When the Money Stops, the Thinking Must Start01/12/2017
The calendar has flipped. We’re in a new year. Unfortunately for producers the prospects for profitability look a lot like last year. Not good.
According to a recent article in Forbes magazine the USDA is reporting that the median average on-farm income for America’s two million family farms will be -$1,412 for 2016, nearly twice as bad as the 2015 median of -$765. With a strengthening dollar likely to throttle exports and growing piles of commodity stocks, analysts really aren’t going out on much of a limb in predicting another negative number for this year.
Yet come spring the planters will roll and the fields once again will be covered fencerow to fencerow with corn and soybeans. The question for producers is there anything that they can do differently than the last two years? Einstein is credited with the famous quote, “The definition of insanity is doing the same thing over and over again, but expecting different results”.
The answer to the question of what can be done differently is actually a simple one. You start by better allocating your resources on an acre by acre basis. This type of “thinking” is supposed to be the sheer foundation of modern precision agriculture. However, when the money stops sometimes the thinking stops too. Producers sometimes abandon hard-fought progress for meat cleaver simplicity when cutting input costs. For many, the first knee-jerk reaction is eliminating so-called ‘frills’ like technology and professional precision services.
This should be considered the agriculture equivalent of cutting your nose off to spite your face. If there is one thing that can move the profitability needle to the positive faster it would probably be precision agriculture technology. According to a study published by farms.com even a 1,000 acre crop farm can see an increase in revenue of $20,000 to $70,000 per year with adopting current technology. Keep in mind that is revenue, not profit. Profit comes from effectively acting on knowledge gained from precision data that you collect.
A lot of this is plain common sense. There are two phrases that embody the hope and reality of precision agriculture today. “You cannot manage what you cannot measure” and “Garbage In, Garbage Out.” Measuring basics like yield and fertility by the acre should facilitate managing each of those acres in an individual manner. We’ve been dabbling in variable-rate technologies for years, but most of us haven’t exactly become religious about it. Blanketing a field with the same rate of fertilizer to grow 150-bushel corn doesn’t make any sense when the top of the hill historically only raises 100 bushel and the bottom cranks out 200.
Allocating inputs evenly across all acres on your farm is more or less the Las Vegas equivalent of putting $1 million plus all on red at the roulette table. That’s how you farm for average and end up fitting nicely at the top of the bell curve in USDA’s annual farm income statistics.
The harsh reality of why this is still happening in 2017 is because most precision systems on today’s farms are still not producing quality foundational precision data – hence “Garbage In, Garbage out!” Bottom line, it’s hard to make good decisions from garbage data or worse yet from no data at all.
This is 2017. There needs to be a sense of urgency—$3 corn instead of $7 corn sort of prods such anxiety. Your New’s Year’s resolution needs to be to get your “Precision House” in order. That means making a commitment both financially and mentally to precision. Even financial advisors overseeing your retirement get 1% to 2% for managing your retirement portfolio. Isn’t knowing where to best allocate millions of dollars on your farm worth at least that much? Food for thought in a new year.
Source: Ag Professional