Which is more important: production or profit?
Most people would use their logical reasoning and say profit.
Therefore, why do most agricultural decisions put production first?
David blames ego. Competitive nature drives people to want to 'be/ have the biggest or the best'. As a consequence of this competitive nature, we inadvertently believe that higher production means more profit.
Unfortunately higher production does not always equal higher profit. While it is a driver of profit, it isn't the only factor.
Profit isn’t determined by yields or growth rates, it is determined by how much your produced, what it cost you to produce and what you got paid for it.
Whatever enterprises you are running, spending $20 to receive an extra $10 income doesn’t work. Please remember that production is only one driver of profit. Profit is a function of:
- how much you produce times what you get paid; compared to
- how much it COST you to produce it.
Calculate and know your cost of production and profitability.
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