In response to last week’s PCC™ Update, I received an email from a subscriber who said, “Please explain how you compute profit per acre. It’s confusing.”
I replied by saying, “It’s very simple… If you know what your annual net profit is and if you know how many acres you operate on, then you can divide your profit by your acres. For example, if you have an annual net profit of $50,000 from 1000 acres, then your profit per acre is $50. The goal of farmers and ranchers should be to increase and eventually maximize their profit per acre.”
Unfortunately, cattlemen have been programed for the last 40+ years to focus on increasing pounds per cow (bragging rights), instead of on increasing pounds per acre (profit). I guarantee those who continue to focus on increasing pounds per cow are decreasing their pounds and profit per acre. Perhaps it is time to review the Ten Steps to Maximize Profits.
If you are a cow-calf producer, you better keep in mind that you are currently receiving record-high prices for your calves. With record-high prices, cow-calf producers can do many things wrong (and most are) and still be profitable. However, the last time we were in a situation like this, the value of our calves was quickly cut in half when herd expansion took off. Therefore, you would be well advised to calculate your profit per acre with much lower calf prices.
Quote Worth Re-Quoting
“It is a thousand times better to have common sense than to have an education without common sense.” ~ Robert Green Ingersoll