New Topic Flaws in production cost comparisons

15 June 1998

New Topic — Flaws in production cost comparisons

ONE of the common claims of the last few years is that the top 25% of farmers are far more likely to make a profit. But the figures that back this claim come from large accountancy companies, and claim yields, even for the worst 25%, which are higher than those used as the average by John Nix.

What does this mean?

It suggests to me that the many farmers who use a small local company for accountancy work do not make an appearance in these figures, and there is an enormous sampling error. When factors such as land quality can lead to bigger yield differences than the Super-Accountants claim, and they exclude rents from their calculations, it becomes difficult to judge whether the reasons they claim for the differences have any validity.

The top 25% by their measure are going to be farming the best land, and paying the highest rental equivalent. And all the extra margin could be an illusion, when the money gets into the farmers pocket.