Does it ever strike you as odd that some folks will try to tell you what you should do but have no idea of what it costs you to do what you do, let alone … what it will cost you to do what they say you should do?
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“Every business is unique, and costs from one farm will certainly be different than costs from the next farm,” says Dale Kaliel, senior economist: production economics with Alberta Agriculture and Rural Development. “Seeding rates, fertilizer application, tillage practices, feed supplement, all will be at least slightly different … it’s what you do on your farm. If you’re managing your business for profit, it’s imperative that your budgets and plans use your costs and yields.”
Alberta Agriculture’s AgriProfit$ team is gearing-up for the next program season. They are enrolling producers and organizing the on-farm interviews to collect information that will be used to develop business analysis reports for each participant. Producers who would like to use costs of production in managing their business are encouraged to join AgriProfit$.
“Participation in the AgriProfit$ program is free-of-charge,” says Kaliel. “It does require an investment in time from producers, so the AgriProfit$ team will try to deliver tangible value to participants in return.”
Each participant receives:
- a detailed enterprise economic analysis, driving at unit costs and returns for their commodities
- a “whole farm” analysis, revealing financial performance, strengths and weaknesses
- benchmark analysis, laying out their own productive, economic and financial progress over time, as well as comparisons to “peers”
- newsletters, bulletins and analysis tools, based on standardized AgriProfit$ information
The link between AgriProfit$ and farm business success can be summed up in two phrases:
You can’t manage what you don’t measure – to reduce unit costs and improve profitability, the first logical step is to measure your current position. A basic business analysis, including key enterprises and a roll-up to the farm financial position, is a starting point. These analysis and budgets are based on your farm.
Who’s in control of this business, anyhow – without a business analysis, a farm basically directs itself. Knowledge of unit costs and financial performance helps producers focus on making the right choices, doing things right (being cost effective) and doing the right things (choosing the most profitable alternative).
“Your analysis will help you measure success and see how each choice improves farm profits, with acceptable risks,” says Kaliel. “With the right information at-hand, the manager is in control.”
The confidentiality of individual producer information is paramount. Only pooled producer information is used in benchmarking, applied analysis, and decision tool support. The focus is on creating “knowledge nuggets” and decision aids based on real farm information. “AgriProfit$ staff also work closely with local forage and applied research associations, adding value to local trials and demos, and bringing the economics and business management messages home,” adds Kaliel.
An AgriProfit$ analysis goes beyond the farm-level information you get from accounting software or from your accountant. This source of information could be limiting as it:
often masks things you could do to manage for profit within your operation
doesn’t deliver unit costs of production
is not typically comparable to broad-based industry economic benchmarks and analysis
“While these differences may seem small, they can make a big difference in how effective you can be in using your own on-farm facts,” says Kaliel.
Source: Alberta Agriculture and Rural Development