Benchmarking is an Effective Tool

It is human nature to compare ourselves to others, however when it comes to benchmarking your ag operation the best place to start is comparing your own farming operation over the years.

CliftonLarsonAllen Partner and Farm CPA Today Blogger Paul Neiffer explains
Neiffer: “I think the most important benchmarking that farmers can do is to benchmark against themselves. I think so many of our farmers they want to benchmark against their peers and what happens is if they are above average they think, ‘Hey that is great, I know I was above average.’ And if they are below average, they tend to discount it and say, ‘That doesn’t apply or the data is wrong.’ Whereas you get a five year or 10 year trend history on your own farm operation and start to benchmark against that, what is important is how are the trends are going for your farm -- is it going up or is it going down? That is more important than trying to benchmark against others.”
Neiffer says that some areas to consider benchmarking in your own farming operation are cost of production and within that cost of production are your machinery cost per acre or bushel as those are changeable rather than the fixed costs for example of fertilizer costs per acre.
He adds it can be a very effective tool if use properly and the key is to understand that benchmarking is a process that takes time to glean the needed information.