My key KPI: Profitability per acre
Welcome to ‘My key KPI’, a new weekly content series where we ask CFOs and FDs what metrics and measures they use to drive their businesses forward.
The aim is to understand how different finance professionals, across a broad array of industries and sectors, use data to inform their decision making.
Driscoll Management Company is a growing business. Literally. The company was formed in 2015 to help a large agricultural business get to grips with its finances.
So Driscoll’s CFO Ian Weight deals in potatoes, lucerne, sugar. His job is to keep the entire operation running and navigating the infamously narrow margins of agriculture.
A key measure that Weight relies on is profitability per acre. “We break that down per crop,” said Weight. “How are we doing on our wheat acres compared to our potato acres? When we look at it like that we can see, for instance, our input costs went up on potatoes but went down on wheat.
“When we do our crop planning, it’s important to know what does it cost us to grow that crop this year versus last year. Or versus another crop.”
Profitability per acre directly affects crop rotation, too. Farms plant different crops on the same land to maintain soil fertility and help control insects and diseases. It’s known as a crop sequencing.
Wheat has been a traditional staple of a crop sequence for Driscoll’s Farms. But recently, low global wheat prices have squeezed its value.
“When we drill into the numbers, we see we’re losing money on wheat. It is one of those necessary growths so the ground can rest. But from the numbers perspective, it doesn’t make sense.
“When we know the cost by the acre, by the bushel - we can compare it to an alternative. Maybe there’s another rotational crop we can add into the mix and we can compare apples to apples.
“It might not make money, but if it loses less, in the farming game, that’s a big deal.”