Farming for Profit or Loss - Know Your Profitability

Tanja Folnovic

Agronomy Expert

At the end of a farming season, every farmer should be fully aware of the profitability and productivity of his agricultural production. Aiming to be productive, farmers are faced with many factors limiting a farm's productivity. Available land, cost of agricultural commodities, challenging weather conditions, problems with market access, poor knowledge and lack of new technologies all affect the performance of a farm. Farm productivity is important for many reasons; from providing more food, better competitiveness on the agricultural market to personal benefits for the farmers such as income, health and wellbeing, as well as being able to increase the outputs of labor. If you earn your living as a farmer, you should be interested in an annual farm report to analyze the profit or loss on your farm. There are a few ways to report income and expenses from your farming activities.

Yield Productivity

The land is a key farmer’s resource that defines the maximum productivity potential for a crop and its varieties. Therefore, one of the key productivity indicators is yield productivity which shows how a specific crop variety performs on one hectare/acre of land. Understanding which crop variety performs the best is crucial for future crop variety selection and production optimization.

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Good agricultural practice recommends creating a season plan that defines expected yield quantity and forecast of a selling price to understand possible income per crop and variety. If a season plan is created, you are able to benchmark yourself continuously - whether you are under performing or over performing.

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Farm Finance Analysis

Finances are crucial for every type of farm production. You can farm as long as you have money. That is the reason why tracking expenses, sales, and cash-flow is so important. It is essential for a farmer to have a complete control over the total cost of production. Tracking cash-flow is essential because simply selling all farm goods doesn’t guarantee profitability. However, actually getting paid for all of the goods does, hence the importance of keeping cash-flow above zero. Agrivi helps you manage finances in a simple and intuitive way and ensures you keep careful track of all transactions leading to transparent and clear overview of your sales, expenses and cash-flow.

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Return on Investment (ROI)

Understanding the yield productivity and cost efficiency of crop production is key for understanding the ultimate farming KPI (key performance indicator) – the return on investment per crop. Return on investment per crop is calculated by comparing the total sales and expenses for every crop production. This offers a clear overview of investment status per crop and quickly displays whether a crop is profitable or still waiting to break-even.

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Understanding the ROI of a crop production helps with understanding which crops are profitable.. Having profitable crop production is the key to having a sustainable and viable farming business, especially when resources such as land are so scarce. Running a farm without insight into all aspects of its productivity is like driving a car blindfolded.

Agrivi helps farmers be more profitable through various sets of dashboards and reports built for ease of analysis and data-driven decision making.