A guide to benchmarking for grain farmers

The value of benchmarking is often underestimated but it can provide invaluable insight and help set your farm apart.

Agriculture is a sophisticated industry, and farmers are fiercely independent business owners. Staying ahead of the trends in the market are often overlooked as managing day-to-day operations, trying to stay on top of significant weather events, and keeping up in an unpredictable economy take priority.

Benchmarking is a valuable tool that’s about a lot more than ranking your operations with other farms. It gives you the chance to see what you’re doing right and where you could improve. It’s the first and most important step on the path to better understanding your business and focussing your efforts on ensuring its long-term success.

Even if what you’ve been doing has been working to date, taking a deeper look at your operations in relation to others throughout the industry across the country will enable you to capitalize on the many opportunities that exist.

You know your business better than anyone and often, what others around you are doing doesn’t impact your operations at all. But taking a step back to examine how to help your business perform better, increase profit, and narrow your focus is worth the time and effort.

Basic elements of benchmarking

Agriculture is a trends-based business. Your farm is different this year than it was last year, though it may not always feel like that. Your current cost structure is far different than it was 10 years ago, but so are your yield and price expectations.

With all the moving pieces and changing elements of your business, it can be hard to know where you stand and if you are maintaining profitability trends relative to your peers. A benchmark shows your current financial snapshot as well as the revenue, cost, and profitability trends, in per unit format, so you can compare to similar farms to your own.

Through the benchmarking process, an advisor will guide you through the key financial performance metrics of your business to help determine what’s working well, where you could focus more attention, and what benefits could exist from further in-depth analysis or consultation.

What’s in it for you?

In the last two years, from a crop producing perspective, the assumptions of how the market will behave have been blown out of the water. Supply chain challenges, the COVID-19 pandemic, and the war in Ukraine have all had a huge impact on grain farmers in Canada.

The list of things you can’t control is long and complicated, arming yourself with the tools to adapt and gaining some insight into your business to help control the things you can, will enable you to form the guide used to make informed decisions moving forward.

Here are a few things that benchmarking can provide:

• A real-time tool to help you assess your farm’s production and revenue, alongside historical results.
• Insight into how your farm stacks up to others based on several financial indicators by gathering detailed data.
• Can be used to assist in developing annual and long-term goals and targets for your business.
• Helps you evaluate your businesses efficiencies and identify areas where you could improve.
• Answers questions like:
  • Do higher yields translate to higher profits?
  • Are my operating expenses in line with other farms?
  • Has additional land increased or decreased my per unit profitability?
• Builds a frame of reference to help with decision making in real-time and longer term.

Aside from helping you see where you’re at in relation to your peers, and yourself from years past, benchmarking illustrates that the struggles you may be facing are not happening in a vacuum and gives you the confidence and tools to tackle whatever comes next.

On the road to improving your business, hard decisions need to be made and seeing the whole picture gives you the control to act in a way that’s right for you.