Will Your Fertilizer Give You a Positive ROI?
We all know what fertilizer does for land. It should make the land produce better quality crops and more of them. And of course, that is why people consider buying fertilizer in the first place. Just like anything that a business or individual would buy, it needs to provide a return on your investment. In this case, that return should come in the form of increased dollars in the farmer’s pocket.
When it comes to growing crops, there may not be a more worthwhile investment for the money…but how does one quantify this “Return on Investment” that can potentially come from fertilizer? It may take a little extra work but the answer is that one needs to track it. This experiment can be time consuming but very worth it in the end in order to determine if fertilizer is giving the return on investment you need to justify buying it.
When tracking this, it would be best for the farmer to keep all else “equal” or the same but it’s understandable that the most productive farmers are always tweaking different variables to get the best results. To start, one should track the previous year’s or season’s production levels for their crops in order to create a baseline. Also make note of what crop prices were the previous year in order to keep prices the same between comparisons.
Next, track how much fertilizer one purchases and the cost and don’t lose that information during the growing season. This information will obviously be needed during tax season but just in case, don’t lose how much was paid for fertilizer and how much fertilizer was applied.
When the growing season ends and harvest begins, track your crop production and multiply the crops produced by the price from last season. This will calculate the total revenue from the crops this season at last year’s prices. Now subtract the total revenue between the two years to arrive at the difference or the production increase between the two years.
Next, divide the cost of the fertilizer, by the increased revenue between the two years and convert this number to a percent. This could be considered the farmers calculated ROI and should give the farmer a good idea of whether purchasing fertilizer for their soil was a worthwhile investment.
How to Calculate Fertilizer ROI
There are going to be factors that are out of the farmers control when conducting this experiment such as the weather but it will be up to the farmer to assign a “weight” to the different variables that differ from year to year. Also, by conducting this experiment, it may reveal that your soil is already very fertile and you don’t need as much fertilizer or perhaps a different type of fertilizer will be better for your ground than the one used.
This article covers a very simple way to calculate the ROI from investing in fertilizer for your land. If you are in the middle of purchasing land or borrowing to buy land, a better method might be to use a farmland return on investment calculator such as the one found here. This way, you can tweak the different amounts you pay for your fertilizer and estimate its impact on crop production in order to see if it increases return on investment very much.
In conclusion, fertilizer can be one of the best ways to boost a farmer’s ROI but if the results are not tracked and calculated, then the benefits of fertilizer may be misperceived in one direction or the other. Always track the results as best and objectively as you can so that you can increase your return on investment the maximum amount!