Farm Gross Margin Guide

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Farm

Gross Margin Guide

A gross margin template for crop and livestock enterprises

20 15

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storedgrain ^.com.au

www.grdc.com.au | www.storedgrain.com.au | 02 6166 4500

Get the latest stored Grain information online

 economics of on-farm storage

 Grain storage hygiene

 aeration cooling or drying

 managing high moisture

 fumigation

 insect pest management

 managing different storages

 storage facility design

 storing pulses and oilseeds

Workshops in all regions covering topics such as:

Booklets and fact sheets on all things grain storage

Call the national Grain storage information

hotline 1800 WEEVIL (1800 933 845) to

speak to your local grain storage specialist

for advice or to arrange a workshop

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Farm Gross Margin 2015

A gross margin template for crop and livestock enterprises

y Provides representative gross margins for all major extensive crop and livestock enterprises across Southern Australia

y Provides templates for allow easy calculation of your own Gross Margins

y Compares the sensitivity of profit of enterprises to a change in production and price

A Rural Solutions SA publication Sponsored by SAGIT and GRDC

ISBN 978-1-921779-78-7

DISCLAIMER

This guide has been prepared in good faith on the basis of the information available at the date of publication without any independent verification. The South Australian Grain Industry Trust, Rural Solutions SA and the Grains Research and Development Corporation do not guarantee or warrant the accuracy, reliability, completeness or currency of the information in this guide nor its usefulness in achieving any purpose.

Readers are responsible for assessing the relevance and accuracy of the content of this guide. The South Australian Grain Industry Trust, Rural Solutions SA and the Grains Research and Development Corporation will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on the information in this Farm Gross Margin Guide.

Published February 2015

storedgrain ^.com.au

Get the latest stored Grain information online

 economics of on-farm storage

 Grain storage hygiene

 aeration cooling or drying

 managing high moisture

 fumigation

 insect pest management

 managing different storages

 storage facility design

 storing pulses and oilseeds

Workshops in all regions covering topics such as:

Booklets and fact sheets on all things grain storage

Call the national Grain storage information

hotline 1800 WEEVIL (1800 933 845) to

speak to your local grain storage specialist

for advice or to arrange a workshop

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Farm Gross Margin and Enterprise Planning Guide

Broadacre farmers in South Australia continue to operate in a challenging environment.

Once again, the 2014 season presented a number of difficulties including frosts, diseases and a very dry finish.

Overall, though, the season was at least average or better over most of the state, reflecting improved cropping techniques and the strong technical competence of most broadacre farmers in the state.

The requirement into the future will be to maintain profitable farming systems in the face of ever increasing cost structures and production challenges. Improving our skill and knowledge of all aspects of our farm business will be the key to meeting the challenge.

In farm business management, the focus is on getting the most from existing land and assets. The three partners in this publication have important roles in this process. GRDC support a number of initiatives in this area including Farm Business Updates, Newsletters and Factsheets. The South Australian Grain Industry Trust (SAGIT) also invests more than $1.4 million a year in supporting research crucial to advancing the SA grain industry. Rural Solutions SA is a business with a mission to work with clients to enhance competitiveness by developing and growing businesses.

Overall prospects for farming remain good and we can expect to go through a period of growth. Change will no doubt continue and there will be the need to adopt new technologies and to increase the effectiveness of existing operations to improve profitability. It will also be necessary to consider different ways of managing risk whilst maximising profit to improve total farm income. This will involve close examination of the key drivers of both profit and risk.

This publication “2015 Farm Gross Margin Guide” will help farmers and their advisers compare the gross margins of enterprises, paddocks and rotations and their respective sensitivity to changes in production, cost and price to ultimately make the best decisions to maximise the chances of a successful 2015 season.

We know that each farmer and their farm business is different and so a ‘one size fits all’ approach will not work. The templates and sensitivity analysis provided in this guide allows you to feed in your own figures and ask the ‘what if’

type questions appropriate to you and your situation. The guide is to help inform your decisions and compare options – it does not make the decisions for you.

This guide is one of few publications that provide gross margins for both crops and livestock enterprises across the range of South Australian rainfall zones.

The South Australian Grain Industry Trust and the Grains Research and Development Corporation have pleasure in partnering with Rural Solutions SA to produce and distribute this guide as a valuable aid in your decision making.

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Michael Treloar

Chairman SAGIT

Keith Pengilley

Chairman, GRDC Southern Panel

Daniel Casement

Executive Director, Rural Solutions SA

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RSSA delivers innovative

agribusiness solutions increasing client profitability and value

AREAS OF EXPERTISE

 Sustainable agriculture and farming systems

 Agronomy & Soil productivity

 Livestock systems

 Horticulture and irrigation systems

 Seafood industry development

 Business and strategic planning

 Industry and policy development

 Market and value chain development

1300 364 322

www.ruralsolutions.sa.gov.au

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Introduction

This book provides a format and general estimates for crop and livestock gross margin profit for broadacre enterprises across Southern Australia. It provides a base to easily calculate individual producers gross margins using the templates provided.

A blank format is included as well as a blank column on every page, along with a full list of product and input costs as a guide for those wishing to construct their own gross margins.

What are Gross Margins

The gross margin for a farm enterprise is one measure of profitability that is a useful aid to enterprise planning.

The calculation of Gross Margins can be the starting point for construction of cash flow budgets and assessment of whole farm profitability. They can also be used to

assist in assessing the opportunity to develop new farm enterprises.

Gross margin profit is the difference between the annual gross income for that enterprise and the variable costs directly associated with the enterprise.

In constructing gross margins, fixed (overhead) costs are ignored, as it is considered that they will be incurred regardless of the level of the enterprise undertaken.

The gross margin of different enterprises should not be compared if they have different overhead costs.

The direct comparison of Gross Margins is most useful when the various alternatives fit into the same part of the rotation e.g. the cereal or legume phase. The Gross Margins in this booklet have been grouped on this basis.

The base gross margins included in this book should be adjusted as required for commodity prices, yield, input costs and input items. These items vary considerably between different locations and different farm businesses.

Treatment of machinery – It is assumed that most machinery items (tractors, seeders, sprayers, harvesters etc.) are owned by the farm business. In each gross margin in this guide, the operating costs (fuel and repairs) have been included based on the number of machinery passes specified. No allowance is included in the gross margin for machinery ownership costs such as depreciation or opportunity cost of capital. When calculating enterprise profitability, these ownership costs need to be included. An alternative is to include all machinery costs at full contract rate.

yCompare the relative profitability of current farm enterprises, paddocks or rotations

yEstimate changes in enterprise profit caused by changes in price, cost or yields

yPinpoint high cost or low income areas in the existing farm plan

yEvaluate the profitability of a

re-organisation of the farm enterprise mix

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Limitations of Gross margins

The gross margins prepared within this publication have been designed to represent ‘average case scenarios’ within the respective rainfall zones of Southern Australia. They should be treated strictly as a base guide only and adapted by users for their particular situations.

Gross margins are best used to compare enterprises that make use of the same resources on the property. They cannot be used where varying capital input is needed for an enterprise. Cropping and livestock gross margins can only be compared if all capital resources are already on the property.

Estimates of inputs and production can vary from what actually occurs.

Although a crop might have the highest gross margin, it might be the most sensitive to variation. Commodity prices, seasonal conditions, pests and disease can significantly affect the eventual gross margin. Risk can be assessed by comparing gross margins calculated with varying values for an input.

Sensitivity analysis tables are included in the book to help determine the impact on the gross margin of significant changes in yield and price.

Agronomic information including chemical rates are provided as a guide only and exact agronomic recommendations will vary with location, soil type and a number of other factors.

Gross margins have been broadly delineated into production zones based on rainfall. Average annual rainfall zones have been classified as ‘Low Rainfall’ (<350 mm), ‘Medium Rainfall’ (350 – 400mm) and ‘High Rainfall’ (>400mm).

KEY POINT

Make your own adjustments to the gross margins in this book to adapt to your own

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Using Gross Margins for Farm Planning

Gross margins are just one component of a whole range of factors which go into enterprise selection for paddocks and zones on a farming property. Some of these other factors include:

y Stage of rotation – weed, pests, nutrition and disease levels

y Suitability of proposed land use to land class – are there physical restrictions which limit enterprise selection?

y Availability of suitable plant, equipment, labour and/or infrastructure to carry out the enterprise.

y Risk – What is the sensitivity of the enterprise to adverse circumstances (e.g. poor yields or prices) and can the farm business afford to carry this risk?

y Integration of livestock in a mixed cropping situation and the need for appropriate pasture supplies for grazing animals

y Personal preference – Being favourably disposed towards something generally means that you will do it better.

Running livestock is an interesting example.

Gross Margins on their own do not make the decision on enterprise selection across the property. Each activity undertaken on a farming property will have an impact on other activities:

y Some may be complimentary such as cropping enterprises which provide a feed base to livestock through crop residues

y Crops planted in one year will have a rotational effect on subsequent crops (both positive (eg cereals on legumes) and negative (eg canola on canola)

For more information on the use of Gross Margin analysis, refer to the following GRDC publications:

Farm Financial Tool – Crop Gross Margin Budget

http://www.grdc.com.au/GRDC-FS-FFT-CropGrossMarginBudget Farm Financial Tool – Livestock Gross Margin Budget

http://www.grdc.com.au/GRDC-FS-FFT-LivestockGrossMarginBudget

Calculating Your Own Gross Margins

Rates and types of fertiliser and weed control treatments will obviously vary for different situations. Remember that these calculations are not meant to be an exact science – roughly right is better than precisely wrong! Use your own estimates when the values vary significantly from those included in the example.

Calculating the break even yield needed to cover variable costs will give some indication of the riskiness or exposure of the particular enterprise. Remember, of course, that there are many other costs (in addition to the variable costs) which need to be covered before a profit is made – these include overhead costs, depreciation, interest and labour and management. Reference to the sensitivity tables will provide further information on how the returns from the enterprise are expected to respond to a range of prices and yields.

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Strategies for Maximising Returns from Individual Enterprises

This Gross Margins guide aims to cover all broadacre cropping and grazing areas in South Australia. Circumstances obviously vary significantly across different regions. However, there are some rules of thumb and other resources which can provide guidance on decision making to aid in maximising returns from individual enterprises.

Storage of Out of Season Soil Water

Provides the opportunity to significantly improve Water Use Efficiency and hence crop performance. The key to effective storage of soil moisture over the summer period is to get the soil water deep in the soil profile, below the zone subject to evaporation and then retain soil moisture through to seeding by control of summer weeds.

Lighter Mallee type soils

y Rainfall events above 40 mm in December/January should result in some stored moisture with summer weed control

y Less than 40 mm rainfall events may still warrant summer weed control for ease of seeding operations and nutrient retention (mainly N)

y Strong case to apply zero tolerance summer weed control policy on light soils with no sub-soil limitations Heavier soils

y May require larger rainfall events (up to 100 mm) in December/January to store soil moisture if soils are already very dry

y Smaller rainfall events from February onwards will warrant control of germinated weeds

y Control of summer weeds earlier than February may also be dependant on other considerations e.g. improved ease of sowing, low cost of control, nutrient retention

Maximising Time of Sowing Benefits

Early seeding generally provides the most reliable yield outcome, particularly in low rainfall situations. However, frost prone areas have special considerations which need to be taken into account.

Sowing Opportunity with Early Break Frost Risk Start Sowing

Low After mid April

Medium After 25th April

High After early May

y Sow at the optimum time, even in high frost risk areas. Use appropriate varieties to manage flowering time.

y The yield loss from moisture and temperature stress during spring will usually be far greater than the damage caused by frost.

y The most severe and damaging frosts are those associated with dry conditions in mid to late spring (black frosts), which can be devastating even to crops that have completed flowering.

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Ensuring Efficient Fertiliser Practices

For more information on Better Fertiliser Decisions refer to the following GRDC factsheet http://www.grdc.com.au/GRDC-FS-BFDCN

Aim to maintain soil nutrient status at appropriate levels to maximise sustainable and profitable production

Phosphorous Replacement Levels

Crop Removal Removal plus losses #

Cereal grain 3 kg/t 4 kg/t

Pulses 4 kg/t 5 kg/t

Canola 7 kg/t 8 kg/t

Cereal hay 2 kg/t 2.5 kg/t

# higher rates may be required on calcareous / ironstone soils or those with moderate to low available P.

Reduce P application on soils with sub soil constrains when:

y Moderate to low stored soil moisture

y And crop sown more than 3 weeks after the optimum sowing date.

N Fertiliser

Wide range of soil types, rotational histories and climatic conditions means that Nitrogen requirements of crops will vary considerably. Assess opening N supply (e.g. by using deep soil sampling) and then monitor yield and N requirements through models such as Yield Prophet^® (www.yieldprophet.com.au) or the CSIRO developed Yield and N Calculator. www.clw.csiro.au/products/ncalc/index.html

CropWatch

CropWatch is a FREE electronic newsletter service provided by SARDI and distributed through Jon Lamb Communications and reports on crop diseases throughout SA.

www.sardi.sa.gov.au/pestsdiseases/publications/crop_watch

PestFacts

PestFacts is a FREE electronic newsletter service, produced by SARDI, designed to keep growers and advisers informed about invertebrate pest-related issues and solutions as they emerge during the growing season. PestFacts issues warnings (or reminders) for a range of invertebrate pests of all broad-acre crops including pulses, oilseeds, cereals and fodder crops. www.sardi.sa.gov.au/pestsdiseases/publications/pestfacts

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Commentary On 2014/15 Gross Margins

What happened in 2014

Despite the lack of spring rains, the Gross Margin performance of most broadacre crops in South Australia in 2014 was quite reasonable. The exception of this was where frost caused significant impacts to yields. Wheat was generally very good with the majority achieving milling grades- similarly, barley yields and quality were generally good, with high percentages of malting grades being achieved for suitable varieties. High demand for uncommitted Durum wheat saw harvest values at very high levels providing very strong gross margins for a small number of growers.

Yields of pulses were also satisfactory (where unaffected by frost) with strong prices (particularly for Lentils) aiding the gross margin performances of these crops.

Canola was the standout disappointment with a range of factors contributing to below average yields. Relatively weak pricing of canola (influenced by international factors) did not aid gross margin returns from this crop.

Livestock industries have continued to perform solidly in 2014. Wool has shown a slight easing trend, but with the medium and stronger wools continuing to perform well in comparison to the finer end of the market. Demand for livestock meat remains very strong with prices for all categories of sheep and beef increasing year on year.

Expectations for 2015

As shown in 2014, grain pricing can change considerably over the course of the year- changing exchange rates and international factors are important drivers. And it should be emphasised that future grain pricing remains uncertain and estimates used in this Gross Margins analysis could vary substantially from those which are actually obtained.

Cereal production remains the standout performer in lower rainfall districts with bread wheat showing the highest gross margin. The malting barley gross margin needs to be adjusted for quality risk if malting grade is not usually achieved. In this case, a high yielding feed barley variety is likely to prove a viable alternative.

Some cereal break crops in medium and high rainfall districts (notably lentils and beans) are showing potentially similar returns to cereals. But again as seen in 2014 with canola, higher production risks need to be factored into these returns.

Canola is showing gross margins slightly lower than the best cereals with lower price expectations (compared to cereals) not favouring this crop.

The gross margin for export oaten hay is reasonable, particularly in lower rainfall districts if reasonable quality and yields can be obtained. Freight to the processor is a strong determinant of profitability of this crop.

Continuing expected strong demand for red meat see livestock gross margins performing well. With sheep, self- replacing Merino ewe flocks remain quite profitable with meat related products from these flocks increasing in importance. Reproductive rates are a strong determinate of the final gross margin achieved for livestock enterprises.

Beef cattle continue to show expected returns on a dse basis well below that available from sheep production but prices are at last showing some improvement.

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Commodity $/ha Low Medium High Pastoral Cereal High

APW Wheat 256 418 671 Prime Lambs 19 33 30

Durum 235 447 747 Merino breeders 28 34 34

Malt Barley 222 356 532 Merino wethers 25 26 26

Feed Barley 209 314 466 24

Milling Oats 53 181 310 9 10 13

Triticale 116 217 353

Oaten Hay 255 280 284

Grain Vetch 129 302 442

Lupins 61 184 284

Lentils 202 455 777

Field Peas 96 200 461

Faba Beans 107 308 724

Chickpeas (Kabuli) 105 358 662

Canola- Conv 196 338 597

Canola-TT 137 250 511

Canola-Clear 151 275 537

The tables below summarise the anticipated gross margins for all crops and livestock for 2015.

2015 GROSS MARGIN ESTIMATES

Enterprise $/dse

LIVESTOCK CROPPING

Beef Cattle Cleanskin

Commodity Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 5 yr

Average 2015 Estimate

APW Wheat ($/t) 310 214 280 260 290 271 280

Durum ($/t) 310 280 305 340 550 357 350

Malt Barley ($/t) 270 220 260 255 320 265 270

Feed Barley ($/t) 200 200 240 215 270 225 230

Milling Oats ($/t) 150 180 215 190 240 195 200

Feed Oats ($/t) 130 170 205 180 230 183 190

Triticale ($/t) 200 170 220 200 240 ₂₀₆ ₂₁₀

Grain Vetch ($/t) 280 280 500 380 650 418 450

Lupins ($/t) 270 155 260 305 335 265 280

Lentils ($/t) 680 410 480 630 940 628 650

Field Peas ($/t) 265 300 330 320 400 323 330

Faba Beans ($/t) 320 370 470 420 490 414 420

Chickpeas 6-8mm Kabuli ($/t) 600 500 575 440 530 529 530

Canola ($/t) 600 500 540 490 480 522 480

Oaten Hay ($/t) 125 140 160 155 160 148 160

COMMODITY PRICES HISTORICAL DATA

Historical commodity price data and trends can be used as a guide in assessing average returns over time and also the variability of those returns for any given commodity.

NOTE: 15/16 Forecast Grain Prices: Forecast grain prices for 15/16 are affected by the value of the Australian Dollar, world consumption, and Australian and other major grain exporting countries production. Future pricing is uncertain and caution is needed with projections.

2015 Gross Margin Estimates

Commodity Prices Historical Data

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Comparative returns between farm enterprises – High Rainfall

Comparative returns between farm enterprises – Medium Rainfall

Comparative returns between farm enterprises – Low Rainfall

$0

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Cropping Gross Margin per Hectare High Rainfall

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Cropping Gross Margin per Hectare Low Rainfall

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Cropping Gross Margin per Hectare Medium Rainfall

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Livestock Gross Margin per dse High Rainfall

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Livestock Gross Margin per dse Cereal Zone

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Livestock Gross Margin per dse Pastoral Zone

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Gross Margins

The gross margins in this book are designed to provide a template only, for users to adapt to their own situation, and should not be relied upon as representative of any one particular situation.

Below is an example of how these gross margins may be adapted to suit individual circumstances. A copy of a blank gross margin sheet, which may be photocopied to calculate your own gross margin, is included at the rear of this publication.

2015

INCOME YOUR

Rainfall Zone LOW MEDIUM HIGH ESTIMATE

Price (15/16 Forecast) $190 $160 $140

Quality Mixed grades

Yield (t/ha) 3.50 5.50 8

GROSS INCOME $665 $880 $1,120

VARIABLE COSTS Rate/ha Rate/ha Rate/ha

Cost Low $/ha Medium $/ha High $/ha

Seed Levies

Seed $240.00 /tonne @ 90 $21.60 120 $28.80 130 $31.20

Seed Treatment $0.00 /tonne @ 0 $0.00 0 $0.00

Fertiliser (Bulk)

18:20:0 $750 /tonne @ 60 $45.00 80 $60.00 110 $82.50

Urea $570 /tonne @ 30 $ 17.10 75 $42.75 150 $85.50

Chemicals-Herbicides

Summer Weed Control Various Allow $20.00 $20.00 $20.00

Pre-emergents

Glyphosate 540 $7.00 /litre @ 1.2 $8.40 1.2 $8.40 1.2 $8.40

Oxyfluorfen $16.00 /litre @ 0.075 $1.20 0.075 $1.20 0.075 $1.20

Dual Gold $16.00 /litre @ 0.5 $8.00 0.5 $8.00

Diuron $11.70 /Kg @ 0.4 $4.68 0.4 $4.68 0.4 $4.68

Post-MCPA Amine $9.00 /litre @ 0.5 $4.50 0.5 $4.50 0.5 $4.50

Pre cutting-Glypho (1) $6.00 /litre @ 1 $6.00 2 $12.00 2 $12.00

Insecticides Fungicides Operations

Fuel & Oil $8.57 $9.43 $10.29

Repairs & Maintenance $7.84 $8.63 $9.41

Freight

Hay $28.00 /tonne @ 3.5 $98.00 5.5 $154.00 8.0 $224.00

Fertiliser (t) $20.00 /tonne @ 0.09 $1.80 0.16 $3.10 0.26 $5.20

Contract Work

Hay mowing $45.00 /ha @ 1.0 $45.00 1.0 $45.00 1.0 $45.00

Super Conditioner $25-35.00 /ha @ 1.0 $25.00 1.0 $30.00 1.0 $35.00

Hay baling $20.00 /bale @ 3.5 $93.33 5.5 $157.14 8.0 $246.15

Insurance $2.50 /$1000 @ $1.66 $2.20 $2.80

TOTAL VARIABLE COSTS $410 $600 $836

GROSS MARGIN/hectare $255 $280 $284

Break Even Price (to cover variable costs only) $117 $109 $104

Break Even Yield (to cover variable costs only) 2.16 3.75 5.97

Gross Margin based on last 5 year average price $108 $214 $348

EXPORT OATEN HAY GROSS MARGIN

COMMENTS

Price received is strongly related to yield. Fertiliser rate assumes hay follows a cereal. Bonuses for shedding and late delivery may apply. Additional capital costs including shedding and extra machinery may be needed.

AGRONOMIC NOTES

The use of a 'super conditioner' can significantly reduce drying time and subsequently risk with less chance of a quality downrade. No allowance has been made for cost of raking.

(1) Glyphosate Weedmaster DST registered for this use

Adjust fertiliser rates to your own situation

considering prior rotation

Chemical rates will vary in some cases with soil types.

Adjust for local chemical costs

Most GM’s assume own equipment. Add or delete contract work component as required

Break even yield is variable costs divided by price

Insert your estimates based on projected yield and price

Cost of seed should always be allowed even if using own seed

Adjust for actual herbicide use.

Consult cost section for costs of other chemicals and label information for rates

Break even price is variable costs divided by yield

Export Oaten Hay Gross Margin

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Gross Margins – Cereals

Cereals are generally regarded as lower risk and form the base of most rotations. However, the importance of cereals in the rotation varies across rainfall districts- they have historically shown to be the most profitable part of the rotation in lower rainfall districts, while in higher rainfall, more productive regions, cereals may be used as “break” crops for potentially more profitable alternatives such as lentils or canola (but beware of the potentially higher risk associated with these crops).

Varieties

Wide range of varieties available. Refer NVT Online (www.nvtonline.com.au) for latest National Variety Trial information and SARDI Sowing Guide 2015 http://grdc.com.au/SASowingGuide2015

for more information.

Weed control

Wide range of options available. Seek advice.

Assessing the potential impact of Soil Borne Pathogens

Levels of some soil borne pathogens (cereals as well as some break crops) can be assessed using the PreDicta B service provided by SARDI. PreDicta B (B = broadacre) is a DNA based soil testing service to identify which soilborne pathogens pose a significant risk to broadacre crops prior to seeding.

It has been developed for cropping regions in southern Australia and includes tests for:

y Cereal cyst nematode

y Take-all (Gaeumannomyces graminis var tritici (Ggt) and G. graminis var avenae (Gga)) y Rhizoctonia barepatch (Rhizoctonia solani AG8)

y Crown rot (Fusarium pseudograminearum and F. culmorum) y Root lesion nematode (Pratylenchus neglectus and P. thornei) y Stem nematode (Ditylenchus dipsaci)

y Blackspot of peas (Mycosphaerella pinodes, Phoma medicaginis var pinodella and Phoma koolunga).

Grain producers can access PreDicta B via agronomists accredited by SARDI to interpret the results and provide advice on management options to reduce the risk of yield loss.

PreDicta B samples are processed weekly from February to mid May (prior to crops being sown) to assist with planning the cropping program.

PreDicta B is not intended for in-crop diagnosis. This is best achieved by sending samples of affected plants to your local plant pathology laboratory.

Note changes to sampling protocol in 2014/15. For more information refer http://www.sardi.sa.gov.au/diagnostic_services/predicta_b

Postal address for PreDicta B samples:

C/- SARDI RDTS Locked Bag 100 Glen Osmond SA 5064

For information on PreDicta B contact:

Alan McKay [email protected] Ph 08 8303 9375

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2015

INCOME YOUR

Price (15/16 Forecast) $280 $280 $280

Quality APW (Change Price for other grades)

Yield (t/ha) 1.5 2.7 4

GROSS INCOME $420 $756 $1,120

Cost Low $/ha Medium $/ha High $/ha

Seed

Seed $0.29 /kg @ 60 $17.40 80 $23.20 90 $26.10

Seed Treatment $0.05 /kg @ 60 $2.94 80 $3.92 90 $4.41

Levies

GRDC Levies 1.0% Gross Income $4.20 $7.56 $11.20

EPR & state levies $3.30/tonne sold $4.95 $8.91 $13.20

18:20:0 $750 /tonne @ 40 $30.00 60 $45.00 80 $60.00

Urea $570 /tonne @ $0.00 60 $34.20 120 $68.40

Pre-emergents

Trifluralin 480g/L $6.00 /litre @ 1 $6.00 1 $6.00 1 $6.00

$0.00 $0.00 $0.00

Glyphosate 540(1) $7.00 /litre @ 1.2 $8.40 1.2 $8.40 1.2 $8.40

Sakura (2) $335.00 /kg @ $0.00 0.118 $39.53 0.118 $39.53

Post-emergents

M.C.P.A. LVE $9.00 /litre @ 0.5 $4.50 0.7 $6.30 0.7 $6.30

Metsulfuron methyl(1) $0.08 /gm @ 5 $0.85 5 $0.85 5 $0.85

Clopyralid (Lontrel) $25.00 /kg @ 0.075 $1.88 0.075 $1.88 0.075 $1.88

2,4-DAmine(625g/l)(3) $5.00 /kg @ $0.00 $0.00 1.2 $6.00

Fungicides

Tebuconazole $12.00 /litre @ 0.2 $2.40 0.2 $2.40

Prothioconazole(Prosaro) $70.00 /litre @ 0.15 $10.50 0.15 $10.50

Operations

Fuel & Oil $12.39 $14.87 $17.34

Freight

Grain (t) $20.00 /tonne @ 1.5 $30.00 2.7 $54.00 4.0 $80.00

Contract Work

Aerial spraying $14.00 /ha @ $0.00 1 $14.00 1 $14.00

Urea spreading $8.50 /ha @ $0.00 1 $8.50 2 $17.00

Insurance $8.50 /$1000 @ $3.57 $6.43 $9.5

Other $0.00 /ha

$0.00 /ha

APW WHEAT GROSS MARGIN

COMMENTS

(1) Includes Surfactant at 0.1%

To calculate using different grades (AH1, ASW, Feed) substitute different prices using appropriate grade spreads.

(3) Second broadleaf spray

AGRONOMIC NOTES

Nitrogen requirements will vary depending on individual paddocks- seek advice.

If targeting higher protein (AH1) additional N inputs will be required.

(2) Boxer Gold could be an option at a similar cost

APW Wheat Gross Margin

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GROSS MARGIN SENSITIVITY LOW RAINFALL Cash Price $/t

$200 $240 $280 $320 $360

0.5 -$35 -$15 $5 $24 $44

Yield 1 $52 $91 $131 $170 $209

t/ha 1.5 $138 $197 $256 $315 $374

2.5 $311 $410 $508 $606 $704

3.5 $484 $622 $759 $897 $1,034

MEDIUM RAINFALL Cash Price $/t

$200 $240 $280 $320 $360

1 -$88 -$48 -$9 $30 $69

Yield 2 $85 $164 $242 $321 $399

t/ha 2.7 $206 $312 $418 $524 $630

3.5 $345 $482 $620 $757 $894

4.5 $518 $694 $871 $1,048 $1,224 HIGH RAINFALL

Cash Price $/t

$200 $240 $280 $320 $360

2 $11 $90 $168 $247 $325

Yield 3 $184 $302 $420 $538 $655

t/ha 4 $357 $514 $671 $828 $985

5 $530 $726 $923 $1,119 $1,315 6 $703 $939 $1,174 $1,410 $1,645 HISTORIC PRICES AND TRENDS

Machinery Costs- Assuming full ownership of machinery

(Fuel and repairs only- excludes depreciation and other ownership costs)

Operation No. Fuel

$/ha $/ha

seed 1 3.89 4.872

spray 4 2.20 1.64

harvest# 1 8.57 5.8725

TOTAL 14.66 12.39

# Rates are for low rainfall zone. Extra cost in higher yielding situations

APW WHEAT GROSS MARGIN

Repairs & Maint 0

50 100 150 200 250 300 350 400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$/tonne

Year

APW 10.5% WHEAT

HISTORIC PRICES (Post Harvest)

Forward Price for 2015/16 as at Jan 2015

$290/tonne

0 20 40 60 80 100 120 140

$/ha

Variable Costs

Low Medium High

APW Wheat Gross Margin

(20)

2015

INCOME YOUR

Price (15/16 Forecast) $350 $350.00 $350.00

Quality Durum 13%

Yield (t/ha) 1.2 2.2 3.4

GROSS INCOME $420 $770 $1,190

Cost Low Medium $/ha High $/ha

Seed

Seed $0.55 /kg @ 80 $44.00 90 $49.50 110 $60.50

Levies

EPR & state levies $3.30/tonne sold $3.96 $7.26 $11.22

Granulock 1% Zn $810 /tonne @ 40 $32.40 60 $48.60 80 $64.80

Urea $570 /tonne @ $0.00 60 $34.20 120 $68.40

Trifluralin 480g/L $6.00 /litre @ 1 $6.00 1 $6.00 1 $6.00

Boxer Gold $14.68/litre @ $0.00 2.5 $36.70 2.5 $36.70

Post-emergents

MCPA LVE $9.00 /litre @ 0.5 $4.50 0.5 $4.50 0.5 $4.50

Metsulfuron methyl(1) $0.08 /gram @ 5 $0.85 5 $0.85 5 $0.85

2,4-DAmine(625g/l)(2) $5.00 /kg @ $0.00 $0.00 1.2 $6.00

Insecticides Fungicides Operations

Fuel & Oil $12.39 $14.87 $17.34

Freight

Grain (t) $20.00 /tonne @ 1.2 $24.00 2.2 $44.00 3.4 $68.00

Contract Work

Aerial spraying $14.00 /ha @ $0.00 $0.00 $0.00

Urea spreading $8.50 /ha @ $0.00 1 $8.50 2 $17.00

Insurance $8.50 /$1000 @ $3.57 $6.55 $10.12

Other

DURUM GROSS MARGIN

COMMENTS

(1) includes surfactant at 0.1%

Assumes durum follows a legume crop or pasture.

Price assumes Durum 13% is achieved.

(2) Second broadleaf spray

AGRONOMIC NOTES

Some Durum varieties have a narrow safety margin with broadleaf herbicides. Seek advice. The effect is worse when the crop is under stress.

Durum Gross Margin

(21)

GROSS MARGIN SENSITIVITY LOW RAINFALL Net Price $/t

$250 $300 $350 $400 $450

0.4 -$60 -$41 -$21 -$1 $18

Yield 1.2 $117 $176 $235 $294 $353

t/ha 2 $295 $393 $491 $589 $688

2.8 $473 $610 $748 $885 $1,022

MEDIUM RAINFALL Net Price $/t

$250 $300 $350 $400 $450

1.5 $75 $149 $223 $296 $370

Yield 2.2 $231 $339 $447 $555 $663

t/ha 3 $409 $556 $703 $850 $997

4 $631 $827 $1,023 $1,219 $1,416 HIGH RAINFALL

Net Price $/t

$250 $300 $350 $400 $450

1.5 -$9 $65 $139 $212 $286

Yield 2.5 $214 $336 $459 $582 $704

t/ha 3.4 $413 $580 $747 $914 $1,081

4.5 $658 $879 $1,099 $1,320 $1,541

HISTORIC PRICES AND TRENDS

(Fuel and repairs only- excludes depreciation and other ownership costs)

Operation No. ^Fuel

$/ha $/ha

seed 1 3.89 4.872

spray 4 2.20 1.64

harvest# 1 8.57 5.8725

TOTAL 14.66 12.39

DURUM GROSS MARGIN

Repairs & Maint 0

100 200 300 400 500 600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$/tonne

Year

DURUM

HISTORIC PRICES (post harvest)

0 20 40 60 80 100 120 140

$/ha

Variable Costs

Low Medium High

Durum Gross Margin

(22)

2015

INCOME YOUR

Price (15/16 Forecast) $270 $270 $270

Quality Malting

Yield (t/ha) 1.5 2.5 3.5

GROSS INCOME $405 $675 $945

Cost Low $/ha Medium $/ha High $/ha

Seed

Seed $0.32 /kg @ 60 $19.20 75 $24.00 80 $25.60

Levies

EPR & state levies $2.30 /tonne sold $3.45 $5.75 $8.05

18:20:0 $750 /tonne @ 40 $30.00 60 $45.00 80 $60.00

Urea $570 /tonne @ $0.00 50 $28.50 100 $57.00

Pre-emergents

Trifluralin 480g/L $6.00 /litre @ 1.5 $9.00 1.8 $10.80 1.8 $10.80

Boxer Gold $14.68 /litre @ $0.00 2.5 $36.70 2.5 $36.70

Post-emergents

2,4- D Amine $5.00 /litre @ 1.2 $6.00 1.5 $7.50 1.5 $7.50

Metsulfuron methyl(1) $0.08 /gm @ 5 $0.85 5 $0.85 5 $0.85

Clopyralid (Lontel) $25.00 /kg @ 0.1 $2.50 0.1 $2.50 0.1 $2.50

2,4-DAmine(625g/l)(2) $5.00 /kg @ $0.00 $0.00 1.2 $6.00

Fungicides

Propiconazole $13.50 /litre @ 0.3 $4.05 0.3 $4.05 0.3 $4.05

Prosaro $70.00 /litre @ 0.15 $10.50 0.2 $14.00 0.2 $14.00

Insecticides Operations

Fuel & Oil $12.39 $14.87 $17.34

Freight

Grain (t) $20.00 /tonne @ 1.5 $30.00 2.5 $50.00 3.5 $70.00

Contract Work

Aerial spraying $14.00 /ha @ 0 $0.00 0 $0.00 0 $0.00

Urea Spreading $8.50 /ha @ $0.00 1 $8.50 2 $17.00

Insurance $8.50 /$1000 @ $3.44 $5.74 $8.0

Other

MALTING BARLEY GROSS MARGIN

COMMENTS

Assumes barley follows wheat.

Price assumes Malting grade is achieved which is high risk. Achieving feed grade would result in lower Gross Margin.

Having to windrow barley will reduce GM by around $25/ha (2) Second broadleaf spray

AGRONOMIC NOTES

Urea may not be required following a legume pasture or grain legume crop

Malting Barley Gross Margin

(23)

GROSS MARGIN SENSITIVITY LOW RAINFALL Net Price $/t

$190 $230 $270 $310 $350

0.5 -$60 -$41 -$21 -$2 $18

Yield 1 $22 $61 $100 $139 $179

t/ha 1.5 $104 $163 $222 $280 $339

2 $186 $264 $343 $421 $500

3 $350 $468 $586 $703 $821

MEDIUM RAINFALL Net Price $/t

$190 $230 $270 $310 $350

0.5 -$168 -$149 -$129 -$109 -$90

Yield 1.5 -$4 $55 $114 $173 $231

t/ha 2.5 $160 $258 $356 $455 $553

3.5 $324 $462 $599 $737 $874

4 $406 $563 $720 $878 $1,035

HIGH RAINFALL Net Price $/t

$190 $230 $270 $310 $350

1.5 -$71 -$12 $47 $106 $165

Yield 2.5 $93 $192 $290 $388 $486

t/ha 3.5 $258 $395 $532 $670 $807

4.5 $422 $599 $775 $952 $1,129

6 $668 $904 $1,139 $1,375 $1,610 HISTORIC PRICES AND TRENDS

(Fuel and repairs only- excludes depreciation and other ownership costs) Operation No. Repairs & Maint Fuel

$/ha $/ha

seed 1 3.89 4.872

spray 4 2.20 1.64

harvest# 1 8.57 5.8725

TOTAL 14.66 12.39

MALTING BARLEY GROSS MARGIN

0 50 100 150 200 250 300 350 400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$/tonne

Year

MALT BARLEY

HISTORIC PRICES (post harvest)

Forward Price 2015/16 as at Jan 2015 $258/tonne

0 20 40 60 80 100 120 140

$/ha

Variable Costs

Low Medium High

Farm Gross Margin Guide

Farm

Gross Margin Guide

A gross margin template for crop and livestock enterprises

20 15

storedgrain .com.au

www.grdc.com.au | www.storedgrain.com.au | 02 6166 4500

Get the latest stored Grain information online

Workshops in all regions covering topics such as:

Booklets and fact sheets on all things grain storage

Call the national Grain storage information

hotline 1800 WEEVIL (1800 933 845) to

speak to your local grain storage specialist

for advice or to arrange a workshop

Farm Gross Margin 2015

A gross margin template for crop and livestock enterprises

DISCLAIMER

storedgrain .com.au

Get the latest stored Grain information online

Workshops in all regions covering topics such as:

Booklets and fact sheets on all things grain storage

Call the national Grain storage information

hotline 1800 WEEVIL (1800 933 845) to

speak to your local grain storage specialist

for advice or to arrange a workshop

Farm Gross Margin and Enterprise Planning Guide

Michael Treloar

Keith Pengilley

Daniel Casement

RSSA delivers innovative

agribusiness solutions increasing client profitability and value

AREAS OF EXPERTISE

1300 364 322

www.ruralsolutions.sa.gov.au

Contents

Introduction

This book provides a format and general estimates for crop and livestock gross margin profit for broadacre enterprises across Southern Australia. It provides a base to easily calculate individual producers gross margins using the templates provided.

A blank format is included as well as a blank column on every page, along with a full list of product and input costs as a guide for those wishing to construct their own gross margins.

What are Gross Margins

Limitations of Gross margins

Using Gross Margins for Farm Planning

Calculating Your Own Gross Margins

Strategies for Maximising Returns from Individual Enterprises

Storage of Out of Season Soil Water

Maximising Time of Sowing Benefits

Ensuring Efficient Fertiliser Practices

Phosphorous Replacement Levels

CropWatch

PestFacts

Commentary On 2014/15 Gross Margins

What happened in 2014

Expectations for 2015

COMMODITY PRICES HISTORICAL DATA

2015 Gross Margin Estimates

Commodity Prices Historical Data

Gross Margins

The gross margins in this book are designed to provide a template only, for users to adapt to their own situation, and should not be relied upon as representative of any one particular situation.

Export Oaten Hay Gross Margin

Gross Margins – Cereals

Varieties

Weed control

Assessing the potential impact of Soil Borne Pathogens

APW Wheat Gross Margin

APW Wheat Gross Margin

Durum Gross Margin

Durum Gross Margin

Malting Barley Gross Margin

Malting Barley Gross Margin

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storedgrain ^.com.au