Agriculture KPIs: Nurture a Successful Farm Environment
Posted on 27th July 2017 in KPIs
Written by Freya Hughes
From cattle to lambs, wheat to grains, it’s your job to keep everything alive and healthy. That includes your finances. We’re looking at the best agriculture Key Performance Indicators (KPIs) to measure in the farming industry, so you can get back to tending your stock.
Farm owners and operations managers should have a handful of KPIs to monitor. These will guide your farm in the right direction. Farming is a demanding industry; you must understand, to an extent, agriculture, viticulture, animal husbandry, machinery management, workforce management, cost optimisation, accounting and more. Read on to get a handle on the latter…
Visit our KPI Library for a herd of examples and calculations for the Key Performance Indicators relevant to your farm.
1. Operating profit
This core metric tells you how much revenue is being generated by the business after costs and overheads have been accounted for. This is an extremely useful KPI for many businesses in many industries, but is a particularly useful for comparing efficiency on and between farms. Operating profit can be expressed on a per animal or per hectare basis, giving you a clear view of how you’re doing against your business goals. Split this Key Performance Indicator into each category you need, ie cows, sheep, chickens, plants, crops and whatever else you might be tending to.
If you’re getting a low operating profit figure, it might be worth evaluating what you produce. Can you produce something cheaply for a good profit? Look at growing something like lavender, which can give you a versatile crop. Negative results indicate that the business is failing to turn a profit from its day-to-day activities. Learn more about calculating your operating profit here.
2. Yield of stock
No matter what you produce on your farm, you need to measure your yield. Let’s say you’re coming up to sheering season and are expecting a high yield of wool to sell on. Any number of things could impact this yield – natural disaster, extreme weather, disease, the list goes on.
Alternatively, if we’re thinking about a crop yield, is the volume of crops going to tick you over into profit or is the cost of maintenance and owning the field(s) going to overtake? Slim margins will keep the hardiest of farmers up at night worrying, so tracking this KPI is crucial. As with your operating profit, ensure you divide your yield into departments so you can see the areas that might be holding you back.
Your yield is your stock so is one of the most important parts of your business. Keep it at the forefront of your mind when making decisions. Calculate your yield here.
3. Feed and water consumption average
A big outgoing in your day-to-day operation is on food and water to keep your livestock and crops healthy. Your goal is to keep this KPI on a set average, so you know it’ll be a set amount of expenditure throughout the year. Of course some hotter months will see the need for additional water, so you can add this increase to your forecast. This is an important KPI to measure as it’ll alert you to overspending.
If your expenditure dips, why? Have you lost animals recently? Or is your crop dying out? Alternatively, if you’re using more water, is this planned or has one of your farm hands not been trained properly?
Either way, this KPI will show you the knock-on affect of other aspects of your farm going off course. Get this metric in your forecast so you can prepare for the peaks and troughs of the year.
4. Profitability per field/department
If you have an in-depth measure of how each part of your farm is performing, you’ll be able to work out which areas need more attention. If you can calculate how much profit each area of your farm is turning over in a given period, you can consider expanding that. This is a crucial KPI to measure, especially if you’re considering growing your farm.
5. Wages to revenue %
This KPI measures the percentage of your revenue that’s being generated in relation to your wage costs. This operational metric is key to measure in a farming environment, especially as seasonal changes dictate the need for more or less staff.
If there’s a negative proportion of incoming sales against your outgoing wages then within months your cash reserves could be drained. Using a forecast, you’ll be able to make a solid decision on whether you can afford more staff or not. Remember to check prospective employees’ skill level, as this could make a difference to how much they’d be paid. Calculate your revenue per employee in the FUTRLI KPI Library.