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Northern Victoria Irrigated Cropping

Gross Margins 2009-10

Download the PDF version of this document: Northern Victoria Irrigated Croppings Gross Margins 2009-10

Table of Contents

1. Introduction
2. The Irrigation Areas of Northern Victoria
3. Calculating and Using Gross Margins
4. Target Prices Profitable Prices!

5. Crop Gross Margin

5.1 Barley (Malting)
5.2 Canola
5.3 Faba Bean (Fiesta vf)
5.4 Lucerne 5 Year Stand
5.5 Maize (Grain)
5.6 Maize (Silage)
5.7 Oats (Milling)
5.8 Oats (Hay)
5.9 Sorghum (Hay)
5.10 Soybean
5.11 Triticale
5.12 Wheat

6. Appendices

6.1 Appendix A A Guide to the Cost of Owning and Operating Farm Machinery
6.2 Appendix B Planting Guide for Optimum Yield of Irrigated Crops in Northern Victoria

List of Figures

Figure 1 Locality guide, irrigated areas in Northern Victoria
Figure 2 How total farm gross margin relates to farm business profit
Figure 3 Estimating the overhead cost of owning farm machinery
Figure 4 Estimated cost of owning/operating a farm tractor 150 kW engine (200 Ehp)

List of Abbreviations
cm centimetre
ha hectare
hr hour
kg kilogram
l litre
Ml megalitre
N nitrogen
P phosphorous
ppm parts per million
t tonne
$’000 thousand dollars

Gross Margins for the Irrigated Areas in Northern Victoria 2009-10

1. Introduction

Purpose of the publication

This booklet outlines how to calculate and use gross margins for a range of cropping enterprises. For each enterprise example gross margins are calculated using typical cost and price information. These examples should not be interpreted as being a true reflection of what will be achieved on individual farms in the region. Rather, they should only be used to assist in calculating gross margins for a specific case, with costs, prices and management assumptions being changed accordingly.

Additional topics covered in the booklet include target pricing and calculating farm machinery costs. This information has been provided to assist the reader in making farm management decisions.

Treatment of GST

All prices shown in gross margin calculations are GST exclusive. This is because most farmers have an Australian Business Number (ABN) and are registered for GST. In this case, the GST paid on input items will earn tax credits to offset against GST collected on sales for the Taxation Office. GST will therefore have no impact on the gross margin calculation. This assumption will not hold for businesses not registered for GST as they will not receive input tax credits on their purchases. In this case GST should be added back by inflating input prices by 10%. Irrespective of this, the tax implications of farm management decisions should be given consideration when planning changes on the farm.

2009-10 Gross Margin estimates

Commodity prices used for the 200910 gross margins are based on price forecasts from industry experts. Information from crop check programs, farmers, chemicals and fertiliser companies have been used to update application rates and prices of inputs.

The gross margin figures were provided in terms of dollars per hectare ($/ha) and dollars per megalitre of irrigation water use ($/Ml).

2. The Irrigation Areas of Northern Victoria

The irrigated areas in Northern Victoria comprise approximately 1.5 million hectares of land adjacent to the Murray River between Mildura and Cobram. A locality guide is shown in Figure 1. The area produces many commodities through summer and winter cropping, dairying, horticulture, red meat and wool production. The soils vary enormously from sandy through to heavy clay.

 Figure 1 Locality guide, irrigated areas in Northern Victoria

Figure 1 Locality guide, irrigated areas in Northern Victoria

3. Calculating and Using Gross Margins

Gross margins provide a simple way for comparing the profitability of enterprises that have similar requirements for capital and labour.

A gross margin refers to the total income derived from an enterprise, less the variable costs incurred in the enterprise. To be useful this figure should be expressed in terms of the most limiting resource in the enterprise, such as hectares of land, water use or working capital.

Gross Margin =(Gross Enterprise Income -Enterprise Variable Costs ) / Quantity of Most Limiting Resource (eg land, water)

For example, the gross margin for wheat is calculated as follows:

A   Yield 5.5 tonnes per hectare
Price on farm $270 per tonne
Variable cost $806 per hectare
Irrigation water use 3.5 Ml per hectare
Enterprise Income = A x B = 5.5 x $270 = $1,485
Gross margin per hectare = E – C = $1,485- $805 = $680
G Gross margin per Ml = F ÷ D = $680 ÷ 3.5 = $194

 

Overhead (fixed) costs are excluded from gross margins. These costs remain constant in the short term regardless of the level of output from the enterprise. Overhead costs include rates, insurance, permanent paid labour, administration, and depreciation.

Overhead costs are not included in a gross margin because they often do not affect the choice between different activities on the farm. This is particularly the case where a farming business is already established and has all the required machinery and equipment to support a range of enterprises. In this case, farm establishment costs are sunk and future costs such as depreciation, rates and interest are predetermined. The question the farm manager wants to answer is “which combination of activities will generate the greatest return for my business given my resources and desired lifestyle?” With overhead costs predetermined in the shortterm the choice between activities will often only involve more or less variable costs being incurred.

Using gross margins

Gross margins can be used to decide between different enterprise options for a farm business. Examples of applications include:

  • Deciding which crop/crop rotation to grow, eg wheat versus barley.
  • Deciding which animal enterprise to run, eg bullocks vs steers, merino flock vs merinoDorset flock.

In using gross margins for cropping it is important to identify the agronomic benefits that one crop can provide to another crop. This can be difficult to do given the complex interactions that exist. One way to address this issue is to estimate gross margins for entire crop rotations. Comparing gross margins for a range of possible rotations can assist in formulating a final choice of rotation to use.

Limitations of gross margins

When choosing between options that have different capital requirements a gross margin analysis by itself will not be sufficient, eg introducing cropping into an existing grazing property that has no cropping machinery or introducing cattle to a sheep property where new yards and fences are required. In such cases a more complex budgeting analysis will be needed to take into account differences in capital and timing of cashflows.

Another issue that should be kept in mind when using gross margins is the possible differences in the timing of cashflows. A new activity may require a number of years to reach a stable state of production due to the need for new pastures to be established or for stock numbers to be built up. Comparing such an activity with one that will reach a stable state immediately can be misleading as it does not give preference to an earlier return on investment or a more even income stream. Such

decisions can be answered using development budgets, which take into account differences of the timing of cashflows.

It is also important to account for differences in risk between options. One way to take risk into account is to calculate gross margins for a range of possible climatic or market scenarios. This is often called a sensitivity analysis and is provided for each gross margin calculated in this booklet. Comparing the range of expected gross margins will provide better information than only using the ‘average’ or ‘expected’ figure.

How gross margins affect your farm business profit

Gross margins are essentially the first step in calculating total farm business profit. Farm business profits (before tax) is arrived at by adding gross margins from all enterprises and taking away overhead costs, interest, lease charges and owner's salary (Figure 2).

 Figure 2 How total farm gross margin relates to farm business profit

Figure 2 How total farm gross margin relates to farm business profit

4. Target Prices Profitable Prices!

Marketing seems to be the buzzword of the moment but what does it mean for your farming operation in practical terms? Is it knowing the ins and outs of futures markets, marketing your produce direct to end users or ringing up the silo a couple of days before harvest to see if they are open or a contract is available? Whatever the case, one thing is for sure everyone is going to need to know more about it in the future.

A sensible marketing plan can benefit your bottom line in the same way as monitoring your crop’s growth requirements. A key step in developing a marketing plan is, knowing what price will produce a profit for your business. Without this knowledge marketing is based around trying to pick the top of the market; a hard thing to do as we have seen in recent years.

Marketing plans should be a balance between trying to achieve high prices and reducing the risk of receiving low ones. A key step in being able to achieve this balance is actually knowing what your grain is worth, or having a target price. A target price gives you a reference point, allowing you to lock in profits during the year and reduce your business risk. Knowing your target price will be increasingly important in years to come as the range of forward selling, hedging and storage options expand. Forward selling and hedging during the year open up the chances of achieving good prices for your grain because you are selling the crop over a longer period of time. Knowing your target price is a key step in confidently forward selling and hedging. It fills in information gaps not supplied by gross margins, aiding your decision making and thus your operation.

The calculation

By definition, if sales at the target price lead to a profit for your business then that price must cover all costs of the business, which consist of variable costs, overhead costs and a margin for profit. Variable costs are used in the calculation of gross margins and include fuel, oil, chemicals, seed and fertiliser. Overhead costs include all other costs of the business (except capital costs) including depreciation on machinery, rates and administration and are present no matter how much it costs to grow the crop. In addition, you must include a margin for profit so the business can grow. Items included here are salaries for the family/ies, tax payments, interest and debt repayment costs and a margin for investment on or off the farm.

An example target price calculation is found on page 6. All figures are converted into $/t rather than $/ha as you don’t get paid by the hectare, do you?

Variable cost per tonne

Converting the variable costs in the gross margin calculations from $/ha to $/t is simply done by dividing the cost per hectare ($/ha) by the expected yield (t/ha). You might have picked up a difficulty in using target prices. How do you know the yield when it isn’t in the bin? This is where some guesswork comes into play. As with any plan, it is ongoing and needs adjusting along the way. It is essential however, as it allows you to compare prices on offer to the price that will produce profit for the business. If the price on offer is greater than the target price, then an opportunity exists to secure a profit for your business. Hence, the target price becomes the focus of marketing decisions over the course of the year.

Overhead cost per tonne

The example includes some fairly typical figures. As overheads are incurred by the business as a whole, we need to apportion cost to the cropping enterprise so it can be incorporated into the target price. Roughly, if cropping accounts for 60% of your time, land and/or income then we should be trying to cover 60% of the overhead cost from cropping returns.

To apportion costs on a per tonne basis you need to know the total amount of grain grown on the farm. In other words, income from selling grain should cover a certain percentage of total overhead costs and profit margins. In this example, if overhead costs total $20,000 and the farm’s total crop is estimated at 500t, which comprises 50% of the business, then the cropping income that has to be made to cover overhead costs is 50% of $20,000 = $10,000. This $10,000 has to be made over 500t, so $20 has to be made on every tonne to cover overheads.

Profit margin per tonne

The same is done with the margin for profit. These overhead and profit margin figures (shaded in the example) will be the same for all of your crops, allowing you to work out the target price easily for all of your crops. This is the reason that in this year’s edition we have left rooms for you to complete your own calculations. All businesses will be different so it is important that you go through and work out some rough figures to focus on during the marketing and growing year.

The cropping year consists of both marketing and growing your crop. You monitor the crop (hopefully!) so why not the markets? Not watching the markets for forward selling and risk management opportunities is like not watching what type of weeds that need to be controlled. Both impact on your bottom line. Go through and do the calculation for yourself; you’ll find it useful. If you have any queries contact your local DPI economist or business adviser for information.

Target Price Calculation

Type of grain produced: ASW Wheat   Your figures
  A AverageYield: 5.5t/ha    
VARIABLE COSTS           $/ha    
Seed   100kg/ha @ $0.65 /kg $65 100 x$ 0.65  
Fertiliser D.A.P 125kg/ha @   1,346/t $168 125 x $1346÷1000  
  Urea 200kg/ha @   $825/t $165 200 x $674÷1000  
Chemicals broadleaf weeds and grasses $5/ha $5 Estimate  
Irrigation and drainage   3.5Ml/ha @   $50perMl $175 3.5 x $50  
Machinery Cultivation 2.5ha/hr @   $76/hr $30 1 x $76÷2.5  
  Sowing 2ha/hr @   $76/hr $38 1 x $76÷2  
  Fertiliser application 4ha/hr @   $76/hr $19 1 x $76÷4  
  Spraying 6ha/hr @   $76/hr $13 1 x $76÷6  
Contract harvesting   2.5ha/hr @   $275/hr $110 $275÷2.5  
Other Insurance $11.40 per $1,000 early seasonvalue $200/t $16

$11.40÷1000x

$200 x 5.5

 
  B TOTAL VARIABLE COSTS/HA $804    
  C VARIABLE COSTS/TONNE(B÷A) $146 $804÷5.5  
SCALE OF BUSINESS    
  D Total grain production (tonne sfrom all crops) 500 Estimate  
  E Cropping as a proportion of total farm business 50% Estimate  
OVERHEAD COSTS    
  F Total clearing sale value of cropping machinery $90,000 Estimate  
  G Annual MRA per tonne of grain F÷(Dx10) $18 $90,000÷500 x 10  
Business overheads    
  H Total Business overheads $20,000    
  I Cropping business overheads/t (HxE)÷D $20 $20,000 x 50% ÷500  
  J TOTAL OVERHEAD COSTS/TONNE (G+I) $38    
PROFIT MARGIN INCLUDING ANNUAL FINANCE AND LIVING COSTS    
Total Debt $60,000 Interest rate 12%    
Principal repayments (budget to pay off over ten years) $6,000    
Interest (annual interest billon debt) $6,000    
Income tax (annual estimate) $5,000    
Owners salary(estimate of salary for each family on the farm) $35,000    
Extra fo further investment(expansion, off-farm investment, super etc.) $5000    
  K TOTAL PROFIT MARGIN NEEDED PER YEAR $58,200    
  L PROFIT MARGIN/TONNE (KxE)÷D $58 58,200 x 50% ÷ 500  
ON FARM TARGET PRICE PER TONNE (C+J+L) $242 $146+$38+$58  


5. Crop Gross Margin

5.1 Barley (Malting) YEAR: 2009-10   Your figures
YIELD 6 tonnes per ha  
PRICE $257 per tonne on farm  
$/ha  
INCOME   6 t/ha @ $257 per t $1,542  
COSTS  

Seed bed preparation

(includes urea application)

1 pass 2 ha/hr @ $76 per hr $38  
Knockdown + preemergent 2 sprays       $19  
Application 2 sprays 3 ha/hr @ $76 per hr $25  
Sowing   2 ha/hr @ $76 per hr $38  
Seed   95 kg/ha @ $0.63 per kg $59  
Fertiliser  
D. A. P.   125 kg/ha @ $1,346 per t $168  
Urea   150 kg/ha @ $825 per t $124  
Application 2 passes 4 ha/hr @ $76 per hr $38  
* A deep soil N test is recommended at approximately $60 per test  
Post emergent herbicides to control:  
Broadleaf weeds and grasses $29  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3.5 Ml/ha @ @ $50 per Ml $175  
Harvesting   2.5 ha/hr @ $275 per hr $110  
Insurance     @ $11.40 per $'000 $18  
Total Variable Costs         $854  
GROSS MARGIN PER HECTARE         $688  
GROSS MARGIN PER MEGALITRE         $197  
             
TOTAL VARIABLE COSTS/TONNE         $142  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $197 $217 $237 $257 $277 $297 $317

Yield

(tonne

per

hectare)

4.5 $40 $129 $218 $307 $396 $485 $574
5 $138 $237 $335 $434 $533 $632 $731
5.5 $235 $344 $453 $561 $670 $779 $888
6 $333 $451 $570 $688 $807 $926 $1,044
6.5 $430 $558 $687 $815 $944 $1,072 $1,201
7 $527 $666 $804 $942 $1,081 $1,219 $1,358
7.5 $625 $773 $921 $1,070 $1,218 $1,366 $1,514
  8 $722 $880 $1,038 $1,197 $1,355 $1,513 $1,671

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Barley (malting and feed)
Drainage: Ensure layout allows irrigation and drainage within 12 hours.
Soil structure: Moderate to good soil structure.
Crop rotation: Sow barley after wheat, which has followed a break crop to improve soil health, reduce risk of root diseases and weed populations. Disease status for some diseases can be determined by soil testing. Soil testing for Deep Soil N is an excellent indicator of potential malting paddocks.
Subsoil moisture: Use fallow or preirrigation (recommended at 1 Ml per hectare) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window (midApril to midMay) for your location.
Crop establishment: Aim at a plant population of 150 to 200 plants per square metre.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures. Check N status with a Deep Soil N test if aiming at growing malting barley.
Control weeds pests & diseases: Use break crops, pre and post emergent herbicides and pesticides to ensure minimal yield loss. Regular monitoring is essential to determine weed and insect threshold levels.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from midbooting through to fully emerged heads stage. Recommended rate of 3.5 Ml per hectare includes preirrigation of 1 Ml per hectare.
Marketing: Determine production costs and fixed costs to grow the crop. Establish target price and begin selling when that price is reached.

 

5.2 (Canola) YEAR: 2009-10   Your figures
YIELD 3 tonnes per ha  
PRICE $610 per tonne on farm  
$/ha  
INCOME   3 t/ha @ $610 per t $1,830  
COSTS  

Seed bed preparation

2 passes 2 ha/hr @ $76 per hr $76  
Knockdown + preemergent 1 spray       $19  
Application 1 spray 6 ha/hr @ $76 per hr $13  
Sowing   2 ha/hr @ $76 per hr $38  
Seed   4 kg/ha @ $8.44 per kg $34  
Fertiliser  
D. A. P.   125 kg/ha @ $1,346 per t $168  
Urea   200 kg/ha @ $825 per t $165  
Application 2 passes 4 ha/hr @ $76 per hr $38  
Insecticides for RLEM $6  
Application 1 pass 6 ha/hr @ $76 per hr $13  
Herbicide to control    
Broadleaf weeds         $19  
Grass weeds 1 spray       $20  
Application 2 passes 6 ha/hr @ $76 per hr $25  
Irrigation and drainage   3.5 Ml/ha @ $50 per Ml $175  
Harvesting            
Contract windrowing     @ $38 per ha $38  

SP harvester

Harvesting using own labour & equipment = $76 per hour

  2.5 ha/hr @ $275 per hr $110  
Insurance     @ $15.10 per $'000 $28  
Total Variable Costs         $985  
GROSS MARGIN PER HECTARE         $845  
GROSS MARGIN PER MEGALITRE         $241  
             
TOTAL VARIABLE COSTS/TONNE         $328  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $300 $320 $340 $360 $380 $400 $420

Yield

(tonne

per

hectare)

2.4 $343 $390 $438 $485 $532 $579 $627
2.6 $451 $503 $554 $605 $656 $707 $759
2.8 $560 $615 $670 $725 $780 $836 $891
3.0 $668 $727 $786 $845 $904 $964 $1,023
3.2 $776 $839 $902 $966 $1,029 $1,092 $1,155
3.4 $885 $952 $1019 $1086 $1,153 $1,220 $1,287
  3.6 $993 $1064 $1135 $1,206 $1,277 $1,348 $1,419

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Canola

Drainage: Ensure layout allows irrigation and drainage within 12 hours.
Soil structure: Moderate to good soil structure.
Crop rotation: Allow at least three years between canola crops. Check chemical use on previous crops, particularly sulfonylureas on cereals. Ideally control weeds in previous season.
Subsoil moisture: Use fallow or preirrigation (recommended at 1.5 Ml per hectare) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window (midApril to midMay) for your location.
Crop establishment: Aim at a plant population of 40 - 75 plants per square metre.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures. Never apply more than 20 kg N per hectare or 8kg P per hectare with the seed.
Control weeds pests & diseases: Use break crops, pre and post emergent herbicides and pesticides to ensure minimal yield loss. Check for insects at least twice weekly at establishment and flowering to grain maturity.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from stem elongation to the end of grain filling. Recommended rate of 3.5 Ml per hectare includes preirrigation of 1.5 ML per hectare.
Windrowing: Windrowing is recommended. Windrow when 40 to 60% of the seeds collected from a representative sample have changed colour from green to brown and are firm enough to roll between thumb and forefinger without squashing.

 

5.3Faba Bean(Fiesta vf) YEAR: 2009-10   Your figures
YIELD 4.5 tonnes per ha  
PRICE $340 per tonne on farm  
$/ha  
INCOME   4.5 t/ha @ $340 per t $1,530  
COSTS  

Seed bed preparation

(includes bed forming optional)

1 pass 2 ha/hr @ $76 per hr $38  
Knockdown+preemergent  
Application 1 spray 6 ha/hr @ $76 per hr $13  
Sowing   2 ha/hr @ $76 per hr $38  
Seed(Registered Seeds)   200 kg/ha @ $0.70perkg $140  

Fertiliser

 
Grain legume super   140kg/ha @ $820pert $115  
Application   4 ha/hr @ $76 per hr $19  
Herbicide to control:    
Grassweeds $25  
Application 1 spray 6 ha/hr @ $76 per hr $13  
Insecticides to control  
Heliothis         $4  
Aerial application 1 spray   @ $15 per ha $15  
RLEM $3  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3.0Ml/ha @ $50perMl $150  
Fungicides     @   $57  
Aerial application 1 pass     $15 per ha $15  
Ground application 2 passes 6 ha/hr @ $76 pe rhr $25  
Harvesting   2.5 ha/hr @ $275 pe rhr $110  
Insurance     @ $15.10 per $'000 $23  
Total Variable Costs         $841  
GROSS MARGIN PER HECTARE         $689  
GROSS MARGIN PER MEGALITRE         $230  
             
TOTAL VARIABLE COSTS/TONNE         $187  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $265 $290 $315 $340 $365 $390 $415

Yield

(tonne

per

hectare)

3.0 ($35) $39 $113 $187 $261 $334 $408
3.5 $96 $182 $268 $354 $440 $527 $613
4.0 $226 $325 $423 $522 $620 $719 $817
4.5 $357 $467 $578 $689 $800 $911 $1,021
5.0 $487 $610 $733 $857 $980 $1,103 $1,226
5.5 $618 $753 $889 $1,024 $1,159 $1,295 $1,430
  6.0 $748 $896 $1,044 $1,191 $1,339 $1,487 $1,635

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Faba Beans (Fiesta variety)

Drainage: Ensure layout allows irrigation and drainage within 12 hours.
Soil structure: Moderate to good soil structure.
Sown on time: Sow recommended varieties within the preferred sowing window (May to mid June) for your location.
Crop establishment: Aim at a plant population of 35 plants per square metre. Knowing seed size is essential to achieve this target.
Adequate nutrition: Faba beans must be inoculated with the appropriate Rhizobium. Apply P according to paddock history, soil test results and target yield removal figures. A minimum of 20 kg P per hectare should be applied aim to be within 4 kg P per hectare of crop demand.
Control diseases: Use resistant varieties. Monitor for leaf diseases regularly. Fungicides should be applied as a preventative measure. Fungicides must be on the leaf during rain periods in order to prevent spread.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at full flowering.

 

5.4 Lucerne 5 Year Stand YEAR: 2009-10   Your figures
YIELD 13 tonnes per ha  
PRICE $320 1st cut 20%  
  $350 later cuts 80%  
Average price $344 per tonne on farm  
INCOME $/ha  
Lucerne Hay 1st Cut   2.6 t @ $320 per t $832  
Lucerne Hay late Cuts   10.4t @ $350 per t $3,640  
Total Income         $4,472  
COSTS  

Seed bed preparation

20% 2 ha/hr @ $76 per hr $8  
Sowing 20% 2 ha/hr @ $76 per hr $8  
Seed 20% 12 kg/ha @ $10 per kg $24  
Fertiliser            
Single super - establishment 20% 250kg/ha @ $900per t $45  

Single super - balance

20% 500kg/ha @ $900per t $360  
Application 2 passes 4 ha/hr @ $76 per hr $38  
Insecticides 20%   @ $20 per ha $4  
Application 20% 6ha/hr @ $76 per ha $3  

Herbicides( pre- and post emergence)to control:

Broadleaf weeds and grasses

$32  
Application 2 passes 6 ha/hr @ $76 per hr $25  
Irrigation and drainage   10 Ml/ha @ $50perMl $500  
Harvesting            
Cutting and raking(contractor)   1ha @ $60 per ha $60  
Baling(contractor)   13t @ $24 per t $312  
Cartage to shed on farm (500-600 kg bales)   13t @ $8 per t $104  
Insurance     @ $12.50 Per $’000 $56  
Total Variable Costs         $1,579  
GROSS MARGIN PER HECTARE         $2,893  
GROSS MARGIN PER MEGALITRE         $289  
             
TOTAL VARIABLE COSTS/TONNE         $121  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $309 $319 $334 $344 $369 $394 $419

Yield

(tonne

per

hectare)

8.5 $1,215 $1,299 $1,425 $1,508 $1,719 $1,928 $2,138
10 $1,624 $1,723 $1,871 $1,970 $2,217 $2,464 $2,711
11.5 $2,035 $2,148 $2,318 $2,432 $2,716 $2,999 $3,284
13 $2,444 $2,572 $2,765 $2,893 $3,214 $3,535 $3,856
14.5 $2,854 $2,997 $3,211 $3,355 $3,713 $4,071 $4,429
16 $3,263 $3,421 $3,658 $3,816 $4,211 $4,606 $5,001
  17.5 $3,673 $3,846 $4,105 $4,278 $4,710 $5,142 $5,574

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Lucerne

Drainage: Ensure layout allows irrigation and drainage within eight hours. Avoid waterlogging throughout the year.
Soil structure: Good soil structure. pH (CaCl2) greater than 5
Sown on time: Sow recommended varieties either autumn or late winter – early spring. Select varieties with at least some root rot resistance. Sow inoculated seed no more than 10 to 15 mm deep.
Crop establishment: Aim at a plant population of greater than 50 plants per square metre (sowing rate 10 to 15 kg/ha).
Adequate nutrition: Apply P removed in hay.
Soil moisture: Check to ensure timely irrigation. Avoid any moisture stress.
Marketing: Supply consistent quality hay for the chosen market. Avoid excessive handling of windrows. Bale hay at 18 to 20% moisture.

 

5.5Maize(Grain) YEAR: 2009-10   Your figures
YIELD 12 tonnes per ha  
PRICE $320 per tonne on farm  
  $/ha  
INCOME   12t/ha @ $320 per t $3,840  
COSTS  

Seed bed preparation

(include shilling/row cultivation & application of 300 kg of urea)

5 passes 2.5 ha/hr @ $76 per hr $152  
Sowing (by contractor)     @ $100 per ha $100  
Seed 25 kg bag 1.25 bags @ $285.50 pe rbag $357  
Fertiliser            
D.A.P.   250kg/ha @ $1,346 per t $337  

Urea (application via irrigation)

  600kg/ha @ $825per t $495  
Application   4 ha/hr @ $76 per hr $19  

Herbicides to control:

   
Broadleaf weeds and grasses - pre emergent         $60  
Broadleaf weeds and grasses - post emergent         $26  
Application/incorporation 2 passes 6 ha/hr @ $76 per hr $25  
Irrigation and drainage   8.5 Ml/ha @ $50perMl $425  
Harvesting            

Contract

(Grain drying may be required@$16/t)

  1.5 ha/hr @ $275 per hr $183  
Cartage to silo on farm(chaser bin)   12 t @ $8 per ha $96  
Insurance     @ $9.60 Per $’000 $37  
Total Variable Costs         $2,312  
GROSS MARGIN PER HECTARE         $1,528  
GROSS MARGIN PER MEGALITRE         $180  
             
TOTAL VARIABLE COSTS/TONNE         $193  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $290 $300 $310 $320 $330 $340 $350

Yield

(tonne

per

hectare)

6 ($504) ($444) ($385) ($325) ($266) ($207) ($147)
8 $55 $134 $213 $292 $372 $451 $530
10 $613 $712 $811 910 $1,009 $1,108 $1,207
12 $1,172 $1,290 $1,409 $1,528 $1,647 $1,766 $1,885
14 $1,730 $1,869 $2,007 $2,146 $2,285 $2,423 $2,562
16 $2,288 $2,447 $2,605 $2,764 $2,922 $3,081 $3,239
  18 $2,847 $3,025 $3,203 $3,382 $3,560 $3,738 $3,917

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING Maize (Grain)

Drainage: Ensure border check layout allows irrigation and drainage within 12 hours or beds/furrows within 18 hours. Avoid waterlogging, especially in the first four weeks after emergence.
Soil structure: Moderate to good soil structure.
Varieties: Use hybrids appropriate for the location, planting time, enduses and harvest times.
Sown on time: Sow recommended varieties within the preferred sowing window for your location. Use a precision seeder to achieve suitable plant populations
Crop establishment: Aim at a plant population of 75,000 to 80,000 plants per hectare for most stockfeed varieties.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures. Ensure adequate Zinc.
Control weeds pests & diseases: Control weeds early, aiming for a weedfree crop. Monitor the crop regularly for insect damage during emergence to flowering.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at flowering.
Windrowing: Use grain moisture content measurements to decide when to harvest grain.

 

5.6Maize(Silage) YEAR: 2009-10   Your figures
YIELD 18 tonnes per ha  
PRICE $180 per tonne standing  
  $/ha  
INCOME  
Maize silage (sold standing)   18t/ha @ $180 per t $3,240  
   
COSTS  

Seed bed preparation

(include shilling/row cultivation & application of 300 kg of urea)

5 passes 2.5 ha/hr @ $76 per hr $152  
Sowing (by contractor)     @ $100 per ha $100  
Seed   1.25 bags @ $285.50 pe rbag $357  
Fertiliser            
D.A.P.   250kg/ha @ $1,346 per t $337  

Urea (300 kg application via irrigation)

  600kg/ha @ $825per t $495  
Application   4 ha/hr @ $76 per hr $19  

Herbicides to control:

   
Broadleaf weeds and grasses - pre emergent         $60  
Broadleaf weeds and grasses - post emergent         $26  
Application/incorporation 2 passes 6 ha/hr @ $76 per hr $25  
Irrigation and drainage   8 Ml/ha @ $50perMl $400  
Harvesting            

at purchaser's expense

           
Total Variable Costs         $1,971  
GROSS MARGIN PER HECTARE         $1,269  
GROSS MARGIN PER MEGALITRE         $159  
             
TOTAL VARIABLE COSTS/TONNE         $110  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $150 $160 $170 $180 $190 $200 $210

Yield

(tonne

per

hectare)

12 ($171) ($51) ($69) ($189) ($309) ($429) ($549)
14 $129 $269 $409 $549 $689 $829 $969
16 $429 $589 $749 909 $1,069 $1,229 $1,389
18 $729 $909 $1,089 $1,269 $1,449 $1,629 $1,809
20 $1,029 $1,229 $1,429 $1,629 $1,829 $2,029 $2,229
22 $1,329 $1,549 $1,769 $1,989 $2,209 $2,429 $2,649
24 $1,629 $1,869 $2,109 $2,349 $2,589 $2,829 $3,069

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING Maize (Silage)

Drainage: Ensure border check layout allows irrigation and drainage within 12 hours or beds/furrows within 18 hours. Avoid waterlogging, especially in the first four weeks after emergence.
Soil structure: Moderate to good soil structure.
Varieties: Use hybrids appropriate for the location, planting time, enduses and harvest times.
Sown on time: Sow recommended varieties within the preferred sowing window for your location. Use a precision seeder to achieve suitable plant populations
Crop establishment: Aim at a plant population of 75,000 to 80,000 plants per hectare for most stockfeed varieties.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures. Ensure adequate Zinc.
Control weeds pests & diseases: Control weeds early, aiming for a weedfree crop. Monitor the crop regularly for insect damage during emergence to flowering.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at flowering.
Harvest: Use milk line observations to decide when to harvest silage.

 

5.7 Oats(Milling) YEAR: 2009-10   Your figures
YIELD 6 tonnes per ha  
PRICE $185 per tonne on farm  
  $/ha  
INCOME   6t/ha @ $185 per t $1,110  
   
COSTS  

Seed bed preparation

(includes urea application)

1 pass 2 ha/hr @ $76 per hr $38  
Sowing   2 ha/hr @ $76 per ha $38  
Seed   100 kg/ha @ $0.75 per kg $75  
Fertiliser            
D.A.P.   125 kg/ha @ $1,346 per t $168  

Urea

  150 kg/ha @ $825 per t $124  
Application   4 ha/hr @ $76 per hr $19  

Herbicides to control:

   
Broadleaf weeds and grasses         $5  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3 Ml/ha @ $50 per Ml $150  
Harvesting   2.5 ha/hr @ $275 per hr $110  

Insurance

    @ $11.40 Per $’000 $13  
Total Variable Costs         $752  
GROSS MARGIN PER HECTARE         $358  
GROSS MARGIN PER MEGALITRE         $119  
             
TOTAL VARIABLE COSTS/TONNE         $125  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $155 $165 $175 $185 $195 $205 $215

Yield

(tonne

per

hectare)

4.5 ($50) ($5) ($39) ($84) ($128) ($173) ($217)
5.0 $27 $76 $126 $175 $225 $274 $324
5.5 $104 $158 $212 $267 $321 $375 $430
6.0 $180 $240 $299 $358 $417 $477 $536
6.5 $257 $321 $385 $450 $514 $578 $642
7.0 $333 $403 $472 $541 $610 $679 $749
7.5 $410 $484 $558 $633 $707 $781 $855

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING Oats (Milling)

Drainage: Ensure layout allows irrigation and drainage within 15 hours.
Soil structure: Moderate soil structure.
Crop rotation: Sow oats as a break crop to improve soil health, reduce risk of root diseases and weed populations. Disease status for some diseases can be determined by soil testing.
Subsoil moisture: Use fallow or pre-irrigation (recommended at the rate of 1Ml/ha) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window for your location.
Crop establishment: Aim at a plant population of 200 plants per square metre for maximum grain yield.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures.
Control weeds pests & diseases: Use pre and post emergent herbicides and pesticides to ensure minimal yield loss.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from head emergence through to flowering. Recommended rate of 2Ml per hectare includes pre-irrigation of 1 Ml per hectare.

 

5.8 Oats(Hay) YEAR: 2009-10   Your figures
YIELD 12 tonnes per ha  
PRICE $200 per tonne on farm  
  $/ha  
INCOME   12t/ha @ $200 per t $2,400  
   
COSTS  

Seed bed preparation

(includes urea application)

1 pass 2 ha/hr @ $76 per hr $38  
Sowing   2 ha/hr @ $76 per ha $38  
Seed   100 kg/ha @ $0.75 per kg $75  
Fertiliser            
D.A.P.   125 kg/ha @ $1,346 per t $168  

Urea

  150 kg/ha @ $825 per t $124  
Application   4 ha/hr @ $76 per hr $19  

Herbicides to control:

   
Broadleaf weeds and grasses         $5  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3 Ml/ha @ $50 per Ml $150  
Harvesting            
Cutting and raking (contractor)   1 ha/hr @ $60 per ha $60  
Baling (contractor)   12 t @ $24 per t $288  
Cartage to shed on farm (500-600 kg bales)   12 t @ $8 per t $96  
             
Total Variable Costs         $1,073  
GROSS MARGIN PER HECTARE         $1,327  
GROSS MARGIN PER MEGALITRE         $442  
             
TOTAL VARIABLE COSTS/TONNE         $89  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $155 $170 $185 $200 $215 $230 $245

Yield

(tonne

per

hectare)

9 ($418) ($553) ($688) ($823) ($958) ($1,093) ($1,228)
10 $541 $691 $841 $991 $1,141 $1,291 $1,441
11 $664 $829 $994 $1,159 $1,324 $1,489 $1,654
12 $787 $967 $1,147 $1,327 $1,507 $1,687 $1,867
13 $910 $1,105 $1,300 1,495 $1,690 $1,885 $2,080
14 $1,033 $1,243 $1,453 $1,663 $1,873 $2,083 $2,293
15 $1,156 $1,381 $1,606 $1,831 $2,056 $2,281 $2,506

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING Oats (Hay)

Drainage: Ensure layout allows irrigation and drainage within 15 hours.
Soil structure: Moderate soil structure.
Crop rotation: Sow oats as a break crop to improve soil health, reduce risk of root diseases and weed populations. Disease status for some diseases can be determined by soil testing.
Subsoil moisture: Use fallow or pre-irrigation (recommended at the rate of 1Ml/ha) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window for your location.
Crop establishment: Aim at a plant population of 250 plants per square metre for hay crops.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures.
Control weeds pests & diseases: Use pre and post emergent herbicides and pesticides to ensure minimal yield loss.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from head emergence through to flowering. Recommended rate of 2Ml per hectare includes pre-irrigation of 1 Ml per hectare.

 

5.9 Sorghum (Hay) YEAR: 2009-10   Your figures
YIELD 14 tonnes per ha  
PRICE $150 per tonne on farm  
  $/ha  
INCOME   14t/ha @ $150 per t $2,100  
   
COSTS  

Seed bed preparation

(includes urea application)

2 passess 2.5 ha/hr @ $76 per hr $61  
Sowing   2.0 ha/hr @ $76 per hr $38  
Seed   12 kg/ha @ $7.26 per kg $87  
Fertiliser            
D.A.P.   125 kg/ha @ $1,346 per t $168  

Urea (application via irrigation)

  200 kg/ha @ $825 per t $165  
Application   4 ha/hr @ $76 per hr $19  

Post-emergent Herbicides to control:

   
Broadleaf weeds and grasses         $5  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   7.5 Ml/ha @ $50 per Ml $375  
Harvesting            
Cutting and raking (contractor)   1 ha/hr @ $60 per ha $60  
Baling (contractor)   14 t @ $24 per t $336  
Cartage to shed on farm (500-600 kg bales)   14 t @ $8 per t $112  
             
Total Variable Costs         $1,439  
GROSS MARGIN PER HECTARE         $661  
GROSS MARGIN PER MEGALITRE         $88  
             
TOTAL VARIABLE COSTS/TONNE         $103  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $135 $140 $145 $150 $160 $170 $180

Yield

(tonne

per

hectare)

11 $142 $197 $252 $307 $417 $527 $637
12 $254 $305 $365 $425 $545 $665 $785
13 $348 $413 $478 $543 $673 $803 $933
14 $451 $521 $591 $661 $801 $941 $1,081
15 $554 $629 $704 $779 $929 $1,079 $1,229
16 $657 $737 $817 $897 $1,057 $1,217 $1,377
17 $760 $845 $930 $1,015 $1,185 $1,355 $1,525

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Sorghum (Hay)

Soil temperature Prefers warmer soils than millet (soil temperature > 18°C)
Adequate nutrition: Provide adequate Phosphorus (up to 40 kg P/ha) and Nitrogen (up to 200 kg N/ha for the season)
Grazing

Prussic acid poisoning is a risk with all sorghum. Don’t graze stressed crops (cold, moisture stress, regrowing crop). Introduce stock slowly. Do not graze until > 60 cm high. There are differences between cultivars and types.

Grazed when crop reaches 75 - 125 cm high back to 15 cm. Hay and silage cut at 120-cm maximum. Conditioning is essential.

 

5.10 Soybean YEAR: 2009-10   Your figures
YIELD 3 tonnes per ha  
PRICE $610 per tonne on farm  
  $/ha  
INCOME   3.0t/ha @ $610 per t $1,830  
   
COSTS  

Seed bed preparation

 

2 passess 2.5 ha/hr @ $76 per hr $61  
Sowing (direct sowing)   2 ha/hr @ $76 per hr $38  
Seed+ inoculation   90 kg/ha @ $1.30 per kg $117  
Fertiliser            
Triple super   200 kg/ha @ $975 per t $195  
Application   4 ha/hr @ $76 per hr $19  
Irrigation and drainage   7.5 Ml/ha @ $50 per Ml $375  

Pre-emergent herbicides to control:

   
Broadleaf weeds         $25  
Application/incorporation   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   7.5 Ml/ha @ $50 per Ml $375  
Post-emergent herbicides to control:            
Broadleaf weeds         $25  
Application/incorporation   6 ha/hr @ $76 per hr $13  
Insecticides         $24  
Aerial application     @ $15 per hr $15  
Crop dessication         $35  
Aerial application     @ $15 per ha $15  
Harvesting   2.5 ha/hr @ $275 per hr $110  
Insurance     @ $11.40 per $'000 $21  
             
Total Variable Costs         $1,100  
GROSS MARGIN PER HECTARE         $730  
GROSS MARGIN PER MEGALITRE         $97  
             
TOTAL VARIABLE COSTS/TONNE         $367  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $460 $510 $560 $610 $660 $710 $760

Yield

(tonne

per

hectare)

1.5 ($397) ($323) ($249) ($175) ($101) ($26) $48
2 ($170) ($71) $28 $127 $226 $325 $423
2.5 $58 $181 $305 $428 $552 $675 $799
3 $285 $433 $582 $730 $878 $1,026 $1,175
3.5 $512 $685 $858 $1,031 $1,204 $1,377 $1,550
4 $740 $937 $1,135 $1,333 $1,531 $1,728 $1,926
4.5 $967 $1,190 $1,412 $1,634 $1,857 $2,079 $2,302

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Soybeans

Drainage: Ensure layout allows irrigation and drainage within eight hours.
Soil structure: Good soil structure.
Subsoil moisture: Use pre-irrigation to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window for your location.
Crop establishment: Aim at a plant population of 35 to 40 plants per square metre.
Adequate nutrition: Apply P according to paddock history, soil test results and target yield removal figures. A four-tonne crop requires approximately 40 kg P per hectare. Inoculate seed with appropriate rhizobium to meet N requirements of soybeans.
Control weeds pests & diseases: Use pre and post emergent herbicides and pesticides to ensure minimal yield loss. Check constantly for insects from emergence to maturity.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water for the entire growing season.
Harvest: Desiccants can be useful for an early harvest and to achieve a quality high yielding crop.

 

5.11 Triticale YEAR: 2009-10   Your figures
YIELD 5.5 tonnes per ha  
PRICE $250 per tonne on farm  
  $/ha  
INCOME   5.5t/ha @ $250 per t $1,375  
   
COSTS  

Seed bed preparation

1 pass 2.5 ha/hr @ $76 per hr $30  
Sowing   2.0 ha/hr @ $76 per hr $38  
Seed   120 kg/ha @ $0.65 per kg $77  
Fertiliser            
D.A.P.   120 kg/ha @ $1,346 per t $162  

Urea

  150 kg/ha @ $825 per t $124  
Application   4 ha/hr @ $76 per hr $19  

Post-emergent Herbicides to control:

   
Broadleaf weeds and grasses         $5  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3.5 Ml/ha @ $50 per Ml $175  
Harvesting   2.5 ha/hr @ $275 per hr $110  
Insurance     @ $11.40 per $’000 $16  
             
Total Variable Costs         $768  
GROSS MARGIN PER HECTARE         $607  
GROSS MARGIN PER MEGALITRE         $173  
             
TOTAL VARIABLE COSTS/TONNE         $140  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $220 $230 $240 $250 $260 $270 $280

Yield

(tonne

per

hectare)

4 $117 $157 $196 $236 $275 $315 $355
4.5 $226 $271 $315 $360 $404 $448 $493
5 $335 $384 $434 $483 $533 $582 $631
5.5 $444 $498 $552 $607 $661 $715 $770
6 $552 $612 $671 $730 $790 $849 $908
6.5 $661 $725 $790 $854 $918 $982 $1,047
7 $770 $839 $908 $977 $1,047 $1,116 $1,185

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Triticale

Drainage: Ensure layout allows irrigation and drainage within 15 hours.
Soil structure: Moderate soil structure.
Crop rotation: Sow as a break crop to improve soil health, reduce risk of root diseases and weed populations. Disease status for some diseases can be determined by soil testing.
Subsoil moisture: Use fallow or pre-irrigation (recommended at the rate of 1.5 Ml/ha) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window for your location.
Crop establishment: Aim at a plant population of 200 – 250 plants per square metre.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures.
Control weeds pests & diseases: Use pre and post emergent herbicides and pesticides to ensure minimal yield loss.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from head emergence through to flowering. Recommended rate of 3.5 Ml per hectare includes pre-irrigation of 1.5 Ml per hectare.

 

5.12 Wheat YEAR: 2009-10   Your figures
YIELD 5.5 tonnes per ha  
PRICE $270 per tonne on farm  
  $/ha  
INCOME   5.5t/ha @ $270 per t $1,485  
   
COSTS  

Seed bed preparation (includes urea application)

1 pass 2.5 ha/hr @ $76 per hr $30  
Sowing   2 ha/hr @ $76 per hr $38  
Seed   100 kg/ha @ $0.65 per kg $65  
Fertiliser            
D.A.P.   125 kg/ha @ $1,346 per t $168  

Urea

  200 kg/ha @ $825 per t $165  
Application   4 ha/hr @ $76 per hr $19  

Post-emergent Herbicides to control:

   
Broadleaf weeds and grasses         $5  
Application   6 ha/hr @ $76 per hr $13  
Irrigation and drainage   3.5 Ml/ha @ $50 per Ml $175  
Harvesting   2.5 ha/hr @ $275 per hr $110  
Insurance     @ $11.40 per $’000 $17  
             
Total Variable Costs         $805  
GROSS MARGIN PER HECTARE         $680  
GROSS MARGIN PER MEGALITRE         $194  
             
TOTAL VARIABLE COSTS/TONNE         $146  
TOTAL OVERHEAD COSTS/TONNE            
PROFIT MARGIN/TONNE            
             
ON FARM TARGET PRICE            

 

Effect of price and yield on Gross Margin per hectare Price ($ per tonne)

    $240 $250 $260 $270 $260 $280 $300

Yield

(tonne

per

hectare)

4.5 $161 $201 $240 $280 $319 $359 $399
5 $280 $324 $369 $413 $458 $502 $547
5.5 $399 $448 $497 $547 $596 $646 $695
6 $517 $572 $626 $680 $735 $789 $843
6.5 $636 $695 $754 $814 $873 $932 $992
7 $754 $819 $883 $947 $1,011 $1,076 $1,140
7.5 $873 $942 $1,011 $1,081 $1,150 $1,219 $1,288

Notes:

1 White box denotes gross margin based on average yield and price

2 Rounded off to nearest dollar.

KEY CHECKS FOR MAXIMISING YIELD Wheat

Drainage: Ensure layout allows irrigation and drainage within 15 hours.
Soil structure: Moderate soil structure.
Crop rotation: Sow as a break crop to improve soil health, reduce risk of root diseases and weed populations. Disease status for some diseases can be determined by soil testing.
Subsoil moisture: Use fallow or pre-irrigation (recommended at the rate of 1.5 Ml/ha) to achieve adequate soil moisture at sowing.
Sown on time: Sow recommended varieties within the preferred sowing window for your location.
Crop establishment: Aim at a plant population of 200 – 250 plants per square metre.
Adequate nutrition: Apply N and P according to paddock history, soil test results and target yield removal figures.
Control weeds pests & diseases: Use break crops, pre and post emergent herbicides and pesticides to ensure minimal yield loss. Regular monitoring is essential to determine weed and insect threshold levels.
Soil moisture: Check to ensure timely irrigation. Ensure plants have adequate available water from head emergence through to flowering. Recommended rate of 3.5 Ml per hectare includes pre-irrigation of 1.5 Ml per hectare.

6. Appendices

6.1 Appendix A - A Guide to the Cost of Owning and Operating Farm Machinery

Neville Hall Former Farm Management Economist, DPI Swan Hill

This article was written in 2001 and the costs were not adjusted.

The method of calculating the true cost of owning and operating farm machinery is discussed. If the costs of an operation are not covered by returns then alternative strategies should be considered. Reduced tillage could mean shift from machine ownership to the use of contractors or the sharing of machinery.

Costs fall into two categories: overhead costs occur continuously and are to a degree independent of usage, while variable costs are relative to the amount of work done.

Changing technology

Technological change often requires new or modified machinery. Costs and returns of any contemplated change should be calculated giving consideration to the alternatives to sole ownership. Alternatives could include syndication, contractors or machinery hire.

Calculating real cost of operating farm machinery

A significant proportion of owning machinery is accounted for by overhead costs - depreciation and the opportunity cost of the investment. Difficulties arise in calculating these costs due to the fact that the ‘real new price’ of a machine differs greatly from the listed price and often trade-ins are inflated in value. In some instances this can affect farm taxation and should be discussed with your accountant. You should also be able to calculate the expected life of the machine. Factors to be considered are the importance of reliability, the capacity to complete an operation in an optimum time frame and the technical efficiency. If required maintenance of an existing machine can be predicted, and the cost of keeping it is less than the expected R & M plus the opportunity cost of a replacement machine, then there is no benefit from a new machine - continue using the existing machinery.

Machinery life and the need to change

The Australian Tax Office (ATO)1 allows farmers to vary the depreciation rate with expected use. Historically, this has been at a rate of 20% over five years for new machinery, or a diminishing value of 30%. Generally for farm management purposes, 10% over a period of ten years is used. Look around your farm and decide what you believe is the life of your most used machinery. Will the machine be used until it is of scrap value or do you believe in keeping up with technical change and trading before the end of the machine’s life? Alternatively, you may believe that you get better value by buying only good used machinery. One rule with regard to farm machinery is that it should not be purchased solely to reduce the amount of tax paid. If you believe that the amount of tax you pay is a problem, discuss it with your accountant.

Preventive maintenance and repairs as a result of periodic analysis of engine coolant and oils of engine, gearbox and transmission, (eg dirt or water in the system may indicate filter failure, traces of different metals may indicate potential bearing or gear failure) will reduce machine down time.

The economic life of non-complex farm machinery (ploughs, scarifiers, seeders etc) could be in excess of 30 years. During the last three decades many farmers have more than doubled tractor power. In general, this has allowed a continuing increase in the width of farm machinery and increased labour efficiency. How much bigger can we go? At present, there is a lot of research being carried out on seeding equipment. Some farmers have replaced a number of machines with multi-purpose seeding equipment. These seeders may be used to ‘break-up’ ground, multiworkings or direct drilling.

Technical change such as narrow profile tynes to reduce draft, the disc plough losing flavour in response to soil conservation measures and the acceptance of four-wheel drive tractors are examples of changes which may make some machines obsolete (these changes also have agronomic and economic ‘spin-offs’). Increases in tractor efficiency of 10% with front wheel assisted and 15% with four-wheel drive units (Ag Note Kit 1986) and the use of radial tyres, indicate options for considerable savings for farmers.

Costing

Figure 3 shows the items to be included in calculating the cost of owning and operating three machines found on a Mallee farm (see Figure 4 for detailed calculations). It is assumed that the spray and the seeder/wide line cultivator are only being used four times a year. A second hand header for example is given for comparison.

The true purchase price should be used when comparing options. The effect of ownership cost when working with another farmer is also shown. Overhead costs include depreciation; opportunity cost (potential return from an alternative investment; insurance; shelter; and, registration (motorised machinery)

Overhead costs include depreciation; opportunity cost (potential return from an alternative investment; insurance; shelter; and, registration (motorised machinery)

*Depreciation

Depreciation allowance accounts for the loss in value of machinery over time. While a proportion of the loss may be allocated to wear and tear (such wear and tear can become repairs and maintenance (R&M), ie in the event of an unscheduled breakdown or general repairs), technical change can account for a significant loss. For farm management accounting, straight-line depreciation is generally used because the concept is equated with an expected machine life. In reality, one would expect R&M to increase overtime and depreciation to decrease. True depreciation should be calculated from the current replacement cost of a similar machine. Often new machines have improved features, these should be allowed for with a monetary value.

* Opportunity cost is the value placed on the capital outlaid in purchasing the machine. When finance is used, use the finance cost. However, if the machine was a cash purchase an alternative investment rate should be used (currently this may vary between 5% and 8%), 10% has been used in the example. In periods of high inflation one may use creative accounting to overcome some problems.

Figure 3 Estimating the overhead cost of owning farm machinery

Depreciation = (Purchase price - Salvage value) /Life of machinery (in years)

Opportunity cost =( (Purchase price + Salvage value) x Interest rate) /2

Shelter = $5 per square metre of shed space

Insurance = $6 per $1,000 of machine value (full fire cover)

Registration where necessary

Repairs and maintenance costing of tractors is based on an investigation by Bloomfield (1982), and costing used by the Agricultural Business Research Institute. R & M of machinery is based on results of the Mallee Farm Monitor Group. R & M cost normally includes tyres and batteries.

Fuel budget is based on 35 litres per hour at $0.35 per litre.

Lubrication cost is assumed to be 10% of fuel cost.

Machine cost per hour is based on a one-operator farm of 2,100 hectares, and cropping 1,040 hectares combined with the expected number of passes (X) per machine. Greater usage will naturally mean a decrease in the overhead cost per hour. The Total Real Cost is not the day-today cash outlay ie the figure used in the gross margin budgets (Total Variable Cost which only includes fuel, repairs and maintenance), but is the cost which includes overheads and should be considered when making machinery management decisions, particularly with regard to alternative machinery purchase.

Machine cost per hour is estimated with a ground speed of 9 kph (air seeder and harvester); 16 kph (spray unit). While some farmers may consider this slow, consideration needs to be given to increased energy cost per hectare from higher working speeds. An efficiency factor of 75% is assumed, this includes wheel slip, headland working, etc.

Contract rate is based on machine cost per hour, plus labour ($15/hr) plus 25% profit margin. A labour cost of $15/hr is allowed for in the contract rate which may not be sufficient in a pure business situation (consider town workshop cost). However, it should be sufficient to cover cost if the objective is to get greater machinery/labour utilisation (assuming extra labour is not specifically employed for contracting).

Sunk cost

Once a decision has been made to purchase a machine you disregard the opportunity cost of the investment, the machine is now part of your asset base on which you should receive a return over time. This is not meant to imply that you should not continue to monitor cost. It may well be that an option is to sell off the machine and hire a machine, a contractor or join forces with a neighbour.

Conclusion

Individual farmers should use their own experience and calculate their cost. The use of second hand machinery and the ‘Jack of all trades’ expertise of many farmers can significantly alter the cost structure of some farming operations. This could indicate that some second hand farming plant is under valued and/or the expertise of some farmers in keeping older farming plant operational is a valuable non-tangible asset.

Figure 4 Estimated cost of owning/operating a farm tractor 150 kW engine (200 Ehp)

Purchase price PP $110,000
Salvage value SV $27,500
Life span (in years) LS 10
Shed space SS 6m x 8m
Registration   $50
Repairs and maintenance   R&M   5%

Overhead cost = depreciation + opportunity cost + shelter cost + insurance + registration

Depreciation = ($110,000- $27,500) / 10 = $8,250

Opportunity cost = [($110,000- $27,500) x0.10] / 2 = $6,875

Shelter = 6x8x$5 = $240

Insurance = [($110,000 $27,500)/2] /(1000x$6)=$413

Registration = $50

Total overhead cost (per 870 hours) = $15,828

Annual operating cost (per 870 hours)

Repairs & maintenance2 = 5% × $110,000 = $5,500

Fuel = 35 l/hr × $0.35/l × 870 hours = $$10,658

Lubrication = 10% × $10,658 = $1,066

Annual operating cost = $17,224

Owning & operating cost per hour = ($15,828 + $17,224) ÷ 870 = $37.99

Suggested rate for casual contract work3

Add $15 per hour for driver plus 25% margin =($37.99 + $15) × 25 = $66.24

6.2 Appendix B - Planting Guide for Optimum Yield of Irrigated Crops in Northern Victoria

Rob Fisher and Damian Jones

DPI, Kerang

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1.) Contact ATO or your accountant about calculating depreciation under the GST System.

2.) R & M cost of a tractor is a difficult costing concept as the timing of major repairs is indeterminate.

3.) This rate would be insufficient to cover all costs in a pure contracting business, eg consider local business workshop cost.