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What Separates High-, Low-Profit Farms?

What Separates High-, Low-Profit Farms?
It boils down to land management, says a North Dakota Farm Business Management Program instructor.

Allen Graner, a North Dakota Farm Business Management instructor at Williston, N.D., says each year the most common question he gets is, "What's the difference between the 20% most profitable and 20% least profitable farms and ranches participating in the program?"

Good land stewardship is part of difference between high-profit and low-profit farms.

"The easy answer to this question is that the high-profit producers have either larger farms or the highest yields and are receiving the higher average selling prices for their commodities," he says. "In reality, the difference goes back to a producer's ability to manage his land resources at a reasonable cost. Most producers will have relatively the same direct input costs associated with the production of a crop or livestock enterprise, except in the area of the cost of their land resources and the make- up of their overhead costs."

These high-profit producers also are "relations people" when it comes to dealing with cash rented land, Graner says.

"They have a tendency to not only be good soil stewards of their land resources, but they also have a good relationship with their landlords, which is valuable when there are wild variations in the increases in land rental costs. The correct matching of proper enterprises with the available land resources can in most instances mean the difference between being a high profit or a low profit producer."

For more information, see "How's your land management?" on page 60 (North Dakota edition) or page 61 (South Dakota edition) of the Feb. 2014 Dakota Farmer. It is also available online.

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