Agricultural Economics Department
Date of this Version
2-19-2020
Citation
2020 Author
Abstract
There is nothing magical or mythical about making a profit. Each ranch/farm business has unique challenges and complexities. This fact makes it easy for operators to become overwhelmed or distracted from the fundamental factors that drive profitability. Each decision made in the farm or ranch business has an impact on profitability through one of three fundamental paths- cost, revenue and their common link productivity. As a result of being involved in the University of Nebraska Testing Ag Performance Solutions (UNL-TAPS) competition in North Platte for the last several years, I have observed some very striking factors that have helped teams (farm competitors) be more profitable. While some teams have barely made positive returns, others have netted hundreds of dollars per acre (TAPS.unl.edu, 2017 Banquet Report, page 11 or 2018 Banquet Report page 20). It is important to remember that each farm/team was on equal ground and had the same resources, the same ground with the same land costs, the same water system, the same equipment, and the same weather and market opportunities. Buy yet their profit outcomes were each quite different.
Simplistically, profit is the leftover revenue from crop/livestock sales after covering all costs. The following discussion is in relation to the three fundamental paths to profitability as listed above. For purposes of this discussion, we will refer to each of these fundamental paths as a strategy.
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