Potato Grower

September 2018

Issue link: http://read.uberflip.com/i/1018739

Contents of this Issue

Navigation

Page 35 of 39

36 POTATO GROWER | SEPTEMBER 2018 PROUD TO DISTRIBUTE KENT WASDEN - (208) 390-7878 RHETT WARREN - (208) 860-8197 OFFICE - (208) 356-7800 – Post Harvest Specialists – Preferred Jet Ag Applicator 149899GrouAg12v.indd 1 12/18/14 8:37 AM Post Harvest • Chemical • Mechanical (208) 356-7800 (208)356-7800 Post Harvest - Chemical - Mechanical Distributor For: LLC Simply Sustainable. Always Effective. 1959-12GroupAg13s.indd 1 7/24/18 4:04 PM United Potato Growers of America By Buzz Shahan Chief Operating Officer ACCOUNTING VS. ECONOMICS Knowing the difference determines long-term viability of your business and the industry. A potato grower's loan officer recently remarked to him, "If I had one wish, it would be that every ag degree issued in every university required a minor in economics—not accounting, economics." Why would a banker feel a need to distinguish economics from accounting? One could surmise that he has seen too many examples of financial grief coming from inadequate training in economics and not from inadequate training in accounting. Keeping good financial records is important, but, in this banker's opinion, understanding fresh produce economics is more vital to surviving and prospering in the potato- producing business than accounting. Is he onto something? Let's examine the difference between accounting and economics. Simply put, accounting lists a business' expenses and income—anticipated and/or actual—in proper columns and tracks the results. Economics, on the other hand, concerns production and consumption and the transfer of wealth that results from how the two interact. Accounting reports whether or not your farm is producing a profit. Economics, however, explains the market forces that transfer wealth—equity— either away from or toward your farm. Given a choice, which one would you rather master? More broadly, accounting production cost and sale price yields a P/L number that tracks the degree to which wealth is either gained or lost by your farm. Infinitely more vital, economics explains the market forces that make the P/L statement turn out like it does. In today's data- focused world, for a grower to not know exactly how production and consumption forces transfer wealth either toward or away from his farm could be called dereliction of duty, lack of due diligence, or even malfeasance. A potato producer incapable of immediately listing his market segment's production/consumption profitability parameters classifies him as economically illiterate. He is no doubt the very fellow the banker is talking about. He's the loose cannon roaming about the market's deck capable of torpedoing not only his own crop's value but that of fellow producers as well. A truism to write on your bathroom mirror with your wife's lipstick is that consistently successful crops such as citrus, lettuce, and others—even wine—all support market-tracking databases. These market- tracking databases exist for the sole purpose of informing producers of their market's economic parameters including current supply logistics, balanced supply limits, upcoming supply events, supply glitches and consumption trends. No potato grower can properly manage his or her business without understanding and managing the very production and consumption forces that determine financial outcome (wealth transfer). Can you fully distinguish the economics of your business from its accounting? Are you swimming deep enough in the potato market's economic data flow to consistently guide wealth toward your operation, or might you be just splashing about in the wading pool of accounting and hoping that things turn out well? No potato grower can properly manage his or her business without understanding and managing the very production and consumption forces that determine financial outcome.

Articles in this issue

Archives of this issue

view archives of Potato Grower - September 2018