TEST CODE HERE

(This is an updated version of a previous post)

Accounting in farms has not changed much over the last several decades. Some farmers are simply content to know how much the farm operation made on a cash basis each year. Others go a step further to be able to determine how much did each crop make, or even how much each field generated in contribution margin to the farming operation (all Granular customers are able to do this!)

How do you know if accounting by soil type is worth it?
It depends largely on where you are. If your operation is blessed with entirely flat, black, well drained ground with minimal variation in yield, it may not be worth thinking this way. However, if, for example, you had a 1,000 acre operation in Wisconsin with a 50-50 split between high yield potential soils and sandy soils with yields of 180 and 130 respectively, $4 corn, and the same crop plan, input budget, and rent for each soil type, you could be making $25,000 on the good soil and losing $75,000 on the other half. In this situation, analyzing by soil might be for you.
But before we get into that, let’s go back to the basics to briefly discuss how soil quality is commonly measured, the indices that exist, and how we make use of them at Granular.
How is soil quality measured?
Ideally, soil quality is the same thing as soil productivity: soil quality should measure how well a given soil type yields crops. If you’re growing corn, for example, then the most intuitive measure of soil quality would be in units of corn grown. Comparing field A to field B, assuming management and weather conditions were identical across these two fields, the differences in yield of corn could be attributed to the differences in the quality of soil itself. Unfortunately it’s rare that such fine scale records of yield history exist, or that management and weather conditions are identical. That’s where soil indices come in.
Soil indices make use of available scientific work that relates characteristics of the soil (clay content, conductivity, acidity, for example) to the soil’s yields. Different indices combine these attributes in different ways, but all end up with a final number to describe how productive the soil is likely to be. The most commonly available soil index is the National Commodity Crop Productivity Index (NCCPI), but several states have their own versions (Iowa’s is the Corn Suitability Rating 2, CSR2, for example).
How common is extreme variation in soil quality within fields?
We analyzed over 10 million farm fields (CLU’s) from AcreValue to look at how within-field soil variability changes around the US. The Dakotas and Appalachia are hotspots for within-field soil variability, while the Des Moines Lobe in Iowa, Loess of Illinois and Lake Plain of Ohio are home to very low variability. For those of you in the corn belt, seeing that the most uniform soils in the US according to the NCCPI index are on the coastal plains of North Carolina might come as a bit of a surprise.

Average Within-Field Coefficient of Variation in Soil Quality from >10 million CLU’s in AcreValue
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So what does this mean for the prospect of accounting by soil type? If you are in the red zones, it may be time to give it a try this winter while putting together your plans for 2017. For a grower, looking at this map should be able to help him or her judge where they land in comparison with peers in other regions as it relates to this important metric. If you are an advisor, accountant or other member of a grower’s trusted network, discussing this type of analysis in an area with more variable soils is more likely to hit home.

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In collaboration with Paul Neiffer.

Farm Accounting has not changed much over the last several decades.  Some farmers are simply content to know how much the farm operation made on a cash basis each year. Others go a step further to be able to determine how much each crop made, or even how much each field generated in contribution margin to the farming operation.

But I believe the next step in farm accounting is to determine how much contribution margin is generated by each soil type on the farm.  A field can contain many different soil types, and the return to the farm can vary dramatically by each. Simply knowing the yield by type is not sufficient since a bump in yield may not offset the increased input costs that are incurred. By having data available that shows the expected return for each of these soil types, a farmer can make an informed decision as to how much inputs he should allocate for each type.  Collecting and analyzing this data is not an easy task, but it can pay off big time.

How do you know if accounting by soil type is worth it? It depends largely on where you are. If your operation is blessed with entirely flat, black, well drained ground, with minimal variation in yield, it may not be worth thinking this way. However, if, for example, you had a 1000 acre operation in Wisconsin with a 50-50 split between high yield potential soils and sandy soils with yields of 180 and 130 respectively, $4 corn, and the same crop plan, input budget, and rent for each soil type, you could be making $25,000 on the good soil and losing $75,000 on the other half. In this situation, analyzing by soil might be for you.  Taking the example further, looking at the marginal benefit for N inputs you could improve your outcome by $6,600 using economically optimal N application on the land, even in spite of lower yield potential.[1]Picture1

Average within-field coefficient of variation in soil quality from >10 million CLUs in Granular’s AcreValue system.
 
This example might sound extreme, but how common is extreme variation in soil quality within fields? We analyzed over 10 million farm fields (CLUs) from AcreValue to look at how within-field soil variability changes around the US.[2] The Dakotas and Appalachia are hotspots for within-field soil variability, while the Des Moines Lobe in Iowa, Loess of Illinois and Lake Plain of Ohio are home to very low variability. However, for those of you in the corn belt, seeing that the most uniform soils in the US according to the NCCPI index are on the coastal plains of North Carolina might come as a bit of a surprise.
So what does this mean for the prospect of accounting by soil type? If you are in the red zones, it may be time to give it a try this winter while putting together your plans for 2016. For a grower, looking at this map should be able to help him or her judge where they land in comparison with  peers in other regions as it relates to this important metric.  If you are an farm advisor, farm accountant or other member of a grower’s trusted network, discussing this type of analysis in an area with more variable soils is more likely to hit home.
 
[1] Iowa State Nitrogen Rate Calculator http://extension.agron.iastate.edu/soilfertility/nrate.aspx $13.33 comes from the .37/lb N * 36 lbs comparison assumes $600 ammonia and continuous corn.
[2] Within-field soil variability is defined as the area-weighted standard deviation of NCCPI within a CLU (field), an aggregated to the county level and divided by the mean.

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How a Potato Grower Found 11% More Profit Using Granular

Learn how Granular helped a real farm discover that their variety choice was costing them $800 per acre

Karl Wozniak, Role
  |  
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Karl Wozniak, Role
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Granular's Annual Customer CEO Summit

March 21-33, 2018

California Academy of Sciences, San Francisco, CA

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Kennedy and Coe, LLC—the nation’s largest food and agriculture consulting and accounting practice—and Granular, Inc., a leader in farm-management software and analytics to the production agriculture industry, announce a strategic alliance to develop integrated products and collaborate around joint clients. The companies are co-developing a benchmarking service and will connect their respective accounting-software and farm management systems designed for professional farm operations.

Ag industry leaders pair to develop new farm management and analytics solutions.

“Working with farmers for over 80 years, we’re intimately familiar with how much farm business sophistication has soared over the decades, and exponentially, it seems, in the last five to ten years. So has the thirst for better data to make informed decisions,” said Jeff Wald, Kennedy and Coe’s CEO. “We believe that Granular’s farm-management platform combined with our financial advisory services gives leaders of dynamic farm businesses exactly what they need to achieve their aggressive growth goals.”
Granular and Kennedy and Coe plan to collaborate regularly with production-ag operations who want to expand, bringing the full complement of their combined advisory services to facilitate a higher level of success.
“Granular serves agriculture businesses that are working hard to expand geographically and become more professional,” said Granular’s CEO, Sid Gorham. “In addition to better software, these producers are looking for financial, tax, and strategic advisors to take them to the next level. We look forward to partnering with Kennedy and Coe’s agriculture experts to deliver an integrated package of advice, services, and technology. “
Farm Benchmarking
Kennedy and Coe and Granular will jointly assess the current management practices on the largest and most professional farms in the US. This involves surveying each functional area in a farm business (i.e. planning, production, cost accounting, grain marketing, financial accounting, tax, and human resources) with the goal of assessing the different levels of organizational maturity in each area. Survey participants will receive a detailed comparison of their operations alongside those of their peers. Kennedy and Coe and Granular intend to share the summarized results of the annual survey with the industry broadly.
Integrating Granular with Kennedy and Coe’s Accounting Software
Another important area of focus is to integrate Granular’s software with cloud-based accounting software supported by Kennedy and Coe’s financial, tax, and management consulting services. This software integration will give producers end-to-end visibility of their business from production activity to their financial statements while minimizing data entry and bookkeeping work. This also permits access by producers to services ranging from day-to-day accounting through CFO-level services and C-suite management advice.

About Granular

Granular is a breakthrough software and analytics platform designed specifically for the professional farm. After launching commercially in July 2014, Granular is being adopted by producers nationwide who are investing to make their businesses more professional, efficient, and profitable. Granular helps these producers organize their operational, financial, and agronomic data into one system and use it to make better decisions. Granular is backed by leading venture investors, including Andreessen Horowitz, Google Ventures, and Khosla Ventures.

About Kennedy and Coe

Kennedy and Coe impacts businesses throughout the nation’s food-supply chain—from policy to plate—as the leading food and agriculture consulting and accounting firm in the US. In 2013, to round out its food and ag service offerings, Kennedy and Coe acquired Vela Environmental and AgKnowledge, companies that delivered proactive policy and legislative involvement, sustainability and resource planning, and detailed farm profit-margin management. Beyond production ag and food processing, the firm works in biofuels; ag-related manufacturing; equipment dealers; contracting, real estate, engineering, architecture, and technicians; and with rural community banks. Ranked among the 100 largest CPA firms in the US, Kennedy and Coe has offices in Kansas, Colorado, Mississippi, Wyoming, and Washington, DC.

Latest

How a Potato Grower Found 11% More Profit Using Granular

Learn how Granular helped a real farm discover that their variety choice was costing them $800 per acre

Karl Wozniak, Role
  |  
September 11, 2017

Company News

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

Industry Insights

Three Ways to Run a Successful Harvest

Three Ways to Run a Successful Harvest

Three Ways to Run a Successful Harvest

Events

Grow 2018

Granular's Annual Customer CEO Summit

March 21-33, 2018

California Academy of Sciences, San Francisco, CA

All Posts

Show All (50)
Industry Insights (6)
Granular Suite (12)
AcreValue (12)
Company News (1)
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Three Ways to Run a Successful Harvest

Three Ways to Run a Successful Harvest

Three Ways to Run a Successful Harvest

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Three Ways to Run a Successful Harvest

Three Ways to Run a Successful Harvest