For Release April 10, 2001

AGRI-VIEWS
by Chuck Otte, Geary County Extension Agent

In these times of tight farm economies, everyone is looking for that secret formula that will make their farming operation profitable. In a nutshell, I can tell you that there is no secret formula. Producers look at yield, market price, size of operation, age of operator, color of equipment and the name of the seed company on a cap trying to find the profit.

Yet, every time we do an annual economic analysis, we seem to find the same thing. Regardless of how you arrange the groups of farmers/ranchers, we see a broad range across all groupings. There are profitable small farmers and there are unprofitable small farmers. There are profitable large farmers and there are unprofitable large farmers. The same holds for age, enterprise make up, color of equipment or any other grouping you can imagine.

Profitability is an elusive target that develops on a case by case basis. We have, however, over the years, been able to identify a few items that can help predict profitability or at least help get you on the road to profitability. And we start that list by what’s not on it. Yield and price are two items that producers always mention, yet are often not very controllable by the producer. If we are attempting to keep our crops and livestock herds at good production levels, then that’s about all that we can do. Price for products sold is also something that we are truly limited on what we can do. In reality, while price is one of the first things to think of, most people simply want the highest price for that year, without ever ever knowing what price they have to have to break even!

So the first thing to pay heed to is record keeping. Keeping good records is the last thing most producers want to do, yet is probably the most critical management item. If you are trying to improve profitability, yet have no idea of what it costs to produce your crops or livestock, how are you going to know what to do? If you don’t know if you have above or below average costs in any management area, how will you know what to adjust?

With the high cost of nitrogen fertilizer and fuel, there may be a natural inclination to arbitrarily reduce these costs. The number of tillage passes is somewhat controllable. We don’t seem to have as much recreational tillage as we used to, but there are probably some reductions that can still be made. Optimum fertilization rates do not change with increasing fertilizer costs. Blindly reducing application rates may cut your fertilizer bill, but increase cost per bushel. Soil test and only apply the fertilizer you need based on that soil test.

I have a lot of information available on what the average costs of production are in our area. I have average costs for various sizes of farms and various farm productivity levels. We can compare your production costs against others. This can become your yardstick so you can see where you measure up. Are your repair costs to high? Maybe it’s time to bite the bullet and buy a different tractor. Maybe you have newer equipment so repair costs aren’t a problem, but maybe you have more machinery than land and need more acres to spread those costs across.

We can do all sorts of comparisons. But we need something to compare with. I’ve got the averages, you’ve got to develop your own figures. And they have to be good solid, meaningful, realistic numbers. A guess and a golly won’t cut it since any comparison is only as good as the data we compare with. And once we know where improvements can be made, you have to be willing to make those changes. I never said it would be simple, but I can help you find those little areas that can make all the difference!

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