The Keys To Financial Success In Agriculture

Running an agricultural business successfully requires not just hard work but also the recognition of the current situation and the search of the ways to make it better. Primarily, it implies managing farm finances, including taxes, loans, major purchases, and labor costs with the aim to cut expenses and increase profit. And currently, there are many effective business algorithms and techniques to follow for achieving this goal.

Keys to Agribusiness Success

It’s critical that farmers treat their activity like any other business. And the key to success in this business is to be a low-cost producer. As the Purdue Distinguished Ag Economics Professor Michael Boehlje says, farmers should tell themselves every day, “My job today is to lower my costs”. So, here are some tips that could help achieve that.

Risk management

The risks in farming are connected with weather, yields, prices, government policies, global markets, and more, causing significant changes in farmers income. Risk management is about searching alternatives that help reduce financial effects of those uncertainties. To help with that, farmers could take advantage of crop insurance, forward pricing, and field monitoring tools that help to predict weather-related and other threats.

Money and capital management

This is about protecting the working capital by extending the terms for items purchased on 10 or 20-year terms. That would help lock in current relatively low interest rates on capital expenses.

Weak and strong areas identification

It’s always more profitable to do fewer things but better. And it starts with identifying the areas that cost more money, while trying to simplify operations and automate processes where possible.

Asset utilization

This is about increasing returns on assets. For example, leasing expensive agricultural equipment instead of buying. Another option is to consider using joint venture and shared machinery to intensify production.

Increasing margins

This term implies cost control via buying smart, using only proven management practices and technologies, and marketing instead of pricing.

Efficient time management

First thing to do when it comes to time management in farming is prioritise tasks. This means spending time on the most important tasks first. Having a list of jobs to be done and listing them by importance may help with that. Another critical point is to have skilled employees to do important but time-consuming and routine tasks.

Boosting sales

It’s critical to focus on increasing productivity, which is about generating more volume with less expenses.

Following a strategy

Whatever strategy was chosen for the agribusiness, it is important to follow it while focusing on product and process innovation. This helps to set specific goals and make decisions necessary for their achievement.

Connecting with a customer

This is about learning more about your customers’ needs and expectations and following exciting business trends. Understanding customers allows for an opportunity to create value for them via the service, delivery, and quality.

Getting extra help

This can be done by hiring agro consultants or via building a network with already successful farmers and non‐farm business managers.

Overall, it all comes down to a single purpose of reducing costs while increasing profits. Let’s get into more detail on how to achieve just that.

Ways to Cut Expenses and Increase Revenue

The most significant point in cutting costs is identifying the biggest cost drains. The first step is usually to assess the crops and plani only the most profitable ones. Besides, farmers can identify the most productive fields and field zones to help them use resources accordingly, based on the needs of different land areas. This is where online filed management tools come in handy. EOS Crop Monitoring is a reliable and easy-to-use tool that allows monitoring crops remotely using satellite imagery and data analytics. By automatically assessing vegetation indices, the tool can easily identify the most productive fields and field zones. Based on these insights, growers can make fast and well-informed farming decisions, thereby cutting costs on resources, including water, fertilizers, and pesticides, applying them only where needed. Besides, the tool allows for a remote scouting management that is much easier and more cost-effective compared to the traditional scouting management. Farmers use the tool to identify the precise areas within a field that show the signs of decrease in biomass health and send scouts to inspect them, thus considerably saving time, resources, and money.

Another option is changing farming practices by using no-till techniques to reduce the need for machinery. Also, growers can consider partnering with neighbors in cooperatives, sharing equipment and other resources to solve their issues more efficiently.

In the long run, a successful farming business is all about adapting to any changes in the market and knowing how to combine innovation with classic business principles. Agro business has its own characteristics that should be considered by farmers wishing to achieve maximum financial efficiency. And as the agro market is constantly evolving, offering new ways of optimization and management, farmers should keep track of those innovations, implementing them in their business practices to generate higher revenues.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes