By Andi Anderson
Labor costs are a significant expense in farming. To ensure efficient resource utilization, farm managers must assess labor efficiency and productivity. These benchmarks provide insight into whether labor is being used effectively.
Understanding Labor Benchmarks
Two key benchmarks evaluate farm labor:
- Labor Efficiency: Measures total labor cost (hired and family labor) as a percentage of gross revenue.
- Labor Productivity: Determines the output per worker by dividing gross revenue by the total number of workers.
A high labor cost percentage with low productivity may indicate excess labor, making it difficult to sustain operations. On the other hand, low labor costs and high productivity suggest efficiency but may require evaluating machinery investments.
Benchmarking a Case Farm
A case farm in west central Indiana, with 3,000 acres of corn and soybeans, was assessed using labor benchmarks. The findings included:
- Labor efficiency: 7.6% (well below the industry target of 11%).
- Gross revenue per worker: $1,086,000 (exceeding the benchmark of $750,000).
However, labor costs per acre were higher than industry standards. This suggests the need to assess machinery usage to balance overall efficiency.
Key Takeaways for Farm Management
- Farms should aim for a balance between labor and machinery costs.
- Labor cost per acre and labor hours per unit should be regularly monitored.
- Seasonal and part-time labor calculations should be considered for accurate productivity assessment.
By benchmarking labor efficiency and productivity, farm managers can make informed decisions to optimize costs and improve operations.
Photo Credit: gettyimages-zoran-zeremski
Categories: Indiana, Rural Lifestyle