Practices of Profitable Producers

Managing the details efficiently leads to profitability.

- Raylene Nickel

What is the single most important thing you can do to operate profitably? Turns out, there is no one silver bullet. Profitability lies hidden in the many nooks and crannies of a farming operation.

“Profitable producers are experts at efficiency; they do everything just a little bit better than average,” said Garen Paulson, University of Minnesota Extension educator in farm business management. “They can produce top crops at lower cost without sacrificing productivity. If you can manage many costs just a little bit better, our research shows that these small improvements really add up.”

Paulson leads the field staff for the Southwest Minnesota Farm Business Management Association. The association is made up of 120 mixed-enterprise farmers sharing financial and enterprise data. From the data, staff economists provide association members with individualized financial and farm enterprise analyses and confidential peer-farm benchmarking. They also consult with farmer-members one-on-one.

The association’s farm-analysis data shows wide differences in net farm income. In 2023, the data showed average net farm income to be $34,756. However, the average net farm income for the most profitable 20% of farms was $319,446, while the least profitable 20% of farms had a net loss of $332,305.

“The average net farm income in 2023 was skewed lower by lower profit in larger livestock farms,” Paulson said. “This was a change from 2022, when farms of all profitability levels experienced positive earnings.”

While efficiencies in management can certainly improve profitability, weather and prices of crops and inputs also play a key role in shaping profitability.