Net farm income is used for family living, to repay debt, and to purchase new and used assets.
At the end of a farming season, every farmer should be fully aware of the profitability and productivity of his agricultural production. Aiming to be productive, farmers are faced with many factors limiting a farm's productivity. Available land, cost of agricultural commodities, challenging weather conditions, problems with market access, poor knowledge and lack of new technologies all affect the performance of a farm. Farm productivity is important for many reasons; from providing more food, better competitiveness on the agricultural market to personal benefits for the farmers such as income, health and wellbeing, as well as being able to increase the outputs of labor. If you earn your living as a farmer, you should be interested in an annual farm report to analyze the profit or loss on your farm. There are a few ways to report income and expenses from your farming activities.
Yield Productivity
The land is a key farmer’s resource that defines the maximum productivity potential for a crop and its varieties. Therefore, one of the key productivity indicators is yield productivity which shows how a specific crop variety performs on one hectare/acre of land. Understanding which crop variety performs the best is crucial for future crop variety selection and production optimization.
Good agricultural practice recommends creating a season plan that defines expected yield quantity and forecast of a selling price to understand possible income per crop and variety. If a season plan is created, you are able to benchmark yourself continuously - whether you are under performing or over performing.
Finances are crucial for every type of farm production. You can farm as long as you have money. That is the reason why tracking expenses, sales, and cash-flow is so important. It is essential for a farmer to have a complete control over the total cost of production. Tracking cash-flow is essential because simply selling all farm goods doesn’t guarantee profitability. However, actually getting paid for all of the goods does, hence the importance of keeping cash-flow above zero.
Understanding the ROI of a crop production helps with understanding which crops are profitable.. Having profitable crop production is the key to having a sustainable and viable farming business, especially when resources such as land are so scarce. Running a farm without insight into all aspects of its productivity is like driving a car blindfolded.
In Kenya, significant political attention has been toward the improvement of food staples productivity, both to offset the rapidly increasing costs of food imports and to stimulate increased incomes and food security at the household level. However, many smallholder farmers, particularly in the semi-arid areas are unable to participate in the supported food staples value chains. Geographic barriers like remoteness, and poor access to natural resources such as water, limit market participation of smallholder farmers in these regions.
To overcome these challenges, the Improving Smallholder Productivity and Profitability (ISPP) project is building smallholder farmers’ skills in agricultural production, water management and in farming as a business in five semi-arid counties. ISPP is increasing household food security and nutrition through improved access and efficient management of water, the use of climate-resilient agricultural practices and agribusiness promotion. The project supports 80,000 households improve their farm productivity and food security.
