A Fresh Look At Farm Profits

Inside Dakota Ag

Are you hoping for a profit this year, or are you planning for one? There is a difference and its easy to see when you rearrange the profit formula.

Published on: February 6, 2014

Try rearranging the formula for calculating profit and see how it affects your planning for 2014.

The profit formula is:

Income – Expenses = Profit.

Joshua Dukart, a technician with Burleigh County, N.D., Soil Conservation District and a certified holistic management educator, says to rearrange the formula this way:

Income - Profit = Expenses

Looking at your farm or ranch through this formula gives you control of the amount of profit you desire. It also also gives you a ceiling for your expenses and really challenges your ability to help them in check, Dukart says.

 “You have to be realistic. But if you take your profit out up front, you plan for it instead of hoping for it. It forces you to become creative and to substitute management for money, with the goal of making a profit every year.”

Some other tips from Dukart:

  • Understand choices when margins are tight. When you have tight margins, you can either increase that margin, or do more of same and get bigger. It’s usually easier to continue doing what you have in the past than to rethink how you do things. But some farmers and ranchers are scaling back so they can focus on doing on a better job on smaller operations. As a bonus, their quality of life improves. “When asked if they would like more time or more money,  9 out of 10 people say more time,” Dukart says.
  • Don’t bet against Mother Nature. We like to blame Mother Nature for too much or too little moisture, storms, temperature, wind, etc. but we create a lot of work for work for ourselves when we go against Mother Nature. “With all of the power she can wield, why would we not work with her?” Dukart asks.
  • Be careful when replacing biology with technology. “I’m not saying we should go back to farming like we did 60 years ago, but we need to move away from being dependent on outside inputs where we rob Peter to pay Paul,” Dukart says.
  • Don’t settle for low production. If crops aren’t growing well, or if livestock aren’t gaining efficiently, people tend to look at genetics. “But most of the time it’s not a genetic issue. It’s a nutritional issue,” he says.
  • These tips are from “Taking a holistic approach to farming,” (Dakota Farmer, Feb. 2014, page 61, N.D. edition) by Lynn Betts. If you don’t have the issue, email me at ltonneson@farmprogress.com and I’ll send you a copy of the page.