Performance Indicators

As an industry, agriculture in general and dairy farming in particular are well-serviced by various means by which producers can analyse and compare their own financial and physical performance with other similar enterprises, herds or farm businesses.

Benchmarking

Several bodies and organisations publish figures such as detailed average and above average gross margin calculations, which allows benchmarking (or comparative analysis) between similar sized enterprises, farms or herds. This kind of performance analysis can help to pinpoint differences between farms or herd performance and the level of information required can suggest or justify means in which a business can change, invest or adapt.

For benchmarking to be effective, it is important to compare like-with-like. For example:

  • Where two different businesses are being compared it is important and fair that they are compared for the same time period.
  • Cost definitions must be identical; some enterprises may be able to apportion certain expenses to defined enterprises as variable costs, whereas with other farms those expenses may be accounted as an overhead, due to accounting complexities. Similarly, some costs may be separately-defined in some accounting systems, but included in other cost categories in other systems.
  • Some comparisons account for unpaid labour on farms; some farms may be fortunate to employ family members at little or no pay but this may make comparison unfair with those who employ paid workers, particularly where labour requirements are similar.
  • Owner-occupied farms may have to include an imputed rental value, in order for their performance to be fairly and accurately compared with tenanted farms.

Often, for a simple comparison, costs, overheads, outputs and margins are compared on a per hectare basis, simply by dividing them by the area farmed.