October 22, 2024
It’s easy to compare notes with neighbors or chat at the local co-op, but to truly understand how your farm is performing, you need hard data. As Mike Dikeman, economist with the Kansas State University Farm Management Association, says, "Benchmarking is as important as accurately calculating cost of production."
Benchmarking compares your farm’s performance in crop yield, resource use, labor and overall profitability. This not only highlights where you're excelling but also helps identify opportunities for improvement. Done right, it can be a powerful tool for optimizing farm management, increasing profitability and staying competitive in a volatile industry.
Key areas
Here are the primary areas where benchmarking can drive real improvement in your operation:
Yield. When comparing crop yields, the goal is to measure production per acre against regional or national standards. For instance, if the average yield for corn in your region is 200 bushels per acre and you’re producing 150, there may be areas in your farming practices that could be optimized.
Quality. Metrics such as size, taste and nutrient content can be benchmarked to meet consumer demand and stay competitive in the market.
Resource management. Benchmarking your farm’s water consumption against best practices can highlight inefficiencies or identify strategies that conserve water while maintaining yields. Similarly, comparing your fertilizer use with regional or national averages can help minimize costs and environmental impact.
Cost of production. Financial benchmarks are often the most telling. Break down your cost of production into categories like seed, labor and equipment costs. If your expenses are higher than your peers, you can explore why and adjust accordingly.
Profitability. Compare profitability metrics, such as net profit margins, against industry standards to identify areas for cost reduction or revenue enhancement.
Technology adoption. Benchmarking your farm’s use of precision agriculture tools against those of your peers helps you see where you stand on the tech curve. If your operation lags in automation, you may be missing out on significant cost savings and efficiency gains.
Labor efficiency. Labor is one of the biggest costs for any farm. By benchmarking labor productivity — such as output per labor hour — you can identify inefficiencies and adjust to improve productivity. And compare the level of training and skills among your farmworkers to industry standards to ensure your team is equipped to handle challenges.
Innovation. Comparing your research and development investment into new farming techniques, crop varieties or technologies, to those of others in the industry ensures you’re putting sufficient resources into future-proofing your farm.
Mike Dikeman stresses that benchmarking is not just about measuring performance — it’s about making better decisions.
5 steps to start benchmarking
Identify key metrics. Focus on areas important to your farm’s success. This might include yields, water use, labor productivity or net profit margins.
Collect data. Use tools like the K-State Financial Benchmarking Tool to gather data from your own operation and compare it to industry standards.
Analyze performance. Compare your data to benchmarks and identify where you're falling short or exceeding expectations.
Implement changes. Use what you’ve learned to make data-driven decisions that improve efficiency, reduce costs or boost yields.
Monitor progress. Benchmarking is not a one-time process. Regularly revisit your benchmarks to ensure you’re keeping pace with industry changes.
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