Improve your farm’s output and financial health by leveraging industry standards.

Key Takeaways:
  • Benchmarking allows farmers to compare performance metrics and uncover opportunities to improve profitability.
  • Evaluating key areas like crop yields, resource use and labor efficiency helps identify where to optimize operations.
  • Regular benchmarking ensures farms stay competitive and adapt to industry changes effectively.

 

In agriculture, it’s easy to compare notes with neighbors or chat at the local co-op, but to truly understand how your farm is performing, you need hard data. As Mike Dikeman, economist with the Kansas State University Farm Management Association, says, “Benchmarking is as important as accurately calculating cost of production.”  

Benchmarking compares your farm’s performance to others in key areas like crop yield, resource use, labor and overall profitability. This comparison not only highlights where you’re excelling but also helps identify opportunities for improvement. Done right, it can be a powerful tool for optimizing farm management, increasing profitability and staying competitive in a volatile industry. 

How Benchmarking Works in Agriculture 

When you engage in benchmarking, you’re essentially measuring your farm’s performance against others, both locally and globally. The U.S. agricultural industry generated $532 billion in revenue from 2018 to 2023 and employs over 4 million workers​ according to IBIS World Reports. While this may sound impressive, it’s important to note that revenue per business averages around $234,000, and profit margins hover at a strong 27.6%​. This high profitability signals opportunities for farms that can streamline operations through benchmarking. 

For instance, one farm might discover that its crop yields are lower than those of a peer farm of similar size and soil conditions. By adopting more efficient planting or irrigation techniques, such as precision agriculture—where GPS and drones monitor field conditions—the farm could improve yields and profitability. 

Key Benchmarking Areas for Agriculture 

Here are the primary areas where benchmarking can drive real improvement in your operation:  

  • Yield: When comparing crop yields, the goal is to measure production per acre against regional or national standards. For instance, if the average yield for corn in your region is 200 bushels per acre and you’re producing 150, there may be areas in your farming practices that could be optimized. 
  • Quality: It’s not just about how much you grow, but the quality of what you produce. Metrics such as size, taste and nutrient content can be benchmarked to meet consumer demand and stay competitive in the market. 
  • Resource Use Efficiency: Resource management, particularly water usage and fertilizer application, plays an important role in both cost control and sustainability. Benchmarking your farm’s water consumption against best practices can highlight inefficiencies. This can lead to strategies that conserve water while maintaining yields, an increasingly important consideration in areas prone to drought. Similarly, comparing your fertilizer use with regional or national averages can help minimize costs and environmental impact. This is especially important when dealing with fluctuating fertilizer prices and stricter environmental regulations. 
  • Cost of Production: Financial benchmarks are often the most telling. Start with your cost of production, breaking it down into categories like seed, labor and equipment costs. If your expenses are higher than your peers, you can explore why and adjust accordingly. 
  • Profitability: Compare profitability metrics, such as net profit margins, against industry standards to identify areas for cost reduction or revenue enhancement. 
  • Technology Adoption: From GPS-guided tractors to precision irrigation systems, technology is changing farming. Benchmarking your farm’s use of precision agriculture tools against your peers helps you see where you stand on the tech curve. If your operation lags in automation, you may be missing out on significant cost savings and efficiency gains. 
  • Labor Efficiency: Labor is one of the biggest costs for any farm, especially given today’s labor shortages. By benchmarking labor productivity—such as output per labor hour—you can identify inefficiencies and adjust to improve productivity. Additionally, by comparing the level of training and skills among your farmworkers to industry standards, you can ensure your team is equipped to handle challenges. 
  • Innovation & Research: Benchmarking how quickly you adopt new farming techniques, crop varieties or technologies can help you remain competitive. Comparing your research and development investment to others in the industry ensures you’re putting sufficient resources into future-proofing your farm. 

Mike Dikeman stresses that benchmarking is not just about measuring performance—it’s about making better decisions.

5 Steps to Start Benchmarking 

  1. Identify Key Metrics: Focus on areas important to your farm’s success. This might include yields, water use, labor productivity or net profit margins. 
  2. Collect Data: Use tools like the K-State Financial Benchmarking Tool to gather data from your own operation and compare it to industry standards.  
  3. Analyze Performance: Compare your data to benchmarks and identify where you’re falling short or exceeding expectations.  
  4. Implement Changes: Use what you’ve learned to make data-driven decisions that improve efficiency, reduce costs or boost yields. 
  5. Monitor Progress: Benchmarking is not a one-time process. Regularly revisit your benchmarks to ensure you’re keeping pace with industry changes. 

Benchmarking is an invaluable tool for any farm that wants to remain competitive and profitable. It provides clear, actionable insights that go beyond gut instinct or casual conversations.  

Benchmarking isn’t a one-size-fits-all approach. Each farm is unique.  

Adams Brown agriculture team can help you identify the key metrics that matter most for your specific operation. Contact us today to get started on a benchmarking strategy that works for your agribusiness. 

Also published in Farm Progress.