Benchmarking as a means of improving the financial wellbeing of organic dairy farms

Summary

This report was presented at the UK Organic Research 2002 Conference. Benchmarking is an important management tool enabling the comparison of actual financial data on a similar basis. Currently there is little data available on the actual costs of farming to organic standards. Limited financial or incomplete management information tends to lead to poor decision taking. The objective of the exercise is to identify the practices, which lead to enhanced financial performance, either low costs of production or high levels of profitability. The identification of these most profitable practices enables informed decisions to be made about the way the farming business needs to change. The main problem areas include the collection of detailed information broken down into the required cost centres. The allocation of costs between enterprises on small and medium sized farms is often difficult. Obtaining either a large enough sample of farms, if the farming system is different, or a sufficient number of farms with a similar farming system is essential. Analysis is normally undertaken on a cost of production basis as this allows for better comparison between units of a different size. Finance costs are normally excluded, but depreciation charges are included to reflect the level of investment in the business. A realistic value of family labour needs to be included to allow for the production of a Comparable Farm Profit (CFP).