Over the past decade, two different kinds of producers have emerged. Those that are focused on growing their farms and those that are content with staying the same size they have been. Within the growth-focused group, farm economy analyst David Kohl says there are two more subgroups: those who make money and those who don’t.
“It's really interesting, the alpha dog and the alpha pup, they were the aggressive producers that basically growth was their top priority,” he told Pam Fretwell on the Top Producer Podcast. “There's nothing wrong with that.”
According to Kohl, when you look at data out of University of Minnesota and at the state farm records systems, what you’ll see is a certain group of alpha dogs are good managers and they’re making money.
“I call them the green liners,” he explains.
There’s another set of alpha dogs that expanded their operations more quickly than their management practices and they are losing money.
“You know where we see the difference? Right at about a million dollars of revenue,” he explains. “What you'll see, as Yogi Berra says, is a fork in the road. The alpha dogs that have adjusted and are good managers, they're doing very well, but the others are dropping off the table. Now some of them are starting to burn through that land equity etc.”
For example, Kohl says if you look at $2 million of sales and revenue, the green-line alpha dog makes about $500,000 - $600,000 in revenue. The red-line alpha dog, or those that grew their businesses faster than their management, are losing $300,000.
“That's $800,000 to $900,000 difference on two million in sales,” he says.
For more from David Kohl, listen to the Top Producer podcast below.