Impacts of Best Management Practices on Farm Financial Performance

A rapidly changing global agribusiness environment creates a challenge for commercially oriented agricultural producers to improve business acumen through strategy development and execution. A best management practice is broadly defined as a practice that is considered to be most effective in improving business performance.

This study examined the relationship of financial leverage and management practices with financial performance on a group of Minnesota and Northwest farms. Management practices were classified into seven broad categories of management, namely strategic planning, financial management, networking, marketing, technology adoption, family relationship and human resources management.

Using multiple regression analysis on 242 observations, the effects of financial leverage and management practices on revenues and profits were determined. While the relationship of best management practices with profitability is less conclusive, this study concludes statistically significant relationships between management practices and financial performance, measured in terms of revenues. There exist positive and statistically significant returns to business planning, transition management, customer management and family relationship management.