Profit/Loss Mapping and How We Can Use This Data
In today’s agricultural world, we all know that the markets are down, and margins are tight, making it very difficult to stay afloat. Recently, we started using the Financial Tracking and Analysis Wizard within in AgLeader SMS to derive some Profit/Loss maps. In doing so, there were several things that really stuck out.
There are 2 fields that are only separated by a quarter mile, however one of them was profitable and the other was not. Yes, there were some differences in the inputs, but I want to show how important Profit/Loss Mapping can be and how a grower could use that for decisions in the future. In this case, both fields have the potential to be very productive. These fields are soil sampled every 2 years and fertility levels are kept sufficient.
Below are several maps of these 2 fields and it brings up several interesting questions:
- What was so different between both fields? Hybrid, Soil Type, Drainage, etc?
- What went wrong in the first field?
- How can we use this data to improve in the future?
- What other options are available to increase profitability?
As you can clearly see in the maps, the first field average 205 bu/ac but somehow managed to have a loss of -$11/ac. In field 2, the yield was 231bu/ac but was very profitable at $167/ac. Field 2 did out yield Field 1 by 26bu, but that still does not make up the difference in the average Profit/Loss Analysis.
There was another interesting idea that came from creating these Profit/Loss Maps. What if you looked at your least productive acres(along fencerows, ditches, or woods), and managed them differently, or cut them out of production entirely. I know that nobody likes to hear that they should farm less, but if that could improve your net income, wouldn’t you at least consider it? If you didn’t want to cut your acres back, I would suggest that you seriously research ways to cut the input costs on these acres. The following map is an example of a situation where the grower could “cut” those acres out of production to improve their bottom line.
In my analysis on this field, if the grower would have cut these acres out of production, they could have saved around $1500 worth of inputs. Also, the profitability of this field could have increased significantly to closer around $200/ac.
So, as we get closer to the 2018 crop year, ask yourself: What can you do to increase your profitability with the resources that you already have? If you have any questions or would like more information on Profit/Loss Mapping, I would be more than happy to assist you.