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What are your farm’s numbers telling you?

wutwhanfoto/ThinkstockPhotos Man Calculating Bills
Accurate, updated financial information can be used throughout growing season.

When times are tough in agriculture, everything you do as a manager makes a difference. From production practices to the timeliness and accuracy of the farm’s books to the way you handle your farm’s finances, every good management practice that can be put in place right now adds up. It can impact your farm’s situation in a positive way.

Having the commitment and dedication to work toward making everything on the farm a little bit better goes a long way. It’s what I believe the farmers who are the best managers always strive to do. They don’t become complacent or satisfied with where they’re at, as they manage their operation. They’re constantly looking for ways to do things a little bit better – a little smarter or more efficient.

Just by asking those questions and looking at their farm in that way, they’re already on the path toward becoming a more excellent manager and creating an even better farm operation.

Getting better and better

Even farmers who are already at the top of their game can still do this. It’s about knowing yourself – your strengths and weaknesses as a farm leader – and choosing to take a closer look and determine what you could do even better. It might be a new skill you could learn to up your management game, or a tool you decide to invest in to help you make decisions better.

One thing that many farmers are finding helpful, particularly in these tight economic times in ag, is knowing their true breakevens – for whatever crop they’re producing. Having that information always at the ready helps when it’s time to make decisions for the farm. Otherwise, you’re left to guess where you’re at, which isn’t easy.

Making sure that you’ve included all the costs associated with producing your crop in that breakeven calculation is particularly important. This means making sure that all costs such as your farm’s machinery investment are included in that calculation. Otherwise, you could end up mistakenly believing that your breakeven is lower than it actually is.

When you know exactly where you’re at, and work to update those figures throughout the year and especially during the growing season, you have a better overall picture of your actual breakeven. Then, you’re able to have more confidence as you’re making decisions.

Make the assessment

Working with an ag finance advisor to get a financial analysis of your farm – that includes your breakeven costs – is vital to the decision-making you do on your farm. The numbers help you assess your farm’s actual condition.

Do you know your farm’s true breakeven costs? Are you updating and using those numbers to help you make decisions, even throughout the growing season as the crop is still maturing? Conditions change quickly, so it’s important to stay on top of this.

Here are a few questions to ask yourself to see if you’re getting the most out of your farm’s numbers:

  • Do I know my farm’s actual breakeven cost to produce each crop that we grow?
  • Have I included all relevant costs in those calculations?
  • How do I decide on how to allocate costs to each crop?
  • Do I use my breakevens as I’m making decisions for my operation? How am I currently using them to help inform my decision-making?
  • Do I update information (projected yields, costs, etc) throughout the growing season, so the data is always accurate?

Learn more: Read the new summer issue of our Smart Series publication, bringing business ideas for today’s farm leader. This issue includes perspectives on how to make your farm business more competitive, financial best practices, key ratios for leaders to watch, and more.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

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