Know your farm’s profit drivers
Profit varies across farm businesses and between years and is driven by changes in price, production and costs. Farm business managers should know how each of these key profit drivers affects their business profit. Understanding this enables key decisions, particularly around returns on investment of time and money, to be made with confidence. Knowing a farm’s profit drivers assists managers to analyse the risk and resilience of their business and make expenditure decisions within a season and between seasons.
It is the capacity of the farmer to effectively manage each of these drivers that determines a farm’s profitability under a range of conditions. Management skill is often the differentiating factor between the top and bottom performers operating in similar environments.