University of Maryland Extension

How to improve farm profits?

Dale M. Johnson, Extension Specialist, Farm Management

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Generating profits should influence most decisions as a farm manager. Many things affect the level of profit. This, in turn, determines remuneration for the operator’s management & labor, the growth potential of the farm business, and the ability to pay off debt. A good farm manager should ask himself/herself the following questions often.

  • Am I making the most profitable use of my land and structures with the agricultural enterprises I have chosen?
  • Are my operating inputs at the optimal level?
  • Is my equipment the proper size for my farm?
  • Do I acquire the most favorable terms on borrowed money?
  • Does my borrowed money earn a rate of return greater than the interest rate I pay?
  • Are my field operations timely?
  • Do I plan and carry out good marketing strategies?
  • Do I make good use of my time and hired labor?
  • Do I take advantage of new technologies?
  • Do I maintain good business relations with others?
  • Do I manage my taxes to increase after tax income?
  • Are my operator management and labor allowances reasonable?
  • Am I allowing my farm operation to grow by putting back some of my profits into the business?

There is no one clear path to improving profits. Rather, profitability is a state of mind in which a farm manager carefully controls every aspect of the operation to make the most profitable and economic use of the resources available to the farm business.


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Calculating profits for taxes
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