Few would argue with the assertion that farming is a challenging business. Farmers need to make decisions about crops months (if not years) before they have a handle on the dynamics of supply and demand for their produce. An unforeseen glut could cause prices to plummet. Weather systems, pests, and invasive weed growth could undermine production. Labor shortages can impact the timing and yield of the harvest.
In the midst of uncertainty, better data and the associated analyses can go a long way toward improving bottom line performance. Historically, this exercise was confined to quarter-end and year-end financial performance assessments. While these analyses are valuable barometers of fiscal health, they provide a partial set of guideposts for the upcoming season. The business also needs operational benchmarks to support effective decision-making.
A new set of tools – called precision agriculture – provides detailed quantitative data to help farmers measure the productivity of their land by field and individual parts within the field. Armed with this information, the farmer can make site-specific decisions about how to manage the crops. For instance, data on moisture levels can lead to variances in watering cycles. Low-yield sections may receive an extra infusion of fertilizer. And a highly productive area may support greater density of plant materials.
Precision agriculture technology also improves core business processes. It produces “prescription maps” that can be integrated with the computer on an automated planter to control the flow of seeds as the machine moves across the field. A prescription map for fertilizer can be used to regulate the nozzles that dispense fertilizer, thereby varying the use of nutrients in proportion to seed density. Automation gets rid of time delays associated with manual (mechanical) adjustment of the equipment. It reduces consumption of seeds and fertilizer. And it diminishes the environmental impact of excess chemical run-off.
Whether produced by advanced software or another form of productivity analysis, profitability data by field represents a crucial piece of input to drive future planning. While an old agricultural maxim called for acquiring land and farming every inch of it, the reality may simply be that certain parcels simply don’t produce a return that justifies the investment in seed, fertilizer, and tilling. A more focused farm may be a more profitable one.
Labor represents another mission-critical area that benefits from better data. Farmers want to know: Am I paying my workers too much? Too little? Are there shortages in my geographic area that might impact my business?
As an independent third party, Aldrich conducted a comprehensive labor survey for the agricultural sector surveying a variety of farmers, ranchers and crop producers. The survey identified all relevant positions – from the least paid day worker to the most highly skilled manager – and determined the minimum, maximum, and average wages by position. The data also evaluated the associated labor supply. Armed with this information, agricultural business owners may use it to evaluate compensation structures consistent with their business requirements and tempered by prevailing rates in the market.
While better data and the deeper insights they produce cannot overcome all of the challenges faced by today’s farmer, the information provides knowledge to chart the best possible course through uncertain territory.
Meet the Author
Erik Gillam, CPA
Aldrich CPAs + Advisors
Erik joined Aldrich in 2004 and has spent his entire career focused on providing assurance audits, reviews and compilations to agricultural and farming. Erik leads the agribusiness niche at Aldrich. As a leading agribusiness consultant, Erik has experience working with a range of agricultural-related clients from small family operated farms to large cooperative organizations that…
- Agriculture and farming
- Closely-held businesses
- Audit and assurance
- Certified Public Accountant