7 Key Performance Indicators (KPIs) that Farms Should Measure & Track

If you’re going to improve your farm operation in the future, you need to know where you stand today. As such, it’s important to measure & track farm key performance indicators (KPIs) to understand your efficiency, productivity, and overall performance. 

Think of farming without KPIs like flying a plane without instruments. You could get a sense of where you’re going, but you’ll be missing details that, if not addressed, could cause you to crash and burn. 

However, if you measure and track farm KPIs, you could realize the following benefits for your operation: 

• Improved decisioning based on real-time insights specific to your farm—not state or county averages from five years ago

• Identifying inefficiencies and bottlenecks to drive corrective action

• A single source of truth to measure performance and drive accountability among all farm partners

• Optimized resource use, including land, labor, water, and crop inputs

• Early risk detection, allowing for timely intervention and mitigation

• Improved financial stability and predictability, especially when measuring farm performance against market prices

• Prioritization of environmentally sustainable practices to help mitigate climate impact

In the end, farm KPIs are there to help you do two things: increase productivity and reduce waste. Improve both of these areas, and your bottom line will show it. 

Farm KPIs run the gamut, varying based on your short- and long-term goals. However, here are seven that farmers and landowners alike should measure and track. 

1. Crop yield or livestock productivity

The metric that most closely drives farm productivity is crop yield. The more crop you produce, the more money you’ll make—simple, but true. 

Tracking your crop yield over time can show whether your operational efficiency is improving or falling behind. By correlating yield KPIs with changes in farming practices, you can evaluate those decisions to determine whether you should continue them in the future. 

Note that while some correlations will be obvious, others won’t be. Plus, you’ll have to take into account intervening variables—like weather or other unforeseen circumstances—that could impact your findings. 

For example, you could implement a new hybrid the same year a derecho sweeps across 80% of your fields, damaging a significant portion of your crop. Your yield, naturally, will decrease. But that doesn’t mean the hybrid doesn’t work. Rather, you should probably try it again to see if yield improves in a better weather year. 

The same principle applies to livestock as well as crops, although the specific metrics will vary. Some metrics to track include offspring per female, average weight gain, milk production, etc. 

2. Revenue and profit margins

If crop yield is your cornerstone farming metric, revenue and profit is your cornerstone financial metric. 

Farmers live and die by the “break even” price of a given commodity. But the problem with the break-even mentality is that you shouldn’t shoot to break even. You should shoot for a profitable farming year, as difficult as it may be.

When you set your target crop yields against commodity futures, make sure you’re taking into account fluctuations in input costs. Right now, we’re facing higher input costs amid a downward trending economy. 

Virtually every variable in the balance sheet is subject to change, so make sure you’re basing your profit projections on the most up-to-date data available.

3. Cost per unit

In keeping with close monitoring of input costs, one farm KPI to track is the cost per unit—whether we’re talking a pound of corn or soybeans, or a head of livestock. 

Higher commodity prices won’t help you if your cost per unit keeps apace. If you’re seeing a high cost per unit, you’ll need to take action to avoid unprofitability. 

Keep in mind that because farm operations bear a number of generally fixed costs—equipment, rents, taxes, labor, etc.—the marginal cost of each additional crop acre decreases. As such, one counterintuitive way to reduce cost per unit is to pick up new ground and scale your operation. 

4. Inventory levels

In 2021 and 2022, shipping delays gave farmers a new appreciation for the importance of inventory monitoring! You don’t want to get into the throes of the planting season to realize you’re short of seed, fertilizer, feed, or other critical supplies.

Not only should you keep an eye on your own inventory levels (that’s a given), but also the lead time for replacement from your retailer. This may not be as exciting of a statistic to track as profitability, but if your inventory reaches critical levels, you won’t have the resources to realize that profit. 

5. Labor efficiency

Farm labor expenses rank the third highest cost of the whole operation, coming only behind seed and fertilizer. As you work to maximize the performance of seed and crops, you should also find ways to improve farm labor performance. 

To do this, you need to measure labor efficiency. Know which employees are performing best in certain areas, and work with them to improve or, if needed, move them to another part of the operation where they’ll have more to offer. 

6. Water usage and irrigation efficiency

With almost a quarter of the U.S. experiencing drought during the 2023 growing season, irrigation and water usage are a major factor in farming success. This is especially important in areas with water scarcity. 

As such, you should track both overall water usage levels and consumption per crop unit. With precision monitoring, you could even dive deep into which parcels or fields are using the most water, which could help you maximize resource allocation. 

As water usage plays an important role in environmental responsibility, farmers can play their part in protecting our planet by monitoring and adjusting water use. 

7. Energy consumption

Similar to water use monitoring, farms should also be conscious of their energy consumption. Not only will improved energy efficiency reduce farming costs, but also positively impact the environment. 

One tactic farmers can use is to allow energy farms to be built on their land. Not only does this help net out their energy use, but it provides an additional revenue stream for the operation. A win-win all around!

If you’re tracking your KPIs carefully and see an opportunity for growth, check out the CommonGround marketplace to see local listings for farmland leasing.