How should farmers maximize their profits ?

[!Kaggen]

As a farmer and also an adviser to other farmers this question is coming more and more difficult to answer.
Issues such as
1. The sustainability of working with limited resources such as fertilizers, soil and water.
2. Climate change
3. Carbon emissions accounting
4. Energy costs
5. Animal welfare
6. Large retailer market dominance
7. National food security
8. Food safety regulations
9. Disease pandemics
10. Market commodity speculation
11. Pollution

are all contributing to making it more and more difficult to build in profitability into a farm business.

I do not think any other industry has as many interest groups to satisfy.

As an example:

In Southern Africa were I live and work food and electricity are both scarce and getting scarcer.
The main electricity supplier in the region "ESKOM" owned by the South African government has not invested in new power generation facilities for the last 20 years and now we are close to using up all our capacity. With the recession and shortage in capital many new plans for new facilities have been shelved and electricity prices have and will continue to rise steeply to pay for facilities under construction. It is a desperate situation which has forced the SA government to allow private energy production initiatives to fill as much of the shortfall as possible. Part of this is using biomass in either biodigesters or gasifiers to produce electricity. With the current prices for food received by farmers and the inputs costs, most farmers are either breaking even or going under. With a guaranteed purchase price offered by ESKOM for electricity generated by biomass of R1/KWhr farmers would make more money using their land to grow crops for electricity production than for food. Up to 70% more in wheat growing areas.
Unlike biofuels which is effected by the price of oil and as we have seen this is very volatile. Electricity prices will definitely not fall anytime soon especially since plans for any serious power generation such as new nuclear power stations have been shelved.

Is it reasonable for a farmer to become profitable by growing energy crops instead of growing food with no profit?
I think it is.

[The Central Scrutinizer]

"Using food to run cars is dumb". - Charles T. Munger

To answer the question - it is reasonable for a farmer to do whatever works best for him (and is legal).

[JJM 777]

The main problem is that farmers are so uncontrollably scattered in all countries of the world, it is very difficult for them to form a cartel to inflate their producer prices. This is an anthill without a queen problem, all those millions of farmer ants would be powerful together, but without leadership and cooperation they are as weak as one single ant only, very easy to ignore or to squash.

[!Kaggen]

The main problem is that farmers are so uncontrollably scattered in all countries of the world, it is very difficult for them to form a cartel to inflate their producer prices. This is an anthill without a queen problem, all those millions of farmer ants would be powerful together, but without leadership and cooperation they are as weak as one single ant only, very easy to ignore or to squash.

And in my experience even if they could cooperate they don't.
I cannot figure this one out, but seems to be related to poor social skills I find amongst fellow farmers.

[Gord_in_Toronto]

Maybe farmers elsewhere should consider the example of the Canadian Wheat Board:

http://www.cwb.ca/en/about/

Though Canada's current right-wing doctrinaire government has been trying to close the Wheat Board down, they have been rebuffed by the Canadian courts to this point and do not dare to bring the issue to Parliament as they are in a minority position in government.

[Puppycow]

I would grow whatever crop is most profitable. If electricity is scarce and you are helping to generate more of it, you are contribting more value that way.
The price commanded by your crop is an indicator of its value to society. So by maximizing your profit, generally speaking, you maximize the value of your contribution to society.

The main caveat to this is that if the government has subsidies for energy crops that artificially inflate their value beyond their true value, it would not necessarily be the best for society even if it maximizes your profit, but this is the fault of government policies, not you.

[Sparhawk]

Your question sort of drifted from the original topic, so I'm not sure if this will help.
If you want to maximise profit, then I would look at implementing TPS/Lean manufacturing principles. This focuses on eliminating the wastes in your processes, so as much as possible you are only value adding. There are many lean organisation but lean.org is a good place to start.

[!Kaggen]

Maybe farmers elsewhere should consider the example of the Canadian Wheat Board:

http://www.cwb.ca/en/about/

Though Canada's current right-wing doctrinaire government has been trying to close the Wheat Board down, they have been rebuffed by the Canadian courts to this point and do not dare to bring the issue to Parliament as they are in a minority position in government.

Thanks for the info

[!Kaggen]

I would grow whatever crop is most profitable. If electricity is scarce and you are helping to generate more of it, you are contribting more value that way.
The price commanded by your crop is an indicator of its value to society. So by maximizing your profit, generally speaking, you maximize the value of your contribution to society.

The main caveat to this is that if the government has subsidies for energy crops that artificially inflate their value beyond their true value, it would not necessarily be the best for society even if it maximizes your profit, but this is the fault of government policies, not you.

Yes, my thoughts except if governments are to promote private sustainable energy production how could they do it other than through financial support? The feeder tariffs to ESKOM for biomass-to-energy are higher than what it cost them to produce electricity from coal or nuclear. Also these facilities were built using Tax payer money so are also subsidized indirectly. Whilst government utilities own most of the electricity generation its difficult to use free market principles consistently. It is not that simple I suppose. As a farmer though my first priority is to stay in business and have sufficient income to improve my land and manage it sustainably. So from my point of view I would still grow energy crops.

On a side, I was watching this program of the TV last night about specialized pig farming in Spain to produce this product:
http://en.wikipedia.org/wiki/Jam%C3%B3n_ib%C3%A9rico
From an environmental, animal welfare and economic point of view this farming is great for the farmer, pigs and the environment. Its also been around for centuries. But it is very exclusive and certainly does not aim at feeding the world. It really put the energy crop thing into perspective though, since if someone is prepared to pay for what you can produce and its good for you as a farmer and your farm then why not.

[!Kaggen]

Your question sort of drifted from the original topic, so I'm not sure if this will help.
If you want to maximise profit, then I would look at implementing TPS/Lean manufacturing principles. This focuses on eliminating the wastes in your processes, so as much as possible you are only value adding. There are many lean organisation but lean.org is a good place to start.

Thanks will investigate

[fagin]

I believe the opium crop in Afganistan is down - good opening.

[balrog666]

How should farmers maximize their profits?

Easy - don't report them!

:)