Managing Fixed Costs, the Key to Profitability in 2017

For most growers, this will be another year of tight margins and lowering production costs will be a necessity. Evan Hahn, Vice-President Credit-Agribusiness with Farm Credit Mid-America, says tracking your fixed costs is the key to profitability in 2017. “At Farm Credit,” he stated, “we encourage producers to keep an eye on their fixed costs to determine is those fixed costs are positively or negatively affecting their bottom line.”

He told HAT good record keeping is the best way to track your fixed costs, “This provides a fuller picture of how your costs are impacting your production costs as well as the profitability of your entire operation.” Hahn identified the top two fixed costs that farmers need to track: equipment costs and land costs.  “This is an ideal time for growers to look at their equipment utilization, and ask themselves which equipment to I need to have vs. what I would like to have, and are there things that I am not fully utilizing,” Hahn said. On the land side, he said growers should begin with an honest assessment of the profitability of each acre, “The land that is not generating a positive margin can stress an operation.” He added, the better your information, the better prepared you will be to negotiate rental rates with landlords.

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