortgage, your PA5 might be 195 acres. A PA5 for 200 acres on a three-year blind, sealed-bid, cash-rent contract might come only to 60 acres. Acres not currently under your control can be assigned a low PA to allow for the chance you will add them to your operation. This stat would allow a year-to-year assessment of tenure risk trends for your operation.

Productivity Growth Ratio (PGRx): Divide the slope of your x-year trend-line yield by the slope of the same trend line for your county. Don’t worry about the math—Excel can do it automatically. If you accelerated your yields at 3.2 bu. per acre per year over the past 10 years while your county trend was 1.6 bpa/year, your PGR10 would be 2.0. Anything more than 1 demonstrates you are pulling away from the pack. When the number drops below 1, one trick you can use is a longer time period.

Online Percentage (OLP): We usually measure efficiency by when work is accomplished. OLP, however, measures misused time due to poor planning, road time, breakdowns, support failure, etc. Divide the hours of field work done by the hours when work conditions were "right." The higher the ratio, the more efficiently deployed capital and labor are, and the lower those costs can be driven. It’s analogous to the engine/separator hour ratio on combines.

Acres per Row (HP) per Day (ARD): Being able to plant x acres per day might not be the best measure of utility. Divide the number of acres planted (harvested, tilled, etc.) by the width or power of the implement used. I suspect many eight-row operators can put up ARDs to rival their 36-row neighbors. The time period could also be less (per hour) or greater (per season).

Out-of-the-Field Profit (OFP): Many farm profit calculations get bogged down, in my opinion, in arbitrary rules concerning machinery costs, depreciation, fixed expenses for radically different farms, etc. It is better to compare what happens on the field of battle, so to speak, than in the accounting program. Add total crop sales to any government payments and subtract variable expenses (fertilizer, seed, pesticides, labor, fuel, rent and interest on these expenses). Divide by number of acres (total acres for share rent). The result is a clear measurement of basic profit generation that can be easily compared across fields, farmers and years.

Our profession generates a few benchmarks, mostly by habit or tax law whim. More informative statistics to guide decision making might help identify key factors in our increasingly complex business environment.

At the very least, it would be helpful in creating a Fantasy Farmer League.
 

John Phipps is a farmer from Chrisman, Ill. He is the TV host of "U.S. Farm Report." Contact him at johnwphipps@gmail.com. For local station listings, log on to www.USFarmReport.com.

 

Read more "Perspective."


See Comments

FEATURED IN: Top Producer - February 2012

 
Log In or Sign Up to comment

COMMENTS

No comments have been posted



Name:

Comments:

Receive the latest news, information and commentary customized for you. Sign up to receive Top Producer's eNewsletter today!

 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions