5 + 5 + 5 = Home Run

• November 8, 2009
• Paul Neiffer

Many farmers do a good job of benchmarking their operations to other operations in the same state of region.  By doing this benchmarking, they are able to see where they are either behind or ahead of other farmers.  Some get discouraged trying to get out of the middle range into the top 20%.  Most think that it is too hard to get there.

What I would like farmers to key in on is what I call the 5 + 5 + 5 = Home Run concept.  This is obtained by doing the following:

• Increasing yields by 5%,
• Increasing the price received for your crop by 5%, and
• Decreasing total costs by 5%.

Lets see how these objectives would apply on a typical farm. 

Lets assume that the average corn yield is 150 bushels with average price of $3.50 per bushel and the farmer has total costs of $2.50 per bushel.  His current net income is equal to 150 bushels times his net margin of $1 equals $150 per acre.

If we increase the yield by 5% to 157.50 bushels, the price to $3.675 per bushel and decrease costs from $375 per acre to $356.25 per acre his total return per acre will equal 157.50 times 3.675 or $578.81 per acre of revenue less $356.25 equals net return of $222.56.  By doing these 5 + 5 + 5 adjustments, the return goes from $150 per acre to $223 per acre or an increase of $73.  This equates to an almost 50% increase in profits.

As you can see, it does not take a large change in the three major production centers to yield a large increase in net income.  I suggest you review your numbers and set these 5% targets and even if you only hit 2 of them, you will be many dollars ahead.  Good luck.

 

 

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