High-profit farms in the North Dakota Farm Management Program aren't simply high profit because they are bigger, says Keith Torgerson, one of the program instructors at Wahpeton, N.D.
He says high-profit farms tend to:
- Have more consistent yields and their yields are higher than those on the average farm. The reason for this yield difference is partly due to weather, but the high-profit farms tend to do a better job of focusing on all aspects of production including drainage, technology and planting those crops whose genetics best fit the soil type for that area.
- Spend more time analyzing what type of crop insurance best fits their cropping program and their land type. They do not buy enterprise unit crop insurance because it's cheaper, but because it does the best job of reducing risk.
- Work with others farmers to lower costs. This would include buying inputs together or sharing a piece of equipment, thus reducing overhead or fixed expenses
- Benchmark their performance. Benchmarking, or comparative analysis, helps them determine if their decisions on machinery and inputs are having the desired effect on their cost structure for the individual enterprises.
- Look at their total costs per enterprise and analyze each cost.
- Have a strong management team and distinct business and personal goals. The management team is made up of agriculture professionals that are working with the farm, and usually includes the crop insurance agent, banker, farm management instructor, veterinarian, crop consultant, and any other person who is working closely with a specific area of the farm business.
- Use their marketing decisions to reduce risk. They also have a plan in place to reduce the risk of what the farms greatest risk might be. For example, a farmer who is highly leveraged will have a plan in place to reduce his risk on interest rates should interest rates go higher. A large dairy farmer would need to have a plan in place if his hired labor did not show up for work. The high-profit farms tend to seek out answers to problems before they arise.
- Use the information from all of their records to help them determine where to spend their time and to get the best return on their investment of both time and money. They have a very positive attitude and adopt new technologies quickly and appropriately.
Read more in the October issue of Dakota Farmer.