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Corn+Soybean Digest

Three Keys To Profitability In 2001

A good friend and long-time customer gave me the most recent Southwest Minnesota Farm Business Management Report. It provides analysis and income summaries for 453 farms in that area. By studying these records I can see how a few small changes can create a huge swing in farm profitability.

In the profitability keys listed below, I'm writing about the difference between the average and the top 20% of farms. The analysis is for owned farmland.

Based on the Southwest Minnesota report, here are three sure - fire ways to turn a profit this year:

1) Do everything possible to maximize yield. As the "Corn Profit Summary" table shows, the top 20 of these farms averaged a 13.6 bu/acre higher corn yield than the overall average yield. That production difference was usually the difference between breaking even and showing a good operating profit. The soybean yield difference was 4.6 bu/acre. Again, that's enough to make a significant difference in the bottom line - even with soybean prices at just $4.50/bu.

2) Control expenses. This is obvious, but I was amazed that the top 20% got higher yields while spending $20.80 less on each acre of corn and almost $20/acre less on soybeans. The larger farms were able to spread their equipment costs over more farm acres and paid less interest per acre. Machinery and interest expenses are two variables that can have a large impact on your bottom line.

3) Manage risk with crop insurance and a good marketing plan. The top 20% of farmers saved about $1/acre in insurance expense and averaged just 2/bu more on corn sales and 7/bu more on soybean sales than the average of the group. The big difference was in how well they used the farm program to increase farm income. Our studies show a $40/acre swing in farm income since last fall - depending on how and when you locked in your LDPs.

To ensure the long-term viability of your operation, you need to strive to be in the top 20%.

I acknowledge that changing some of your business practices may not be easy. But be aware that how successfully you recognize and make these changes to your business will have a huge impact on your farm profitability in the next three to five years.

Attitude is very important. Farmers making the most profit have positive can-do attitudes. They do not complain about low prices, but emphasize efficiency. They look at how to maximize dollars per acre and profitability.

My friend made these three observations: - You need a large enough operation to be fully employed and have a minimum annual gross income of $200,000.

- Some land ownership is desirable, but other assets provide more return.

- Good managers get high yields while controlling costs.

View the entire annual report and other regional reports at

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