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February 6, 2024
One practice many farmers ask about or are already doing is how to compare their operation to other similar operations. Often, benchmarks and averages of financial data are used to make these comparisons. Averages from similar-sized operations in similar geography or soil types may provide a decent comparison.
It can be a worthwhile practice to look at these numbers to get a sense of different benchmark metrics for your farm. The real question, though, is what does it do for you as you lead your farm? Or, an even better question: What do you plan to do with that information? How will it inform your decision-making going forward?
I think what happens for many farmers is this: They review the benchmark information, compare it to their operation, and then it might not really go any farther to help them with future decision-making. Because of the uniqueness of each farm operation, it’s tough to compare apples to apples with other operations – even (or maybe especially) the neighbor just down the road.
There are many unique factors at play in each operation that can strongly influence how your farm may appear to stack up when looking at benchmark averages. Because of that, I also recommend that leaders try this: Work to beat your best.
I’m not talking here about trying to beat your top yields or production. This is more about first getting a clear handle on which financial metrics really matter for your operation – which make the biggest difference in moving the needle toward success. These will likely be different for each operation.
Then, it’s a matter of tracking those key metrics each year so you can compare your farm to – your farm! This is about working to improve your financial metrics year after year. Even a little bit of improvement every year adds up in an enormous way to your farm’s success.
The goal is to always work to beat your farm’s best when it comes to your business numbers – not the best of the farm down the road or across the country. Consistently beating your farm’s best will add up to a successful farm operation over time.
This focus on consistent, continual improvement is the key to success for your farm – in all aspects and areas. Even a 1% improvement is still progress! Imagine making a 1% improvement in all areas of your farm, year after year. Chances are that initial momentum will pick up speed and result in some major success for your overall operation.
Beating your farm’s best can be built into the whole culture of your operation, as well. There are many ways to involve your farm’s entire team in working to beat the previous “best,” however it could be measured.
Keep in mind, though, that whatever is being monitored and measured is what will likely receive the most attention and care from everyone – so take care what you choose to highlight through measurements and metrics. You can work with a financial advisor for your operation to select the best metrics for your farm.
Farmers have found that getting some third-party perspective from our market advisors has helped ease their minds. The advisors help farmer clients with planning and execution around marketing decisions and help keep them up to speed on the current rapidly-changing grain market situation – and how it impacts their operation.
Get a free two-week trial of our marketing information service (MarketView Basic). Your free trial includes regular audio and video updates, technical analysis, recommendations and more. Learn more about our market advisor programs and offerings at www.waterstreetag.com.
CEO, Water Street Solutions
Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.
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