Wednesday, January 25, 2012

What is it we are trying to Benchmark?

A main goal of the M.A.I.N. group  is learn from peers in farming operations with similar challenges. One of the ways we are trying to learn from each other is by comparing or benchmarking the operations in the group. But, at each group meeting we have discussed what is the best method for benchmarking. How do we account for labor and management? How do we break out equipment costs, etc.? Are we asking the right questions? We have taken as much time to discuss whether or not we are making the correct comparisons as we have discussing the comparisons themselves. These are good discussions and these questions are common throughout family businesses, not just agriculture.

An ag economist friend of mine said that these questions have employed numerous ag economists and consultants throughout the years. Steve Hofing, from Centrec Consulting Consulting Group is going to try to help us answer some of those questions. A link to one of Steve's presentation on growing a farm business is linked here. We have given Steve a copy of the anonymous farm numbers as well as our new format for reporting numbers.

In a day or two, each M.A.I.N. member will receive a new version of an excel file to report farm numbers. You will see that the formatting is different and the benchmarks are different as well. We are going to follow the methods outlined in the Illinois Farm Business Management Program and used by similar programs across the country. In those programs, they try to evaluate nonland costs and total costs. In addition, they compare these costs to yield (cost, $ / bu) and compare returns relative to variable costs, total nonland costs and total costs.

So, look for the Excel file coming to you in a day or two. And, look forward to Steve's discussion with us on March 3, 2012 in Nashville.

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