With rising costs and increasing challenges facing agricultural operations, now more than ever is the time to think about ensuring your efficiency and productivity are heading in the right direction. If you are asked how productive your fertiliser usage is, for example, or your year-on-year rate of mortality in your livestock, would you know? Creating a baseline or benchmark to help you measure and improve your operations is key to maximising your margins.
What is a baseline?
When considering your farm or ranch’s productivity, it is important to start with a baseline or benchmark. This is a measurement of your operation’s performance before any changes or improvements are made. After all, it is difficult to calculate the success of your outputs without a figure to relate it back to. So, before making any changes to your farm or ranch, first make sure you have a baseline showing how things are today, in the area you want to track or improve.
How do you calculate baselines?
This depends on what area of your farm you are looking to improve. Perhaps you want to understand Daily Live Weight Gain (DLWG) in your stock by adjusting their feed to see if they finish quicker. In this case, you need to track their current DLWG and finish times as a baseline. If you are trying to reduce the environmental impact of your operation, then using a company such as AgreCalc
can be beneficial. This company uses a carbon calculator to determine the level of carbon produced on your farm. They offer a consultation service and the tools necessary to measure carbon emissions, increase production efficiency, and improve economic gain. If your aim is to increase biodiversity on your farm, then surveys can help to understand your current biodiversity baseline. Determining your farm’s biodiversity baseline will depend on your knowledge, experience and time you have available. There are many organisations that can help. These include the Farming and Wildlife Advisory Group (FWAG),
your local wildlife trust, the Woodland Trust
, and any specialist groups such as those focused on birds, mammals or botanical species. Farming for a Better Climate
has some useful information. In the US, Audubon
is one example. AgriWebb
can help you to keep track of your operational performance. With your farm’s data to hand in well laid-out graphs and figures, you can see where your farm is underperforming with the touch of a button.
Creating a financial baseline or benchmark.
You can calculate a baseline through measuring your operation’s performance. There are 5 key components you can use to do this. They are output, variable costs, fixed costs, gross margin, and net margin.
- Output – this includes the sale of any stock minus stock purchases. It also takes into account the fluctuation in stock value throughout the year;
- Variable costs – the size of the enterprise will affect these costs. Examples of these costs include feed, fertiliser and veterinary costs;
- Fixed costs include things like water, electricity, machinery and insurance;
- Gross margin – this is what is left after variable and fixed costs are removed from outputs;
- Net margin – this is a percentage that is calculated by dividing the net profit (your total revenue minus all operating expenses) by the total revenue
A financial advisor will be able to help calculate these for you but keeping on top of these figures is important when considering ways to improve your financial gains.
Using your baseline to measure success
It is important to determine your short- and long-term goals as clearly as possible. Decide on which metrics will help you to reach those goals and track them throughout the year. It is important that these performance goals are quantifiable. Measuring a baseline, whether that is dairy output, soil health, water quality, crop yield or landmass is a key starting point. Building on these parameters and measuring them throughout the year is a great way to gauge your farm’s success.
Examples of Other Metrics You Could Measure
There are so many different outputs to consider on your farm. How do you know which ones to measure? For livestock farmers, examples include feed conversion ratios, average daily weight gain, litres of milk per cow, weaning weight, eggs laid per hundred hens. For arable farmers, examples include crop yields per hectare, seed and fertiliser efficiency, and planting dates. Financial metrics include liquidity, solvency, profitability, financial efficiency, and repayment capacity.
Things to consider when measuring your baseline
There is currently a lot of emphasis on reducing the environmental impact of farming. Increasingly, governments are suggesting that farmers may receive greater rewards the more sustainable their practices. One goal could be to reduce carbon emissions or improve biodiversity on your farm. As moving to sustainable practices takes time, understanding your baseline now and gradually moving toward more efficient practices can set you up well for the future. When considering your benchmark for these parameters, take into account the geographical and historical data. For example, megafauna that is now extinct, once roamed the Earth in place of today’s herbivores. Their impact on the environment may have been considerable. So, when should a baseline be recorded from? What would be considered the baseline for ruminant methane emissions? Agricultural advisors would likely help to determine the baseline for your individual farm, but looking at the wider regional and global measures may be more sympathetic to today’s farmers and ranchers.
Calculating a baseline or benchmark for your farm or ranch is important for the success of your business. Without considering a baseline, it can cost you more money to produce a lower output. In a recent survey, 34% of farmers in the UK, who calculated their baseline, reported increased financial returns. Other benefits to getting on top of your baseline is the ability to compare your farm’s performance to other similar farms. Whatever your farming practices, keeping detailed records and seeking professional business advice can significantly affect the success of your farm. Sources