Farm Management Software Blog

Crop Benchmarks Reveal "It's the Overhead"

Posted by Norman Brown on Wed, Nov 25, 2015 @ 08:50 AM

Moe_and_John.jpg

That's the difference between profit and loss based on benchmarks compiled by consultants Moe Russell andJohn McNutt in the November 2015 Farm Futures Magazine article, "Red Ink Coming, But How Much?"  These benchmarks were released at the 2015 FBS User Conference in Moline, Illinois.

While land costs are a prominent deciding factor, corn machinery costs varied from $65 to $211 per acre and overall operations costs (adding labor, fuel and custom work credit to the machinery) ranged from $65 to $362 per acre.  “In most of my work with clients, if you look at a cost issue, it’s usually erosion across the board — land is too high, machinery cost is high because they’re not pushing enough units through, or buying too much new iron," says McNutt. 
Providing custom work can be an alternative strategy to "selling iron," according to McNutt.  “'With custom work, people aren’t generally getting paid what it costs them to do it, but it still has a profound effect on lowering overall cost of production,” he says. “If you can add that as a strategy, it can make you more and more competitive.” 

Click here for a copy of the Latta Harris/Russell Consulting Group corn-soybean benchmarks andhere to watch a video John and Moe's presentation at the 2015 FBS User Conference.

Editor's note:  While very useful in identifying "high level" problems cost benchmark studies like this are usually based on "peanut butter spreading" of  labor and machinery costs across all acresregardless of the mix of crops grown or the unique production practices used to grow each commodity.  Moreover, operations decisions are ultimately made at the activity level (planting, spreading, spraying, harvesting, trucking, etc.)

To reach that level of accountability, benchmarking and control you need to adopt full activity-based management accounting.  More to come on this subject next month.

Click to edit your new post...

Tags: cost accounting