When Cost Cutting Becomes Profit Cutting

Posted on
May 19, 2020

By: Dustin Sawyer, Laboratory Director

In times of scarcity – such as the current state of our world- it can feel as though decisions have greater consequences than ever. It isn’t uncommon, then, for a desire to seek information that will help make the best decisions possible. But what about when the decision is being made about the financial future, in a time of financial scarcity, and the information needed will cost some of the very money that is meant to be saved? When considering tough economic decisions, look to the return on investment, or ROI, of spending choices.

ROI is an easy calculation when a spending decision will pay back some kind of dividend. These dividends can be straightforward, such as earning interest or opening a new revenue stream. Or they can be more nebulous, such as increased efficiency or decreased future spending. In either case, if there is a direct financial result from a financial decision, a gut feel usually results in a spending decision within a fairly short time. However, when it’s more difficult to draw a direct link between a spending decision and economic return, this situation can lead to a strange paradox in which seeking the information that will help make sound financial decisions is foregone because the cost of the information itself goes against the goal of saving money.

Ultimately, well-informed decision making is key, but how is the very information that guides such decisions valued? Teams of professionals are invoked to help make these important decisions. Doctors help with health, financial planners assist with retirements, nutritionists support animal health, and agronomists bolster crop growth. When the chips are down and the decisions are going to have more dramatic consequences than usual, the last thing to deny these trusted partners is accurate and timely information.

According to the USDA’s Farm Service Agency (FSA), 19.4 million acres of crop land were not planted in 2019. That is the highest prevent-plant acreage on record since the FSA began releasing the report. It was thought that there would be increased pressure to push production on the acreage that did get planted, as the United States would have a deficit to make up with all of that cropland out of production. Soil labs across the country braced for an influx of in-season testing such as the pre-sidedress nitrate test (PSNT) and plant tissue tests. The opposite ensued. In-season testing dropped to the lowest point in years. Those farmers who did manage to get a crop planted decided to cut spending on the information that their industry partners needed to help them be successful.

This year, better planting conditions exist and planting is progressing faster than average in many states. However, a different version of economic uncertainty looms. When strategizing for the uncertain future, it’s important to keep one goal in mind: profit. When agronomists were asked why in-season testing volume dropped off so significantly in 2019, at a time when production was more important than ever, much like the farmers, they responded that it was a cost-cutting measure. The irony is that on a per-acre basis, agronomic testing is one of the lowest-cost inputs on the farm. These crucial measurements provide valuable insights regarding where fertilizer can be cut back, or where a micronutrient application may boost crop yield. They deliver the information that showcases where to spend production money – and how to do so with a scalpel, not a hatchet. Because in the end, profit isn’t a game of not spending money. Profit is about spending money wisely, and that can only be achieved with accurate information.

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