Haven’t People in Ag Suffered Enough?

There’s an old farmer’s joke that goes like this:

The IRS suspected a farmer wasn’t paying proper wages to his hired hand and sent an agent to investigate him.

IRS AUDITOR: “I need a list of your employees and how much you pay them.”

Farm Owner: “Well, there’s Clarence, my hired hand, he’s been with me for 3 years. I pay him $1,000 a week plus free room and board. Then there’s the mentally challenged guy. He works about 18 hours every day and does about 90% of the work around here. He makes about $10 per week, pays his own room and board, and I buy him a bottle of Bacardi rum and a dozen Budweiser’s every Saturday night so he can cope with life. He also gets to sleep with my wife occasionally.”

IRS AUDITOR: “That’s the guy I want to talk to – the mentally challenged one.”

Farm Owner: “That would be me. What would you like to know”?

Unfortunately that is all too true in today’s world.  We talk with farmers on a weekly basis and it is a growing fear that margins will continue to shrink. The government has tried through the MPP but the government … well, you know.

Two years ago the USDA Economic Research Service even published an article which started with the line: Given the broad USDA definition of a farm, most U.S. farms are not profitable as ongoing businesses.

So how do farmers and dairymen continue to operate in a word that is increasingly unfavorable to the average farmer.  Well there are a few ways to solve this:

  1. Just put a higher priority on farms in general and stop penalizing them – new labor laws and recent water mandates in the State of California are not helping matters there.
  2. Increase in size – The same report mentioned above shows that larger farms make a better margin due to economies of scale.  This is not an option for every farmer though and massive size increases are risky. There scale jumps wildly but it makes a large difference if you are under/over $150k or under/over $1M.
  3. Reduce Debt – Yes, we realize what we said, stop laughing … no, actually, you can laugh at that.
  4. Optimization – This strategy can include everything from using robots to the perfect strategy for keeping a piece of equipment another year to analyzing data that tells you to, for instance, change feeding cycles by minutes in order to increase production.

In the end we have to come to terms with the fact that fully 70% of farms operate on less than 10% margin.  

At RoboGnosis we are doing our best to help people in Ag increase those margins through optimization (as well as retraining workers who lose their jobs to optimization so that they can go and get even better jobs).  If you want to know how to increase profit margins on your farm, give us a call.  Even though we don’t typically work with farms, we tend to work more with manufacturers, we can spend time with you and point you in the right direction. That is, even if we are not making a technology product that will make your life better we will either find it for you (even if it is a competitor), make it for you or find someone who will.

Farmers, you are growing our food, we are all in this together!

 

Articles read in research for this post:

https://www.ers.usda.gov/amber-waves/2015/januaryfebruary/profit-margin-increases-with-farm-size/

http://agribusiness.purdue.edu/blog/understanding-the-margin-squeeze

http://www.nmpf.org/latest-news/press-releases/mar-2017/march-7-nmpf-recommends-changes-margin-protection-program-make

Posted on July 24, 2017 in Agriculture Trends, Education

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About the Author

I am Brandon Smith one of the co-founders of RoboGnosis. I am obsessed with robots and love everything about them. I make robots in my presonal and professional life. On top of that I am a husband, father and love life.

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