Deal with data
Quantitative data is key to producers’ success, says Kevin Dhuyvetter, specialist in farm management and professor of agricultural economics at Kansas State University.
In west-central Minnesota, Brett Duncan uses data to drive farm-management decisions. After working as an engineer for an agricultural equipment manufacturer, Duncan took over in 2005 for his dad.
In the transition, Duncan and his father developed a strategy, separating the businesses, day-to-day management, cash flow and ownership for more sophisticated financial analyses. “I use budgets and cash flow to plan decisions through the year, and adjust them to match what actually happens,” he says. In addition to cost-of-production estimates and yield estimates, Duncan uses basic business ratios to track how the business is doing.
Data has also helped Duncan build confidence in his bankers and negotiate flex rents with landlords, who are already familiar with the ground, yields and comparable rents in the area. He calculates flex rents using public information adjusted for specific field types.
Easily modified budgets help Duncan quickly tell whether or not an additional crop treatment will be cost-effective.
A variety of tools ease managing financial and farm data: QuickBooks for daily bookkeeping and profit and loss statements, and the University of Minnesota’s FINPACK farm-management software. While the farm’s crop plan was once a simple spreadsheet, Wagers now goes into far more depth to estimate grain production and storage capacity, cost of production, grain marketing and other useful measures.
He bases decisions on whether to take on new ground and cash rent on how much it costs to grow a given crop.
“We’re always looking forward,” Wagers says. He uses historical business overhead data to estimate 80% of production costs.
With a few calls to suppliers and references to previous years’ QuickBooks data, Wagers enters the estimated price per-unit of inputs in a simple Excel spreadsheet. If the price changes, he can easily change the input to reflect the new cost of production. These calculations help him make decisions on locking prices in fall or winter.