The Acre Advantage: 5 Benchmarks to Know
- Grant Wiese
- Aug 18
- 2 min read
SW Financial Literacy
The Acre Advantage
5 Benchmarks Every Farmer Should Know
Last week I threw a spreadsheet together for work to help compare a few financial ratios to the number of acres farmed by the operation. You can have the spreadsheet here:
Big disclaimer: This spreadsheet was made for the county I live in and the target metrics will not apply to your area.
That said, it still has valuable calculations, and you could prob
ably do research to find some averages in your area.
Below is a description of how each calculation is found and why it matters to your operation. Please note, adjustments would be needed as well for diversified operations that are not strictly row crop. Enjoy geeking out on the spreadsheet!
1. Working Capital Per Acre
What it is: Measures liquidity—how much cash or easily accessible assets are available per acre.
Why it matters: Strong working capital ensures the farm can handle unexpected expenses, invest in opportunities, and maintain operations during downturns. Low working capital can lead to cash flow issues and reliance on debt.
2. Fixed Asset Cost Per Acre
What it is: Includes payments for principal & interest (P&I), leases, and cash rent, divided by total acres.
Why it matters: Indicates how much is being spent on long-term assets and land access. High costs may signal over-investment or inefficiency, while low costs could mean underutilization or missed opportunities.
3. Cash Rent Equivalent
What it is: Converts owned land costs (real estate P&I and property taxes) into a per-acre equivalent to compare with rented land.
Why it matters: Helps assess whether owning land is financially competitive with renting. If the cash rent equivalent is much higher than market rent, it may be worth reevaluating ownership strategy.
4. Machinery & Equipment (M&E) Value Per Acre
What it is: Total value of machinery and equipment divided by total acres.
Why it matters: Reflects capital intensity. High values may indicate overcapitalization or a need for better asset utilization. Low values could suggest aging equipment or underinvestment.
5. M&E Payment Per Acre
What it is: Annual payments related to machinery and equipment (e.g., loans or leases) divided by total acres.
Why it matters: Shows the financial burden of equipment financing. High payments can strain cash flow, especially in low-revenue years. Comparing this to peer benchmarks helps identify potential cost-saving opportunities.
Need help with your operation's financials?
I have limited spots available for 1-hour consultations helping you:
Understand your farm's financial position.
Prepare for future growth opportunities.
Discuss purchase & finance options on farm transactions you are working through now.
Sign-up here if my services can benefit your operation:
Have a great week!
Grant
