Tag: yield efficiency

I spend some of my best work days with growers – encouraging them to use their data to drive better agronomic decisions. Of course, I’m frequently also inviting them to become customers.

Tight economics for most corn and soybean growers has made selling anything more challenging. As tempting as it might be, I never suggest that data-driven decisions will lead to spending less on inputs. In fact, I believe the promise of spending less has hurt “precisions ag” adoption. Variable-rate lime applications might be the lone exception.

Rather than promote the input-savings message, for me, it’s all about investing more wisely within each field and across your operation. Everything you save in one part of a field will likely be spent in another. Every seed saved in the worst part of the farm will be invested in the best part.

The first step in using your data to drive efficiency requires a change in thinking. It requires that you stop pretending all fields are the same. Technology allows us to measure the differences that exist. And variable-rate technology allows us to treat each part of each field differently.

Is it working? Are precision ag tools really allowing us to be more efficient? Is the concept of producing more with less real?

Paul Fixen, senior vice president of the International Plant Nutrition Institute, recently summarized some encouraging evidence, and the answer is “yes.” Fixen writes that in the U.S. in the past 35 years, we have raised corn yields by 70 bushels per acres (70% increase). During the same time period, average nitrogen rates have only increased 6 pounds per acre (5% increase). This is a success story that needs to be told over and over again!

Fixen also cites precision ag’s role in increasing soil testing and notes that “nutrient use has never been as measurement-guided as it is today.”

Premier Crop has many customers who focus on using all their layers of data to drive efficiency in all their corn and soybean production. The table above is an example of data from a grower’s first-year corn acres where the grower split-applied his N and focused on stretching every pound of N while maintaining high yields.

Results like these don’t happen by accident. Achieving higher yields while dramatically lowering pounds of applied N per bushel produced requires using variable-rate technology to execute an integrated and complex agronomy plan each year.

Remember the old days of 1.2 pounds of N per bushel of yield less credits for legumes? Those days are long gone for many of the best operations. We need to tell our story to others – family, friends, urban neighbors, legislators and public policy makers.

Learn more about crop management.

A quick Google search on the word efficient returns the following definition – achieving maximum productivity with minimum wasted effort or expense.  I like to think of efficiency as a ratio, or fraction. Most often the input value of the equation is time or money.  Efficiency is something almost everyone strives for in some aspect of their life. Think about different tasks you try to become more efficient at.

Here’s an everyday example of efficiency.  My pickup’s gas tank holds 24 gallons and I can drive about 440 miles on one tank.  My wife’s car has a gas tank capacity of 14 gallons, which gets her almost 480 miles of driving.  One tank of gas in each vehicle results in only 40 miles difference in total output or miles traveled.  However, when calculating efficiency these values equate to her vehicle being roughly twice as efficient as mine.  If the capabilities (towing, hauling, etc.) of our two vehicles were the same it wouldn’t make sense to drive my pickup because the input expense is almost twice as much to return roughly the same output.  This thought process can, and should, be applied to crop production.

You rarely hear a farmer complain about being too efficient.  However, production efficiency ($/bu.) is often overshadowed by one of its components: output.  In farming output is synonymous with production, or yield. Historically, yield has been the basis for comparing hybrid performance, analyzing other agronomic factors, such as soil tests and application rates… and coffee shop conversations.  Although yield is a critical component, it is only half of the equation when measuring efficiency. We must remember to examine the input side of the equation.

When completed the equation it reads as shown below.

I don’t know many farmers who are tracking the number of bushels produced per dollar invested.  It isn’t a metric that can be easily related back to operational decision making. Here’s an example calculation: 235 bu/ac ÷ $700/ac = .34 bushels produced per dollar spent.

The result becomes more relevant when you flip the equation.

The measure of efficiency now equates to breakeven cost per bushel ($/bu.), or how many dollars it took to produce one bushel of grain.  Here is an example with the same values from above: $700/ac ÷ 235 bu./ac = $2.98 / bu.

Cost per bushel produced is a metric that is easy to comprehend and is also actionable.  Knowing your breakeven cost per bushel allows you to have greater confidence when making marketing decisions.

It’s important to understand that breakeven $/bu. changes within the field and that there are two ways to improve efficiency, or lower your breakeven $/bu.: 1) Reduce input expense 2) Increase yield.

As a farmer, you’re able to control the input side of the equation, which directly affects output.  To effectively lower your breakeven $/bu. and gain efficiency you must manage your input dollars spatially within fields.  All fields have some degree of agronomic variability – yield, soil fertility, elevation, soil type, etc.

It doesn’t make sense to manage inputs at a flat rate across a field when trying to improve farm efficiency or lower your breakeven $/bu.  For example, uniformly lowering your nitrogen rate across an entire field will reduce your input expense, but will limit your yield potential in ‘high productivity’ areas of the field due to the reduced rate.  Conversely, excess nitrogen applied uniformly across the entire field will be wasted on areas with lower yield potential to begin with, dragging down efficiency.

Understanding and managing variability within each field is key to improving efficiency (lowering your breakeven $/bu.).  Flat rate additions or reductions in inputs can have a significant impact on efficient production.

People are always looking to improve everyday tasks to make their lives more efficient, it’s important to have that same mindset for farming.  Remember that production (yield) is a key component of the efficiency equation, but knowing what it takes to achieve a specific level of production takes you to the next level of understanding profitability.

In part 2 of this series we’ll show you how to understand your profitability and see where you are leaving money on the table. You’ll learn how to make informed decisions and increase your margin.

“The reality is the definition of success
is different for everyone, but the other reality is,
profitability matters.”
– Darren Fehr

DARREN FEHR:  We come across a lot of people who have a very small or narrow group of metrics that they’re measuring, and, consequently, the question that comes back to us often is: how do I improve my performance? So, let’s start here, Dan. Defining success is a very important first step. How has the definition of success evolved over time with the farmers that you have worked with?

DAN FRIEBERG: In general, growers get that, in order to drive higher profitability, they need to drive higher yields. So, they understand that higher yields are key, and the reason that’s the case is because row-crop farming is a high fixed-cost business. If you think about before you plant a crop, most of your machinery investment is locked in. The fuel and the labor to actually make passes across the field is variable. Obviously, land cost, whether you own it or rent it, is, by far, the biggest fixed cost. There’s a lot of other costs: family living, health insurance and all those things. Whether you produce 100-bushel corn, or 200-bushel corn, or 50-bushel wheat, or 80-bushel wheat, it doesn’t matter. You still have a bunch of fixed costs. Producing more bushels is the only way to drive your cost down. So, yield has become the surrogate for profitability, but we know better. We know that all yield isn’t created equal. It’s really not about yield. It’s about how efficiently we produce yield. It’s how many dollars do we return to land and management.

DARREN FEHR: We started talking about this topic, I don’t know, 18 months ago, 24 months ago. Now, economics is a really big part of the conversation. When people think about how they drive success, what are some of the big barriers to actually uncovering this idea that I know what my profitability is, or my return on investment? This ROI thing gets thrown around really easily, but this isn’t easy to get to. What advice do you have for farmers to really be proactive in getting to understand how much they get back for every dollar they spend?

DAN FRIEBERG: It is really complex. I had a friend, a professor at Iowa State, who said real-world agronomy isn’t rocket science. It’s way more complex than rocket science. His point is we put somebody on the moon with what wouldn’t be the equivalent of a PC now, or a laptop now. He’s basically saying that real-world agronomy is just super complex because it’s this interaction of all these different biological factors, including the weather and soils and fertility and seeds and genetics. If you appreciate that agronomy is incredibly complex, and you add economics to that, then everything agronomic is economic. The reason we make the agronomic decisions we do is because we get that there’s an economic impact to them. When you add all those pieces together, there are lots of complexity to deal with. What we argue is that agronomic-economic complexity is very spatial, meaning it’s changing within fields. There are parts of fields that are just begging to be managed at a higher level. And there are parts of fields that are sending signals, like, you just need to quit wasting money here. You need to change to what is successful in each part of the field.

DARREN FEHR: Dan, as the industry’s evolved, and we’ve got this many billions of dollars of venture capital funding come in towards a variety of different ag tech startups, we have this division happening. We have precision ag that’s more agronomy focused, and we have farm management information systems, which is arguably more economic focused, maybe less agronomic and more economic. Why is there this division happening, where people are having to choose: am I going to focus on subfield agronomy? Or am I going to focus on field-level economics?

DAN FRIEBERG: Of course, our answer is you don’t have to choose. That’s what we’re about. We are all about combining those pieces together. Our solution is not one or the other. It’s both. With Premier, this is 22 years, maybe 23 crop seasons. We’ve been doing this a long time, and I’m convinced that the reason every grower doesn’t do what we do — and this is not just us, this is not just Premier — is the precision. If you put every company that has any kind of a precision ag offering, and that includes a lot of major companies, like really big companies, there’s a whole bunch of offerings. But the reason every grower doesn’t do what we do is we haven’t shown, year after year, that it pays. It’s almost that simple. If we show growers that it pays every year, they’ll do it. There’s always an adoption curve, but, eventually, everybody gets on the bus because it’s just a matter of proving that it pays. And that’s why, for us, this push to tie economics to agronomics is such a big deal. That’s what we’re doing year over year. We’re proving that it pays. If we advocate or advise the grower to spend more money in the best part of the field, at the end of the year, it’s not a “trust me” it works. We’re providing the dollars-and-cents analysis to show that they got a higher return. So, to your ROI message, that’s exactly what we’re doing. A lot of times, they’re spending 30 to 50 dollars an acre more on inputs in the best part of the field, but we’re generating an additional 80-dollar return to land and management beyond that input spend.

DARREN FEHR: You’re saying that there’s that much money left on the table at the end of the day. Once people have an accurate view of precision economics at the subfield level, you’re saying there is that much money left on the table.

DAN FRIEBERG: There is. The more we get people excited about doing this, the more we’re going to be able to stretch those numbers even higher. There is no doubt we need to continue to push higher yields. The times right now demand that you scrutinize every dollar you spend to get the higher return. We used to have a slump in commodity prices, and it begs that we just have to be keen on how we spend every input and every input dollar to get higher returns.

DARREN FEHR: So, in this environment, what we’re facing, with a significant cash issue at the farm gate, this isn’t about cutting costs. This is about managing costs, so that every dollar we spend stretches as far as possible.

DAN FRIEBERG: You may cut costs in some parts of some fields. It would be a false promise to suggest that you’re not going to spend whatever you save, that you’re not going to spend extra in the best part of the field. The point is we have the ability to prove and to deliver a report card on every field that says it paid. It paid better than had we flat-rated it and pretended it was all the same.

DARREN FEHR: So, we started off with how you can’t manage what you don’t measure. Dan, what are the metrics? What should farmers be measuring?

DAN FRIEBERG: Everything. That’s what makes it so complex. We talked about 400 layers of data at a subfield level, and people just think that we’re crazy stupid for handling the complexity of all those data layers, but that’s reality. So, the idea is it’s not one thing that matters. It’s the combination of a whole bunch of things that matter, and it changes. It changes within fields, so what matters is different within different parts of the field. Darren, everybody in the United States can bring in digitized soils. Digitized soils means we get soil type and texture and slope and drainage class and things like that. You can bring in soils layers, which is a great starting place. In our case, we have a lot of spatial soil sampling, meaning zone or grid sampled. Instead of just doing one sample that represents the entire field, you’re capturing differences, which means you’re capturing differences in organic matter and pH and fertility. There could be a couple dozen layers captured that way. We capture as-applied fertility. That’s more complex than people think because there’s a lot of growers that would put nitrogen on five different ways. There would be some with the phosphorus, some weed and feed, some primary N goes on or side dress or manure or starter. We capture rate, source and cost, so those are all sortable data layers that can be analyzed. We get probably 15 layers off the planting file: its population, density, seeds and things like hybrid and variety. There are hundreds of layers that aren’t necessarily captured on a monitor that really matter. Manure would be an example. There’s still a lot of manure applications that really have a huge impact, both agronomically and economically, and they’re not always captured on a monitor. There’s a lot of input capturing the real cost associated with all this, too. It’s just a lot of detail, but that’s what we do because we think that’s what’s most meaningful.

DAN FRIEBERG: Darren, you said that you can’t manage what you don’t measure. That was a Peter Drucker quote. I would recognize the name, but the younger generation doesn’t even recognize Peter Drucker’s name. He’s a management guru, but people have added on to that Drucker statement. One of the add-ons to the Drucker statement is: things you measure tend to improve. So, if you don’t measure it, does it have any chance of improving? It just really goes to being intentional and having a goal. That’s what we do with growers when we’re interacting with growers. Every year, there’s a goal-setting discussion about: how are we going to measure success? With some growers, they want to drive yield efficiency. They want to drive higher returns, so that they can hire some help and their family life can improve. They can have more time with the family because they’re able to afford hired labor. Others want to expand their operation. Everybody’s got slightly different goals, but, usually, it comes down to: they’re business people, and they want to generate more returns or hold their operating capital in check.

DARREN FEHR: The reality is the definition of success is different for everyone, but the other reality is that profitability matters. In having a business, whether it’s farming or anything else, everybody’s trying to make some money. Measuring the right parts to drive operational growth and profitable growth is really important. And what you said earlier about planning, we’re going to talk about that next week: being proactive and offensive in planning versus being reactive and defensive. So, we’re going to talk about trying to stay ahead of the game, trying to plan before you buy, as opposed to buying and then trying to plan where you place the input. Stay tuned for that. Dan, thanks a lot for being with us this morning and talking about how you can’t manage what you don’t measure and driving higher yield efficiency.

Continue to listen to the Premier Podcast, where everything agronomic is economic. Please subscribe, rate and review this podcast, so we can continue to provide the best precision ag and analytic results for you.

“Yield efficiency is about tying
agronomics and economics together.
It’s perfect timing for the market
because things are so tight at the farm gate.”

RENEE HANSEN: All right. Welcome, Dan, to the Premier Podcast. Thank you for joining us today. Today, we’re going to focus on yield efficiency and have you explain to us how important yield efficiency is and why a farmer should be focusing on yield efficiency.

DAN FRIEBERG: For years, in general, people have used yield as a measure of profitability, meaning that, as long as we achieved higher yields, that was our measuring stick for how good we were doing. Across the nation, we keep stair-stepping up, from a yield perspective. But, of course, we know that higher yields come at a cost. They come at a higher cost. What yield efficiency is for us is combining agronomics and economics. It’s just being willing to really put the dollars and cents from the grower’s perspective on the line. So, yield efficiency, the way we’re defining it, is the dollar-per-acre return to land and management. And the reason we exclude land and management is that we want to create a score that growers could anonymously benchmark against other growers in the area.

And when you include land cost, it really can be very distorting. Some people own their own ground, and they don’t necessarily charge themselves an opportunity cost on the land. Others are paying cash rent, and there are all kinds of different land arrangements. Plus, land cost is really personal and private. Taking land out of the equation from an economics perspective, when a grower sees a yield efficiency score, and it’s a dollar-per-acre return to land and management, they instantly are able to take their land cost out of that number and know how much is left for them. A lot of times, the return to management is profit. It’s family living. It’s what’s left over. So, yield efficiency is really, for us, about tying agronomics and economics together. It’s perfect timing for the market because things are so tight at the farm gate. The economics are really tight. There’s a lot of operations that are struggling to break even, let alone make any money. It’s a great time to be focused on not just better agronomics but better economics, as well.

RENEE HANSEN: Yeah, that’s such a great point, Dan, the fact you’re saying to focus on agronomics and economics. How is Premier Crop doing this different with our growers? How are we separating ourselves out from the marketplace? Because there are a lot of red waters out there and competition, so how does Premier Crop do this differently?

DAN FRIEBERG: Renee, it’s just about being real. We’re not just taking the statewide average cost of inputs divided by the yield file. What makes us different is we’re doing this spatially within the field. A lot of our go-to-market involves helping growers manage different parts of their fields differently. When we talk about yield efficiency, we’re talking about keeping track of all the input dollars as they change within the field. So, if you’re variable-rate applying part of your fertilizer, we’re tracking the cost associated with those variable-rate applications. If your variable-rate seeding, we’re tracking the difference in seed cost as you move across the field. With yield efficiency, maybe the best way to talk about it is it’s real.

This is a dollar-per-acre return that is tied to not somebody else’s costs but your actual costs. That’s probably the biggest, that there’s a fair amount of work involved to get there and to really have it be meaningful and right. There’s just a lot of shortcuts that people take. There are other solutions that do this at a field level, and we do that too. So, growers, they get a report card on every field, but what makes it even more unique is we drive it down within fields. It’s within-field measurement. I was doing a grower meeting last winter before COVID, and one of the growers saw me and said: “So, you can actually tell me if I got my management zones right.”

And I couldn’t figure out exactly what he meant, but then I finally figured out what he was talking about. What I was showing is we can actually measure yield efficiency down to a management zone. If we’re spending more on inputs in what we think are the best parts of the field, we can show the economic return to spending more. Renee, our company is 22 crop seasons into this. We’re getting ready to head into our 23rd crop season, and I’m convinced that the number-one reason that precision ag, as we talk about it and talk about all the things we do, the reason it’s not bigger is we haven’t consistently proven to the grower that it makes more money. That’s really the missing piece.

Every grower will respond to economics. If they could be assured that every year they were going to know that everything they were doing and being told to do agronomically actually paid, they would do it. It’s on us to step up our game and to be willing to measure our success, not just by yield but by dollars and cents. Are we able to drive higher returns in how we manage inputs? The big components of yield efficiency are yield times the selling price that the grower gets to set minus what they spent on seed, crop protection, nutrients and field operations. That’s how it’s all calculated, and it just generates a dollar-per-acre return.

RENEE HANSEN: I’ve been out in the field too, Dan, and growers that have been using Premier Crop for multiple years, let’s say five to 10 years, continue to say that the service that is offered far outweighs the economics. And I think a lot of growers are afraid to jump in because they’re either not variable rate seeding or variable-rating nutrients yet because they haven’t seen the benefits. If they could understand what their yield efficiency can be by utilizing Premier Crop on a per-acre basis, not an average. And those growers continuously say, over and over again, that the money that they’re spending on the service far outweighs what they’re making back in returns.

DAN FRIEBERG: It’s being willing to measure whether what we did worked or not. There’s a lot of people who generate a prescription, but there’s no validation at the end of the day, whether that paid or not, and that’s the difference. Being able to validate whether using a prescription actually delivered more return to the grower, that’s really what this is all about.

RENEE HANSEN: Validating it, and they can compare against others in their region, Dan. So, can you share with us how we benchmark? They benchmark against themselves, but they also can benchmark against others in their region.

DAN FRIEBERG: It’s the idea of benchmarking versus peers in your area. The ultimate benchmark is benchmarking in your own operation, so being able to have a handle, just knowing the most profitable parts of each field and how your fields compare to each other. That’s the first starting place. Every grower wants to see beyond their own operation. It just amazes me. They love to be able to compare in a system where quality data is really key. They love to be able to compare how they did and are doing compared to their peers. What you see with the yield efficiency score is, right away, what you see is sometimes the growers that had the highest yields that year didn’t have the highest yield efficiency.

And it’s kind of that gut check. When you see that your yield is the highest but your yield efficiency isn’t, that’s kind of a wake up call. And it really creates dialogue, like: “What am I doing? What’s different? For people who are having a higher yield deficiency, what did they do differently?” And that’s really the details and that’s really what makes it fun, having those dialogues and figuring it out. But the first point of it is actually measuring. It’s actually knowing where you’re at. We’ve talked on an earlier podcast about: “You can’t manage what you don’t measure.” Or another way to say it is: “What gets measured gets focus.”

That’s where people focus. If you’re not measuring the dollar, if you’re not measuring everything you’re doing agronomically economically, then you’re not going to focus your attention on it. So, we just believe that it’s time, in this day and age with the technology we have available, it’s time that we deliver analytics to the grower that shows how we’re investing. The only way to drive yield efficiency is you have to figure out where, within every field, to invest and how much to invest in each part of the field. Sometimes, investing in nutrients in some parts of the field is literally a waste of money because that’s not what’s yield limiting. It’s something else.

RENEE HANSEN: And if you can save money in that part of the field, why wouldn’t you? You talked about how critical this market is. Why is it so critical right now? Why is it more critical now than it ever has been in the past to determine yield efficiency?

DAN FRIEBERG: It’s so hard to make money. It is really, really hard to make money. It’s just very difficult right now. It’s difficult, and things are just so tight. Commodity markets have really taken a tumble, and we’re just in a really tight time, so it’s really hard. Renee, in those 23 years, sometimes, I think we actually grow fastest as a company when things are the worst at the farm, when the economics are the worst. And I know that doesn’t make sense to some people, but when it’s so hard to make money, that’s when growers decide: “Okay, I’ve got to do something different. I’ve got to focus on managing in much more detail.” And that’s kind of what we do. We help them plan and, really, we help them spend every input dollar as wisely, within each field, as possible to try to drive higher returns. You hate these times because there are so many growers that really have a lot of financial stress. So, it’s tight anyway, and then you throw horrible weather events in the middle of it, and it just compounds how difficult it is to make money.

RENEE HANSEN: There’s that saying of: “Spend money to make money.” What would you have to say about that and where we are right now?

DAN FRIEBERG: You do. Another way to say it is: “You can’t save your way into prosperity.” That’s really the magic. Sometimes, there are areas where you can save money, and those are really critical. Saving money in those areas makes a lot of sense, but there are other areas where you have to invest, that you have to invest more to make more.

RENEE HANSEN: And just be more efficient. And that’s what we’re talking about with yield efficiency. Dan, how does a grower start? How can they get started to determine their yield efficiency?

DAN FRIEBERG: What we do is we lead them through. We try to get accurate yield data, and then it’s about tracking the input cost. If they’re doing any kind of variable-rate activity, we’re looking for those files. We’re looking if they’ve done anything variable rate because we’re trying to track that difference in cost within the field. It’s like: “What did you apply and how much did you spend?” And if that’s variable-rate, that’s great. If it’s just straight-rate, then that’s fine too. That’s a way to get started. It takes yield. We’ve got to know yield and have to know the key input costs.

RENEE HANSEN: Yeah, and this is something that Premier Crop has been working on. You’ve worked on this and talked about how, when you started Premier Crop, that you were going to focus on costs, as well, but didn’t back then. And now we’re really bringing it back to that and merging the agronomics and economics. Can you talk about the direction where we’re going in the future?

DAN FRIEBERG: You’re exactly right. We actually started with this, and we have customers who have done this for 20 years. We had a slightly different approach then, and we still do it. We can calculate break-even cost per bushel, but break-even cost per bushel includes land and management. Land and management, for a grower to share land and management, it’s really personal. It’s very private, and it doesn’t work where it has issues when it comes to benchmarking. But we can definitely do that. We can go to break-even cost per bushel. I think yield efficiency, for us, has seemed like a way to get started, a way for us to get started with growers. The reality is we don’t influence land costs. The places where we spend most of our time are talking about how you manage seed, your seed investment, crop protection, nutrients and operations from a tillage perspective or field. No-till versus strip-till versus conventional or conservation. It’s all those pieces and how they integrate with the crop protection plan and other parts of them.

RENEE HANSEN: Great. Well, thanks for joining us today, Dan. I believe, on the next podcast, we’ll talk more about farm finance and the economics of the situation that we’re in, in this critical market. Is there anything else that you’d like to add in regards to yield efficiency or getting growers on board?

DAN FRIEBERG: When you ask about: “You have to spend money to make money.” In general, there’s a lot of truth behind that. But, sometimes, throwing the kitchen sink, like throwing the kitchen sink at a crop, isn’t always profitable either. It kind of goes to changing the paradigm from high yields. High yields are really critical to remain profitable, but it has to be done efficiently. It has to be done with an eye towards: “How do we generate more return?” Not just the highest yield, but how do we generate more return to every grower’s operation?

RENEE HANSEN: Thanks, Dan. Maybe we’ll get Darren back here. He’s probably working on his golf game right now, so hopefully we’ll get him back on our next podcast. Thanks for listening to the Premier Podcast, where everything agronomic is economic. Please subscribe, rate and review this podcast so we can continue to provide the best precision ag and analytic results for you. And to learn more about Premier Crop, visit premiercrop.com.