To wrap up this discussion, today’s column discusses what a producer can do to strive for as efficient an operation as possible with the four factors of production – Land, Labor, Capital, and Management. Please keep in mind that unlike many other enterprises, producers of agricultural products have certain disadvantages including weather, producing a product with a limited shelf life compared to most products, and trying to predict what the factors of production used actually produce. Take a moment to think about the last point – a car manufacturer or a smart phone manufacturer can tell you based upon the inputs used exactly how much will be produced and the rate of production. A producer using the same level of inputs may produce 50 bushel per acre wheat, 20 bushels, or have no yield even if doing everything correctly. So how do producers maximize efficiency?
• First producers essentially need throw out the concept of maximizing anything but of optimizing everything. Simply put, management is the key factor of production when striving for efficiency. While the top of the management pyramid is the owner of the operation, this may include crop consultants, accountants, marketers, operation managers, and the list goes on. The key to an efficient operation is the level of management which leads into the next point.
• Efficient use of land and capital requires knowing exactly what you have. There is a reason that K-State Extension spends so much time extolling the virtues of soil testing, plant tissue testing, feed testing, and variety/hybrid evaluation. You can’t maximize efficiency unless you know what you already have, what you need, and what the potential production is.
• Careful record keeping optimizes production as it allows for the long-term evaluation of an operation. This includes everything from inputs and yield monitoring, to exact observations of pest pressure. By knowing precisely what was done where and how it impacted production, a producer can optimize the amount and allocation of inputs.
• To optimize an operation, producers must constantly educate themselves on everything from the latest technology and equipment to production projection of crops in Australia and Brazil. Since a producer takes and doesn’t make the price of their product, increasing profits means finding methods of optimizing the costs per unit of production, normally through the adoption of new technologies. And while a producer can’t determine the price, a producer can make educated guesses as to what to grow/produce (within sound agronomic practices) to generate the optimal profit.
Naturally there are other ways to increase efficiency. The key for producers is that all they can really do is provide the optimum production environment, constantly evaluate what is going on, and be willing to adapt to conditions.