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South Central Iowa | No problem! I have been wanting to start an input thread for a while, just to see where other people are at. But everyone gets kind of up tight about what they actually spend, and I get that. Some people don't want to give away what their margins are because they are in competitive rent environments. That makes total sense. But maybe throwing it out there could give some one an idea of something to aim for or maybe someone would point out where I could be cutting.
Yes, I spread everything every year, but I do not spread myself. I have a co-op do our dry fertilizer. The bulk fertilizer I mentioned above is only anhydrous. We could probably earn $7-$9 an acre back if we did it ourselves, but between cattle, pre-plant spraying, NH3, getting ready for planting, markets, and life in general, we don't do it ourselves. I also buy my seed, I am not a dealer. Everything else though is in house.
A different rant:
I find myself applying a lot the concepts I learned in from my management degree to farming. This is Porter's forces of competitive rivalry at work. Move down the value chain to the supply side and do as much internally as you can. Farmers are a threat of new entry because they are a threat of substitution for themselves. When you move down the value chain, you are moving up relative to the suppliers. This increases your ability to leverage your buying power. If you are a credible threat of new entry/substitution, you have greater power over your suppliers. Then when you give business and show a degree of loyalty, you engender the appreciation and loyalty of your supplier. This makes negotiation of prices easier and your customer service better.
Division of our operation into smaller units is another concept. Each of these operations, planting, combining, trucking, spraying, etc..., are the equivalent of a Strategic Business Unit. Because we segment each step, we can assess the cash flow and profitability of each SBU. This assessment us to make a cost-benefit analysis from a purely operational standpoint and determine, using the portfolio matrix, which SBU is worth reinvesting money in by purchasing new equipment or which should be limited by repairing old equipment or possibly outsourcing the task.
Farming is a complex task and has many junctions. Different management choices can lead to different cost structures. Thorough cost-benefit analysis coupled with an honest assessment of the value of each step in the process of growing a crop can help a farm be much more profitable. | |
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High cash rent
