Whether you work in agriculture or any other industry, increasing profit margins is one of the topics that always remains top of mind. For farmers, increasing profit margins means maximizing labour, spending efficiently, and increasing revenue so that the business retains as much profit as possible. As all farm managers know, increasing profit isn’t as simple as raising the prices of commodities.
Fortunately, there are a variety of strategies that farmers can adopt to maximize profits without sacrificing the quality of their product, while maintaining strong relationships with buyers.
There are plenty of ways to manage costs and cut back on unnecessary expenses as a grower. However, before you can do that, you need to ensure that you are keeping records of everything. Recording expenses such as input purchases, equipment maintenance, farmland costs, employee wages, etc., is a good way to identify areas where you could cut back. The first step to cutting costs is knowing what you can do without and what you need to keep.
This one might seem obvious, but there are plenty of ways that a grower can influence their productivity and set themselves up for success.
Plant Timely and Efficiently
Growers need to be strategic about seeding intentions. Factors such as soil temperature, water saturation, the number of days the crop requires to reach maturity, and logistics are all important considerations in planning for success. According to Farm Management, various tests can be performed to test how ready your soil is. Seeding too early, or too late, limits yield potential.
The first step in preparing for a successful seeding season starts the year before, when the combine is setting the stage for next year’s crop. Redekop’s Mav Straw Chopper, is a valuable tool in preparing your land for seeding by ensuring a consistent, fine cut, while allowing your seeder to cover more ground with greater accuracy at a faster rate.
Understand Yield Potential
Understanding the yield limiters of local crops and conditions, as well as becoming educated about the specific crops being grown, will help manage expectations. When selecting crop types and varieties, it is essential to understand benefits and detriments of options available in the market. Understanding and planning for realistic production goals is crucial in increasing profitability.
Ensure Proper Water Management
Water is an essential part of farming, and crops rely on proper water management for survival. It’s important that growers manage their land with the goal of providing crops with enough water, without suffering the penalties of field saturation. Proper drainage will prevent water logging, mitigate disease, and balance the soil pH, which is important for healthy plants.
Utilize Crop Rotation
When the same crop type is planted in the same place year after year that ground will amplify selection and proliferation of weeds, insects, and diseases that crop is most susceptible, or least competitive, against. When this happens, increasing levels of chemical fertilizers and pesticides become necessary to keep pest populations below economic thresholds.
Crop rotation is the practice of planting a variety of crops, consecutively, on the same plot of land in order to improve soil health, optimize nutrient requirements, and combat pest pressure. Proper crop rotation strategies result in healthier crops, healthier soil, adjustable fertilizer costs, and a decreased reliance on pesticides, all of which will increase yield and allow growers to chase higher yield targets and ultimately retain a greater percentage of their revenue.
Sell to Local Businesses
Supporting local has become a popular trend. With more and more people looking to adopt greener lifestyles, live sustainably, and reduce their carbon footprint, the demand for locally grown products has increased. As such, grocery stores are prioritizing buying locally to meet these consumer demands.
Growers should take advantage of this demand. According to Chron, selling to local community markets and grocery stores can help a grower decrease transportation costs. A decrease in shipping cost increases profit margins by cutting down on fuel costs, reducing strain on delivery equipment and decreasing the time required of the deliverer, thereby reducing company payroll.
Adopt New Technologies
Traditionally, the adoption of new equipment is slow in the agricultural community. This slow adoption is, in many cases, costing growers in the long run. According to Chron, purchasing more efficient farm equipment, including tractors, seeders and combines, can help reduce equipment costs in the long term. It’s true that growers will see increased costs up front to cover the purchase of more energy-efficient equipment. However, they will also see big savings in fuel efficiency and significant decreases to maintenance costs compared to older equipment.
One of the front runners in new equipment technology can be found in Redekop’s seed control unit. By physically destroying weed seeds, Redekop’s SCU provides a novel way to combat chemical resistance and dramatically decrease reliance on expensive and frequent chemical applications. The seed control unit is a flexible, cost-effective solution that features low power requirements and running costs, ultimately increasing a grower’s profitability.
The solutions outlined above are some simple ways you can increase profit margins for your farming operation. Taking an integrated approach to lowering costs is the best way to guarantee success.