Know your numbers
Endless statistics are involved in baseball. Earned run average, batting average, and runs batted in all fill an important role in evaluating a player’s progress. Like baseball, farming can focus on numbers that, if gathered and used correctly, add understanding to what is seen in the field.
“In my 20-plus years in lending, the one constant in agriculture has always been volatility. Because there are so many variables that can’t be anticipated, a farm’s survival depends on how it is poised financially to manage that volatility,” says Chris Olson, general manager, Rabo AgriFinance. “Quite frankly, managing the pencil is almost as important, if not more important, than managing the steering wheel.”
Because profit margins have been so tight the past several years, Cornerstone Family Farms has rarely seen a financial home run. “We work really hard for a base hit and pray we don’t strike out,” says Aaron Lee, a fifth-generation farmer and general manager at the Salem, Indiana, operation. “There was a time when pretty close was close enough. In today’s economy, we have to know how we are doing down to the penny.”
For years, the row crop operation struggled with tracking and discerning what actually made money. While Cornerstone Family Farms uses Red Wing software for its accounting, Lee also works off of multiple spreadsheets when he is in the field.
“Because I don’t sit still very often, any changes I made wouldn’t get transferred like they should, which meant we weren’t all working off of the same information,” he says. “Obviously, it wasn’t a good process.”
To tie all the numbers together, Cornerstone Family Farms began using Conservis. The cloud-based platform provides useful, actionable data to help the operation find profitable opportunities and make more efficient business decisions.
“There was a lot of opportunity for human error before,” says Kim Brown, the farm’s financial specialist. “While that doesn’t all go away, there are now better checks and balances in place to make sure we are capturing things the way we should. It allows us to keep much cleaner records.”
Accomplishing that starts with ensuring every activity is exactly where it should be. “If a transaction isn’t sitting in the right bucket, any report I generate may not be correct,” Lee says. “We’ve worked really hard over the last year to make sure the buckets are labeled properly, and they have everything in them that is supposed to be there.”
The accrual-based platform tracks income and expenses based on the crop cycle, typically an 18-month period that stretches from the first dollar spent on a crop until the last bushel is settled. “This helps us make more informed decisions based on different weather patterns and farming practices we may try in a given crop year,” Lee says.
Because all costs are entered into the system including equipment, land, and inputs, they have a more realistic accounting of the dollars spent on each acre. As an input is applied to a field, it is automatically removed from inventory and allocated to that field.
“This allows us to not only see what each field is doing but also drill down to better understand what’s happening within the borders of that field, so we can make seed, fertilizer, and tillage adjustments as needed,” Lee says.
If Lee is thrown a curveball, he can now easily make changes as conditions shift. “The system we had before Conservis was good for making plans, but it was very difficult to edit if plans needed to change like dealing with a wet stretch or taking advantage of a market opportunity. I’ve learned that if it’s difficult to update the information, then it often doesn’t get changed at all. The result is a system with useless information,” he says. “In a couple of clicks, we are updated to what’s actually happening on the farm.”
Conservis is also tied to the farm’s grain cart scales, and all its bins are listed in the system. After a driver loads a truck, he uploads cart tickets, which are immediately visible in the system. “This helps greatly with yield data and also for keeping track of bin fill levels in order to plan storage needs before the bin is full. Aaron is able to plan ahead, which increases our efficiency,” Brown says.
As grain comes out of the bins, a report can be generated that helps Lee settle contracts and track inventory. Since he always knows how their inventory matches up with actual delivered bushels, Lee is able to better market bushels.
“We no longer spend our time wondering where we are financially. Thanks to this technology, we know where we are – good or bad – and are managing better as a result,” Lee says. “I’m spending more time using the numbers rather than having to prove the numbers.”
“Banks love data, but what they love even more is accurate data,” Olson says. “Whether it’s from a lender’s perspective or a farmer’s perspective, a platform like Conservis creates confidence in the numbers and helps both make sound, effective decisions.”
Adoption Barriers Remain
Yet, there are still barriers to adoption. Trust, especially if it’s a cloud-based platform, is at the top of the list.
“We recently saw another wave of farm management software enter the market, more venture capital money being pumped into others, and at least one company file bankruptcy,” says Terry Griffin, associate professor, Kansas State University. “Choosing wisely, or staying off the grid, is still important.”
The companies that will see success, he believes, will be the ones who have gathered the most acres first. Because an acre has many layers of data, Griffin says the caveat is discerning how each company defines an acre.
Upstream Ag Insights’ Shane Thomas, who recently compiled a list of the digital acres by company from publicly available data, agrees. “It is not clear how an acre is counted and what that acre entails,” he says, adding that understanding which company truly has the most acres is also a challenge because the information may not be publicly available.
Ultimately, Griffin advises farmers not to join a platform or share data from their farm until they see benefits that outweigh any potential perceived costs. “Trust is a big part of that,” he says.
In addition to trusting the platform, Lee says the simpler the technology, the more apt he is to use it, a common theme among tech adopters, especially younger users. “Sociologists have said that for baby boomers and Generation X, technology has to be as easy as one-two-three,” Griffin says. “With Generation Z, technology must be as easy as one or they will move on.”
Now that he has accurate, real-time data at his fingertips, Lee no longer feels like he is in the dugout wondering what is going to happen next.
“For years, I had no real way to control or predict the outcome. Today, I believe we have a strong playbook to work from,” he says. “We are on base and ready to take advantage of any opportunity that might come our way to move forward.”