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What sets your farm apart?
How do you best distinguish your farm from your neighbors? Is it in your land? Management practices? Machinery?
In a decade-long study, the results of which were released recently by Kansas State University ag economists Kevin Dhuyvetter, Cooper Morris and Terry Kastens, farmers said the most important "management factors" to their farm run the gamut, but oftentimes circle back to what it takes to be the lowest-cost producer, not necessarily the one that nets the highest yields or prices.
The study was conducted with just shy of 700 farmers in Kansas from 2001 to 2010. The primary goal was to identify how frequently farmers differentiated themselves from others in their area based on a set of "management measures":
- Seed costs
- Custom hire
- Less-till adoption
- Planting intensity
- Government payments
- Farm size
"This analysis measures how persistently farms differentiate themselves from their neighbors’ average performance and management measures and how that relates to profit gains," says Dhuyvetter. "We draw conclusion from differences, not absolute values for farm profit, prices, costs, or the like."
The economists used a statistical model to quantify the potential profitability of a farm according to the surveyed farmers' emphasis on the management measures examined in the study. In other words, they looked at the influence on a farm's balance sheet of each of the factors like yield and land rent.
"Although the only technology adoption variable explicitly considered was our less-tillage proxy, other technologies also might be important in explaining profitability. Consequently, because technology adoption often can be measured by farm size (larger farms tend to be those that adopt new technologies), our statistical model also included a variable of farm size (the percent of acres greater or less than the regional average)," Dhuyvetter says. "Variables that represent core producer management abilities and farm characteristics were included -- planting intensity to marketing to size -- that explain a significant amount of the variation in farm profits."
The result: Factors closer to the ground and the actual production of the crop have a greater influence on effective farm management than anything else. Cost of production and crop management practices like planting intensity and tillage are the ways most farmers can "differentiate themselves from their neighbors," Dhuyvetter says. That's because, he adds, they are easier to control in the short run and can be quantified much quicker.
"Increasing size would make the most significant impact on profitability; however, this is generally outside the control of the manager -- at least in the shortrun. Nonetheless, it is important for farm managers to recognize this “economies of size” impact as they think about long-term goals and objectives for their operations," Dhuyvetter says. "Of the factors that are likely more manageable in the short run, being in the low cost group of a region’s farms and adopting technologically-related farming practices (e.g., substituting herbicides for tillage and increasing planting intensity) were more important than being in the high price group or getting high yields."