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Managing with Tight Operating Margins

Ron Haugen, Dwight Aakre, and Willie Huot

Summary

North Dakota State University Extension Service conducted an educational effort entitled: “Managing with Tight Operating Margins”. In 2015 and 2016, several presentations were made to North Dakota producers. Pretentions were open to any producer, established, beginner or retirement age. All facets of farm revenue and costs were discussed. With the downturn in commodity prices, this topic was very timely.

The objective of the presentations were to educate producers about which costs could be reduced. The differences between net income and net cash income was discussed. Actual farm business records were presented showing high and low profit producer averages. Return over variable costs was discussed. A discussion on which factor has more effect on the bottom line; yield, price or cost. The presentations emphasized the importance of maintaining yields in low price years. Higher yields had more impact on net income per acre than price, costs and rents. As a result of the presentations, producers gained a better understanding of management with tighter margins.

The presentation to the Extension Risk Management Education National Conference includes an overview of presentation materials, a discussion of what factors have the most influence on margins and a description and evaluation of the program. Educators could use this information and adapt it for their own geographical area and needs.

Details

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