The Road Warrior of Agriculture

Sharpen Your Pencil!

Knowing your cost of production is not going to be an option but a requirement for the producer that aspires to be profitable.

Drawing from the Minnesota West Farm Business Management summary finds a wide spectrum in cost on all enterprises.

For example, on soybean enterprises that were cash rented, the total cost of production per bushel was $5.47 on 286 farms in 2001. Further analysis finds this cost declining to $4.24 per bushel on the top 20 percent of profitable farms, compared to $6.98 for the low 20 percent. As profitability increased, cost of production showed a decrease.

For farms that were owned, the total cost of production was $4.62 per bushel on 235 farms in 2001. The highly profitable farms had a cost of $3.74 compared to the low 20 percent of profitable farms’ cost of $6.31. This was nearly a $2.50 difference.

One of the farm management instructors uses an interesting measure of machine and man cost per acre. His top 20 percent of producers have a cost of $22 per acre, including machinery cost, hired and management labor. The low 20 percent had a cost of about $60 per acre.

Lesson Learned

Fully deployed human and capital assets are becoming even more critical in a globally competitive environment.

In a commodity business, keeping overhead costs low and using cost control techniques will be key elements for success!

On the Road?

Last week I made it to Texas, but the snow hit Virginia before my flight could leave for Canada. I plan to head up to Toronto this week, but with more winter weather headed in, I might be grounded again. The one thing you can never control is weather. I will also address the National Block and Bridle Convention in Washington, D.C. this week. This year the Virginia Tech chapter is hosting it. It should be an energizing conference!

My e-mail address is:

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