How Farmers Lose Profits in 2019: 5 Steps You Need to Follow to Save Your Money
Farming is full of challenges, and this isn’t going to change in 2019. But there are steps that you can take to stop losing money. You can reduce your costs, and increase your profit margins for the future if you take action now.
Step 1: Understand Your Finances
“Riches abuse them who know not how to use them”. Before you can make any changes, you first need to understand where and why you’re losing profit. Make sure your accounts are up to date, as this is where you’ll get valuable insights into the finances of your farm.
Henri Bierens from the Netherlands believes that the most important metrics to consider is the cost of produced product/ton/hectare.
People say, record keeping will not help in making/saving any money. But I say, it is the first part and you need to combine it and go at the micro level to see exactly where the costs are and why this field produces less than the other, etc.
Some analytics can significantly reduce time and cost. For example: which fertilizer is better, more cost effective etc. If certain things could be done by software it would make a farmer’s life very easy.
Competition is increasing and we have to watch the cost as at the end of the day I would know whether I have made a profit or not.
The first step toward understanding your finances is to keep records from your field operations. And we know that many farmers are still doing that on paper, then they need to go to the office and insert this data into a computer. They often skip doing that because they are very tired and then they lose that piece of paper.
You should start using your smartphone for making notes. There are many record-keeping apps available for farmers.
The best way to keep the information about your field operations is to combine it with tractor navigation.
So now when you use an app for tractor navigation, it automatically saves information about your field work, it calculates how many hectares you did, how many hours you worked, which machine did you use on which field and for which operation. And if you add materials that you used and their amount the system will create a report that will be saved automatically and you can excess it any moment in the future from your smartphone or computer.
Understanding your own finances is very important. Successful farm operators make decisions based on the facts and figures. It will help you to identify black holes in your finances and to minimize your losses. You will be able to do better planning and expand your business.
Step 2: Negotiate
There are many areas where you can renegotiate your agreements, for example:
Bank
Building good relationships with your bank manager is always good. You can give regular updates about your business performance and discuss future plans.
Your bank should be interested in your business succeeding. If you want a better deal on your accounts, just talk to the bank about what can be done. If you want any loan repayments to be lower, ask the bank how they can help do this.
Your bank may be willing to talk you through refinancing options, or other methods of making your finances work better for you.
Merchants
You may be able to renegotiate deals with your merchants. Be curious about their business objectives and search for win-win deals.
You should also look at new local merchants. Local merchants tend to want to engage with local producers. Be proactive and ask about products types and volumes they want at specific times of the year. You should also ask what you would need to do in order to be the producer the merchant calls if they’re short of product.
Merchants will also be able to talk to you about what the future of the market looks like. They tend to have a greater understanding of the markets, so will be able to give you valuable insights into how it should perform over the coming months and years. However, you should remember that markets can be volatile, and even the most experienced merchant can’t guarantee how the market will perform.
Step 3: Productivity
Productivity isn’t just about being busy. There’s always going to be some job or task that you need to do, but is it the best use of your time? There are a few factors to take into consideration here.
Hiring Employees
Doing farming means that you need to be able to do everything: be a vet, nurse, builder, plumber, electrician, handyman, and more. But delegate boring repetitive tasks is a great way to free your time for more important business development activities.
It is for sure a challenge to find a good employee. In this case, you can partner with your neighbor. We know from the experience of our customers that it can work quite successfully.
Having somebody else working on your farm can cause a lot of managing issues too.
But new technologies again can help you with some issues. For example, you can use “Saved track pattern” in tractor navigation app for farmers. So you can record your track and your employee will just follow it. Because nobody knows better than you how to drive your field.
It is also possible to mark areas in the field with stones or deep pits that your apprentice don’t run on them and avoid tractor breakage.
We are also working on team management functionality, with that feature you will be able to assign tasks to other people and to see the progress and quality of the performed work. Do you find this feature useful? Please let us know.
Being Busy Or Being Productive
Multitasking used to be considered a good thing to do more things within a shorter period of time. But researchers suggest that multitasking can actually reduce productivity by as much as 40 percent! So it is better to focus on one task until it’s completed.
Using an automatic steering system though can help you to free your hands during the field operations and you can spend this time on other tasks: checking your emails, making important phone calls.
GPS tractor systems like FieldBee helped me doing fieldwork more accurately even after driving a few hours. I was able to concentrate more on operating the implement and improve the result of my fieldwork. I think I saved about €20-40 per ha. That is a lot these days.
- says Dominik Diesmayr, a farmer from Austria
Modern Technology
Modern technologies in agriculture can reduce costs and increase productivity. Some farm processes will be completely automated in the future. Until that moment there are already many new smart devices and programs that can significantly improve farmers work.
For example, everybody knows that a huge amount of resources is wasting every year because of inefficiencies during field operations: spraying the same areas multiple times, missing spots during spraying and seeding etc.
It is known that automatic steering with RTK accuracy can significantly reduce both overlaps and missed spots. All farmers who have tractors dream about precise automatic steering system.
Although such systems are available on the market from the 90s only 3-5% of all tractors are equipped with them because they were very expensive and complex.
But time is changing GPS and auto-steer systems are getting more and more affordable and easier to use and install. There are a lot of GPS systems that has an affordable price and can make your life much easier.
Step 4: Invest In Your Farm Business
For some people, the advice ‘you have to spend money to make money’ seems counter-intuitive. It can be easy to be lulled into looking to gain profits by saving, but it’s important to invest in your business. Investment usually means that you will have to set down some capital. Here our advice on building relationships with your bank or partnering with your neighbor might be handy. There are a few areas that you can look at when deciding where to invest in your farm.
Investing in Alternative Energy
Energy bills for farms can be expensive, and alternative energy could be a great way of reducing those costs. For example, wind turbines can provide enough energy to meet your needs. You may also want to look at solar panels, which would convert sunlight to energy, or hydro energy.
You may also, be interested in leasing a small portion of land to a wind turbine energy company. The company will install wind turbines on the land and pay the farmer, usually on a monthly basis.
Investing In Farming Methods
Investing in farming methods can mean looking at replacing or improving your machinery with automatic steering systems, sprayers with variable rate application systems. However, it can also mean investing your time into analyzing the farming methods you currently use.
Analyzing your use of chemicals is one of the first things that you should do to optimize your costs. You need to check your current chemical use and possibly look for replacement chemicals.
You should do experiments in different fields with different chemicals and check the yield from them in order to make good decisions. As the most expensive product isn’t necessarily the right product for the land.
Investing in farming methods could also mean looking at becoming an organic operation. The demand for organic products is growing, which means that there is a market there.
However, organic farming methods are very different from the more traditional farming, so be prepared for a learning curve. Make sure that you do your research, talk to other organic farmers, and be prepared to invest time and capital in the transition to organic farming.
Investing in new machinery and equipment
Modern machinery has been designed to be more productive and efficient than its dated counterparts. There are already electric tractor and robot tractors available on the market.
However, even if now is not the right time to invest in a new modern tractor, you can always upgrade your current machine.
Using a smartphone and tablet with different apps for farmers can be the first step. Equip it with GPS and automatic steering system will help you to drive more accurate in the field, save materials and even complete tasks in the dark if the weather is about to change tomorrow.
But can you calculate how much exactly this system will save you money?
One of our customers who is growing potato has made a rough calculation of the expected payback of the system. He will be able to plant with a higher accuracy (with closer lines) which will result in a minimum of 2% increase in output. In the case of 100 hectares, this means two more hectares, approximately 80 tons of potato. He calculates the price of a ton as 100 euros so 80 tons will mean plus 8000 euros profit (minus the cost of seed potatoes that are used to for the extra planting, approximately 6 tons to plant for 1500 euros).
Using tractor GPS systems will also help him to cut back costs on spraying by reducing overlaps. He can waste at least 2% fewer resources which he expects to be 6000 euros for 200 hectares. Another plus side is the reduced fatigue for the driver who does not have to concentrate on the steering anymore.
Step 5: Invest In Your Farm Business
For an occupation that involves spending great amounts of time outside, farming also generates many reports. We’ve already looked at financial reports, but there are other reports as well.
Yield Reports
The yield is how much output your farm produced in the specified time period. You can make yield reports as simple, or as complicated as you want. However, it can be a good idea to make separate yield reports for individual fields. If you use yield reports, in conjunction with a tractor GPS system, you can have a full picture of how the land was treated, and how the yield was affected.
Soil Reports
Soil should be tested every year, or if this isn’t possible every two years. Regular testing can help identify how well your land is doing, what could be done to help it, and gives you a benchmark to compare previous, or future reports to. Soil sampling should be done in line with crop rotation.
Conclusion
We hope that you have found this article useful and will improve your profit this year by using our tips.
As an IT company, we believe that new technologies can help farmers a lot. So don’t waste time doing things the old way, it is time to adapt to the new world around.
“We farmers take a lot of risks. The market helps you as well in case you are not working well. The old farmers did not have schooling, but such days are over. Everyone has understood that to survive you will have to adapt to the technology.
says Hanry Bierens