Northern Victoria: Irrigated Cropping

Northern Victoria
Irrigated Cropping
Gross Margins 2009-10
Department of Sustainability and Environment Department of Sustainability and Environment Department of Primary Industries Department of Primary Industries
Northern Victoria Irrigated Cropping

Gross Margins 2009-10
Department of Sustainability and Environment Department of Primary Industries
Published by Farm Services Victoria Department of Primary Industries (DPI) Echuca, Victoria 3564 2009 Also published on www.dpi.vic.gov.au State of Victoria, 2009 This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968. Authorised by the State Government of Victoria, 1 Spring Street Melbourne 3000
ISBN 978-1-74217- 489-1 Acknowledgment:

The assistance of cropping farmers and fertiliser companies in providing data and comments is acknowledged.
Disclaimer:
This publication may be of assistance to you but the State of Victoria and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication.
Note:
The booklet was last published in 2005 as Northern Irrigation Cropping Gross Margins 2005-6.
DPI Contacts:
Olive P. Montecillo Dale Boyd PO Box 441 Echuca, 3564 Phone: (03) 5482 1922 Fax: (03) 5482 5405 E-mail: olive.montecillo@dpi.vic.gov.au dale.boyd@dpi.vic.gov.au Damian Jones 26 Wellington St., Kerang, 3579 Phone: (03) 5452 1266 Fax: (03) 5452 2952 E-mail: damian.jones@dpi.vic.gov.au Dale Grey PO Box 76 Cobram 3644 Phone: (03) 5871 0600 Fax : (03) 5872 1784 E-mail: dale.grey@dpi.vic.gov.au
Chemical Use:
The advice provided in this publication is intended as a source of information only. Before using a chemical or following any chemical recommendation, always check that the uses described on the products label are still registered. Users should note that the currently registered label should always be followed.
Gross Margin 2009-10
ii
Table of Contents Contents

List of Figures
Page
..............................................................................................................................iv
List of Abbreviations ..........................................................................................................................iv 1. 2. 3. 4. 5. Introduction ...............................................................................................................................1 The Irrigation Areas of Northern Victoria ...................................................................1 Calculating and Using Gross Margins ...........................................................................2 Target Prices - Profitable Prices! ......................................................................................4 Crop Gross Margin ..................................................................................................................8
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 Barley (Malting) ................................................................................................................................ 8 Canola ................................................................................................................................................. 10 Faba Bean (Fiesta vf).................................................................................................................. 12 Lucerne - 5 Year Stand............................................................................................................. 14 Maize (Grain)................................................................................................................................... 16 Maize (Silage) ................................................................................................................................. 18 Oats (Milling) .................................................................................................................................. 20 Oats (Hay)......................................................................................................................................... 22 Sorghum (Hay) ............................................................................................................................... 24 Soybean.............................................................................................................................................. 26 Triticale.............................................................................................................................................. 28 Wheat................................................................................................................................................... 30
6.
Appendices ............................................................................................................................ 32
6.1 Appendix A - A Guide to the Cost of Owning and Operating Farm Machinery ......................................................................................................................................... 32 6.2 Appendix B - Planting Guide for Optimum Yield of Irrigated Crops in Northern Victoria ......................................................................................................................... 36
iii
List of Figures Figure 1 Figure 2 Figure 3 Figure 4 Locality guide, irrigated areas in Northern Victoria ................................. 1 How total farm gross margin relates to farm business profit................... 3 Estimating the overhead cost of owning farm machinery ...................... 33 Estimated cost of owning/operating a farm tractor 150 kW engine (200 Ehp) ............................................................................................. 34
List of Abbreviations cm ha hr kg l Ml N P ppm t $000 centimetre hectare hour kilogram litre megalitre nitrogen phosphorous parts per million tonne thousand dollars
iv
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 2009-10 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
MA L LEE
Kerang Echuca
Cobram
Tatura
W IM M E R A
N O R T H C E N TR A L
NO R T H EA ST
SO UT H W ES T
G IP P S L A N D
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 B C D E F G Yield Price on farm Variable cost Irrigation water use Enterprise Income Gross margin per hectare Gross margin per Ml 5.5 tonnes per hectare $270 per tonne $806 per hectare 3.5 Ml per hectare =AxB = 5.5 x $270 =EC =FD = $1,485 - $805 = $680 3.5
= = =
$1,485 $680 $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 short-term 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 merino-Dorset 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
Total Farm Income
Total Variable Costs

All enterprise costs
Total Farm Gross Margin
Overhead Costs
Fuel, permanent labour, rates, administration, depreciation, insurance
Net Farm Income
Owner/operators salary, interest & lease charges
Farm Business Profit (before tax)
Tax
Loan principal repayments
Capital investment
Additional owner drawings
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 crops 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 dont 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 isnt 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 farms 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 years 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; youll 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 Average Yield: 5.5 t/ha
VARIABLE COSTS
Seed Fertiliser D.A.P Urea broadleaf weeds and grasses 3.5 Ml/ha 2.5 2 4 6 ha/hr ha/hr ha/hr ha/hr @ @ @ @ @ @ 100 kg/ha 125 kg/ha 200 kg/ha @ @ @ $0.65 /kg $1,346 /t $825 /t $5 /ha $50 per Ml $76 $76 $76 $76 /hr /hr /hr /hr
$/ha $65 $168 $165 $5 $175 $30 $38 $19 $13 $110 $16 100 x $0.65 125 x $1346 1000 200 x $674 1000 Estimate 3.5 x $50 1 x $76 2.5 1 x $76 2 1 x $76 4 1 x $76 6 $275 2.5 $11.40 1000 x $200 x 5.5
Chemicals
Irrigation and drainage Machinery Cultivation Sowing Fertiliser application Spraying
Contract harvesting Other Insurance
2.5 ha/hr $11.40 per $1,000
$275 /hr
early season value $200/t
B C
TOTAL VARIABLE COSTS/HA VARIABLE COSTS/TONNE (B A)
$ 804 $146 $804 5.5
SCALE OF BUSINESS D E OVERHEAD COSTS

Machinery Replacement Allowance (MRA) F G Business overheads H I J Total Business overheads Cropping business overheads/t TOTAL OVERHEAD COSTS/TONNE (H x E) D (G + I) $20,000 $20 $20,000 x 50% 500 $38 Total clearing sale value of cropping machinery Annual MRA per tonne of grain F (D x 10) $90,000 $18 Estimate $90,000 500 x 10 Total grain production (tonnes from all crops) Cropping as a proportion of total farm business 500 50% Estimate Estimate
PROFIT MARGIN INCLUDING ANNUAL FINANCE AND LIVING COSTS

Total Debt $60,000 Interest rate 12% Principal repayments (budget to pay off over ten years) Interest (annual interest bill on debt) Income tax (annual estimate) Owners salary (estimate of salary for each family on the farm) Extra for further investment (expansion, off-farm investment, super etc.) K L TOTAL PROFIT MARGIN NEEDED PER YEAR PROFIT MARGIN/TONNE (K x E) D $6,000 $6,000 $5,000 $35,000 $5,000 $58,200 $58 $58,200 x 50% 500 $60,000 10 $60,000 x 12% Estimate Estimate Estimate
ON-FARM TARGET PRICE PER TONNE
(C + J + L)
$242
$146 + $38 + $58
5.
5.1
YIELD PRICE
Crop Gross Margin

Barley (Malting)
YEAR: 2009-10 6 tonnes per ha $257 per tonne on farm $/ha Your Figures
INCOME COSTS Seed bed preparation (includes urea application) Knockdown +pre-emergent Application Sowing Seed Fertiliser D. A. P. Urea Application 2 passes 1 pass 2 sprays 2 sprays
6 t/ha
$257 per t
$1,542
2 ha/hr @
$76 per hr
$38 $19 $25 $38 $59
3 ha/hr @ 2 ha/hr @ 95 kg/ha @
$76 per hr $76 per hr $0.63 per kg
125 kg/ha 150 kg/ha
@ @
$1,346 per t $825 per t $76 per hr
$168 $124 $38
4 ha/hr @
* A deep soil N test is recommended at approximately $60 per test
Post-emergent herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage Harvesting Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE 6 ha/hr @ 3.5 Ml/ha @ 2.5 ha/hr @ @ $76 per hr $50 per Ml $275 per hr $11.40 per $'000 $29 $13 $175 $110 $18 $854 $688 $197
TOTAL VARIABLE COSTS/TONNE TOTAL OVERHEAD COSTS/TONNE PROFIT MARGIN/TONNE ON FARM TARGET PRICE
$142
Effect of price and yield on Gross Margin per hectare Price ($ per tonne) Yield (tonne per hectare) $197 4.5 5 5.5 6 6.5 7 7.5 8 $40 $138 $235 $333 $430 $527 $625 $722 $217 $129 $237 $344 $451 $558 $666 $773 $880 $237 $218 $335 $453 $570 $687 $804 $921 $1,038 $257 $307 $434 $561 $688 $815 $942 $1,070 $1,197 $277 $396 $533 $670 $807 $944 $1,081 $1,218 $1,355 $297 $485 $632 $779 $926 $1,072 $1,219 $1,366 $1,513 $317 $574 $731 $888 $1,044 $1,201 $1,358 $1,514 $1,671
Notes:
1 2
White box denotes gross margin based on average yield and price Rounded off to nearest dollar.
KEY CHECKS FOR MAXIMISING YIELD Barley (malting and feed) Drainage: Soil structure: Crop rotation: Ensure layout allows irrigation and drainage within 12 hours. Moderate to good soil structure. 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. Use fallow or pre-irrigation (recommended at 1 Ml per hectare) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of 150 to 200 plants per square metre. 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. 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. Check to ensure timely irrigation. Ensure plants have adequate available water from mid-booting through to fully emerged heads stage. Recommended rate of 3.5 Ml per hectare includes preirrigation of 1 Ml per hectare. Determine production costs and fixed costs to grow the crop. Establish target price and begin selling when that price is reached.
Subsoil moisture: Sown on time: Crop establishment: Adequate nutrition:
Control weeds pests & diseases: Soil moisture:
Marketing:
5.2
YIELD PRICE
Canola
YEAR: 2009-10 3 tonnes per ha $610 per tonne on farm $/ha
Your Figures
INCOME COSTS Seed bed preparation Knockdown +pre-emergent Application Sowing Seed Fertiliser D.A.P. Urea Application Insecticides for RLEM Application Herbicide to control: Broadleaf weeds Grass weeds Application Irrigation and drainage Harvesting Contract windrowing SP harvester 2 passes 1 spray 1 spray
3 t/ha
$610 per t
$1,830
2 ha/hr @ 6 ha/hr @ 2 ha/hr @ 4 kg/ha @
$76 per hr $76 per hr $76 per hr $8.44 per kg
$76 $19 $13 $38 $34
2 passes
125 kg/ha @ 200 kg/ha @ 4 ha/hr @
$1,346 per t $825 per t $76 per hr
$168 $165 $38 $6 $13
1 pass
6 ha/hr @
$76 per hr
1 spray 2 passes
6 ha/hr @ 3.5 Ml/ha @
$76 per hr $50 per Ml
$19 $20 $25 $175
@ 2.5 ha/hr @
$38 per ha $275 per hr
$38 $110
Harvesting using own labour & equipment = $76 per hour
Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
$15.10 per $'000
$28 $985 $845 $241
$328
10
Effect of price and yield on Gross Margin per hectare Price ($ per tonne) Yield (tonne per hectare) $300 2.4 2.6 2.8 3.0 3.2 3.4 3.6 $343 $451 $560 $668 $776 $885 $993 $320 $390 $503 $615 $727 $839 $952 $1,064 $340 $438 $554 $670 $786 $902 $1,019 $1,135 $360 $485 $605 $725 $845 $966 $1,086 $1,206 $380 $532 $656 $780 $904 $1,029 $1,153 $1,277 $400 $579 $707 $836 $964 $1,092 $1,220 $1,348 $420 $627 $759 $891 $1,023 $1,155 $1,287 $1,419
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Canola Drainage: Soil structure: Crop rotation: Ensure layout allows irrigation and drainage within 12 hours. Moderate to good soil structure. Allow at least three years between canola crops. Check chemical use on previous crops, particularly sulfonylureas on cereals. Ideally control weeds in previous season. Use fallow or pre-irrigation (recommended at 1.5 Ml per hectare) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window (mid-April to mid-May) for your location. Aim at a plant population of 40 - 75 plants per square metre. 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. 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. 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 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.
Subsoil moisture: Sown on time: Crop establishment: Adequate nutrition:
Control weeds pests & diseases: Soil moisture:
Windrowing:
11
Northern Victoria Irrigated Cropping Your Figures
5.3
YIELD PRICE
Faba Bean (Fiesta vf)
YEAR:
2009-10
4.5 tonnes per ha $340 per tonne on farm $/ha
INCOME COSTS Seed bed preparation

(Includes bed forming - optional)
4.5 t/ha
$340 per t
$1,530
1 pass
2 ha/hr
$76 per hr
$38 $25 $13 $38 $140
Knockdown +pre-emergent Application Sowing Seed (registered seeds) Fertiliser Grain legume super Application Herbicide to control: Grass weeds Application Insecticides to control: Heliothis Aerial application RLEM Application Irrigation and drainage Fungicides Aerial application Ground application Harvesting Insurance Total Variable Costs
1 spray
6 ha/hr 2 ha/hr 200 kg/ha
@ @ @
140 kg/ha 4 ha/hr
@ @
$820 per t $76 per hr
$115 $19
1 spray
6 ha/hr
$76 per hr
$25 $13
1 spray 6 ha/hr 3.0 Ml/ha
@ @ @ @
$15 per ha $76 per hr $50 per Ml
$4 $15 $3 $13 $150 $57 $15 1 $25 2 $110 $23 $841 $689 $230 $187
1 pass 2 passes
6 ha/hr 2.5 ha/hr
@ @ @
$15 per ha $76 per hr $275 per hr $15.10 per $'000
GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE TOTAL VARIABLE COSTS/TONNE TOTAL OVERHEAD COSTS/TONNE PROFIT MARGIN/TONNE ON FARM TARGET PRICE
12
Effect of price and yield on Gross Margin per hectare Price ($ per tonne) Yield (tonne per hectare) $265 3.0 3.5 4.0 4.5 5.0 5.5 6.0 ($35) $96 $226 $357 $487 $618 $748 $290 $39 $182 $325 $467 $610 $753 $896 $315 $113 $268 $423 $578 $733 $889 $1,044 $340 $187 $354 $522 $689 $857 $1,024 $1,191 $365 $261 $440 $620 $800 $980 $1,159 $1,339 $390 $334 $527 $719 $911 $1,103 $1,295 $1,487 $415 $408 $613 $817 $1,021 $1,226 $1,430 $1,635
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Faba Beans (Fiesta variety)
Drainage: Soil structure: Sown on time: Crop establishment: Adequate nutrition:
Ensure layout allows irrigation and drainage within 12 hours. Moderate to good soil structure. Sow recommended varieties within the preferred sowing window (May to mid-June) for your location. Aim at a plant population of 35 plants per square metre. Knowing seed size is essential to achieve this target. 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. 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. Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at full flowering.
Control diseases:
Soil moisture:
13
5.4
YIELD PRICE
Lucerne - 5 Year Stand

13 $320 $350 $344
YEAR:
2009-10
Your Figures
Average price INCOME Lucerne Hay - 1st Cut Lucerne Hay - late Cuts Total Income COSTS Seed bed preparation Sowing Seed Fertiliser Single super at establishment Single super - balance Application Insecticides Application 20% 20% 20% 2.6 t 10.4 t
tonnes per ha 1st cut 20% later cuts 80% per tonne on farm @ @ $320 per t $350 per t $/ha $832 $3,640 $4,472
2 ha/hr 2 ha/hr 12 kg/ha
@ @ @
$76 per hr $76 per hr $10 per kg
$8 $8 $24
20% 80% 2 passes 20% 20%
250 kg/ha 500 kg/ha 4 ha/hr
@ @ @ @ @
$900 per t $900 per t $76 per hr $20 per ha $76 per hr
$45 $360 $38 $4 $3
6 ha/hr
Herbicides (pre- and post-emergence) to control: Broadleaf weeds and grasses Application 2 passes 6 ha/hr Irrigation and drainage Harvesting Cutting and raking (contractor) Baling (contractor) Cartage to shed on farm (500-600 kg bales) Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE 10 Ml/ha
@ @
$32 $25 $500
1 ha 13 t 13 t
@ @ @ @
$60 per ha $24 per t $8 per t $12.50 Per $000
$60 $312 $104 $56 $1,579 $2,893 $289
$121
14
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $309 8.5 10 11.5 13 14.5 16 17.5 $1,215 $1,624 $2,035 $2,444 $2,854 $3,263 $3,673 $319 $1,299 $1,723 $2,148 $2,572 $2,997 $3,421 $3,846 $334 $1,425 $1,871 $2,318 $2,765 $3,211 $3,658 $4,105 $344 $1,508 $1,970 $2,432 $2,893 $3,355 $3,816 $4,278 $369 $1,719 $2,217 $2,716 $3,214 $3,713 $4,211 $4,710 $394 $1,928 $2,464 $2,999 $3,535 $4,071 $4,606 $5,142 $419 $2,138 $2,711 $3,284 $3,856 $4,429 $5,001 $5,574
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Lucerne
Drainage: Soil structure: Sown on time:
Ensure layout allows irrigation and drainage within eight hours. Avoid waterlogging throughout the year. Good soil structure. pH (CaCl2) greater than 5 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. Aim at a plant population of greater than 50 plants per square metre (sowing rate 10 to 15 kg/ha). Apply P removed in hay. Check to ensure timely irrigation. Avoid any moisture stress. Supply consistent quality hay for the chosen market. Avoid excessive handling of windrows. Bale hay at 18 to 20% moisture.
Crop establishment: Adequate nutrition: Soil moisture: Marketing:
15
5.5
YIELD PRICE
Maize (Grain)
YEAR:
2009-10
Your Figures
12 tonnes per ha $320 per tonne on farm $/ha
INCOME COSTS Seed bed preparation 5 passes
12 t/ha
$320 per t
$3,840
2.5 ha/hr
$76 per hr
$152
(includes hilling/row cultivation & application of 300kg of urea) Sowing (by contractor) Seed Fertiliser D.A.P. Urea (application via irrigation) Application Herbicide to control: Broadleaf weeds and grasses - pre-emergent Broadleaf weeds and grasses - post emergent Application/incorporation Irrigation and drainage Harvesting Contract
(Grain drying may be required @ $16/t)
@ 25-kg bag 1.25 bags @
$100 per ha $285.50 per bag
$100 $357
@ @ @
$1,346 per t $825 per t $76 per hr
$337 $495 $19
$60 $26 6 ha/hr @ @ $76 per hr $50 per Ml $25 $425
2 passes
8.5 Ml/ha
1.5 ha/hr 12 t
@ @ @
$275 per hr $8 per t $9.60 per $'000
$183 $96 $37 $2,312 $1,528 $180
Cartage to silo on farm (chaser bin) Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
$193
16
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $290 6 8 10 12 14 16 18 ($504) $55 $613 $1,172 $1,730 $2,288 $2,847 $300 ($444) $134 $712 $1,290 $1,869 $2,447 $3,025 $310 ($385) $213 $811 $1,409 $2,007 $2,605 $3,203 $320 ($325) $292 910 $1,528 $2,146 $2,764 $3,382 $330 ($266) $372 $1,009 $1,647 $2,285 $2,922 $3,560 $340 ($207) $451 $1,108 $1,766 $2,423 $3,081 $3,738 $350 ($147) $530 $1,207 $1,885 $2,562 $3,239 $3,917
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD 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. Moderate to good soil structure. Use hybrids appropriate for the location, planting time, end-uses and harvest times. Sow recommended varieties within the preferred sowing window for your location. Use a precision seeder to achieve suitable plant populations Aim at a plant population of 75,000 to 80,000 plants per hectare for most stockfeed varieties. Apply N and P according to paddock history, soil test results and target yield removal figures. Ensure adequate Zinc. Control weeds early, aiming for a weed-free crop. Monitor the crop regularly for insect damage during emergence to flowering. Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at flowering. Use grain moisture content measurements to decide when to harvest grain.
Soil structure: Varieties: Sown on time:
Crop establishment: Adequate nutrition: Control weeds, pests & diseases: Soil moisture: Harvest:
17
5.6
YIELD PRICE
Maize (Silage)
YEAR:
2009-10
Your Figures
18 tonnes per ha $180 per tonne standing $/ha
INCOME Maize silage (sold standing) COSTS Seed bed preparation 5 passes 2.5 ha/hr @ $76 per hr $152 18 t/ha @ $180 per t $3,240
(includes hilling/row cultivation & application of 300kg of urea)
Sowing (by contractor) Seed Fertiliser D.A.P. Urea (300 kg applied via irrigation) Application Herbicide to control: Broadleaf weeds and grasses - pre-emergent Broadleaf weeds and grasses - post emergent Application/incorporation Irrigation and drainage Harvesting - at purchaser's expense Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE 2 passes 6 ha/hr 8 Ml/ha 250 kg/ha 600 kg/ha 4 ha/hr 1.25 bags
@ @
$100 per ha $285.50 per bag
$100 $357
@ @ @
$1,346 per t $825 per t $76 per hr
$337 $495 $19
$60 $26 @ @ $76 per hr $50 per Ml $25 $400
$1,971 $1,269 $159
$110
18
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $150 12 14 16 18 20 22 24 ($171) $129 $429 $729 $1,029 $1,329 $1,629 $160 ($51) $269 $589 $909 $1,229 $1,549 $1,869 $170 $69 $409 $749 $1,089 $1,429 $1,769 $2,109 $180 $189 $549 909 $1,269 $1,629 $1,989 $2,349 $190 $309 $689 $1,069 $1,449 $1,829 $2,209 $2,589 $200 $429 $829 $1,229 $1,629 $2,029 $2,429 $2,829 $210 $549 $969 $1,389 $1,809 $2,229 $2,649 $3,069
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD 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. Moderate to good soil structure. Use hybrids appropriate for the location, planting time, end-uses and harvest times. Sow recommended varieties within the preferred sowing window for your location. Use a precision seeder to achieve suitable plant populations. Aim at a plant population of 70,000 to 85,000 plants per hectare for silage. Apply N and P according to paddock history, soil test results and target yield removal figures. Ensure adequate Zinc. Control weeds early, aiming for a weed-free crop. Monitor the crop regularly for insect damage during emergence to flowering. Check to ensure timely irrigation. Ensure plants have adequate available water, particularly at flowering. Use milk line observations to decide when to harvest silage.
Soil structure: Varieties: Sown on time:
Crop establishment: Adequate nutrition: Control weeds, pests & diseases: Soil moisture: Harvest:
19
5.7
YIELD PRICE
Oats (Milling)
YEAR: 2009-10 6 tonnes per ha $185 per tonne on farm $/ha
Your Figures
INCOME COSTS Seed bed preparation (includes urea application) Sowing Seed Fertiliser D.A.P. Urea Application Herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage Harvesting Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE 1 pass
6 t/ha
$185 per t
$1,110
2 ha/hr
$76 per hr
$38
2 ha/hr 100 kg/ha
@ @
$76 per hr $0.75 per kg
$38 $75
@ @ @
$1,346 per t $825 per t $76 per hr
$168 $124 $19
$5 6 ha/hr 3 Ml/ha 2.5 ha/hr @ @ @ @ $76 per hr $50 per Ml $275 per hr $11.40 Per $000 $13 $150 $110 $13 $752 $358 $119
$125
20
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $155 4.5 5.0 5.5 6.0 6.5 7.0 7.5 ($50) $27 $104 $180 $257 $333 $410 $165 ($5) $76 $158 $240 $321 $403 $484 $175 $39 $126 $212 $299 $385 $472 $558 $185 $84 $175 $267 $358 $450 $541 $633 $195 $128 $225 $321 $417 $514 $610 $707 $205 $173 $274 $375 $477 $578 $679 $781 $215 $217 $324 $430 $536 $642 $749 $855
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Oats (Milling) Drainage: Soil structure: Crop rotation: Ensure layout allows irrigation and drainage within 15 hours. Moderate soil structure. 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. Use fallow or pre-irrigation (recommended at the rate of 1Ml/ha) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of 200 plants per square metre for maximum grain yield. Apply N and P according to paddock history, soil test results and target yield removal figures. Use pre and post emergent herbicides and pesticides to ensure minimal yield loss. 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.
Sub-soil moisture: Sown on time: Crop establishment: Adequate nutrition: Control weeds, pests & diseases: Soil moisture:
21
5.8
YIELD PRICE
Oats (Hay)
YEAR: 2009-10 12 tonnes per ha $200 per tonne on farm $/ha 12 t/ha @ $200 per t $2,400
Your Figures

(includes urea application)
1 pass
2 ha/hr
$76 per hr
$38
Sowing Seed Fertiliser D.A.P. Urea Application Herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage Harvesting Cutting and raking (contractor) Baling (contractor) Cartage to shed on farm (500-600 kg bales) Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
2 ha/hr 100 kg/ha
@ @
$38 $75
@ @ @
$1,346 per t $825 per t $76 per hr
$168 $124 $19
$5 6 ha/hr 3 Ml/ha @ @ $76 per hr $50 per Ml $13 $150
1 ha 12 t 12 t
@ @ @
$60 per ha $24 per t $8 per t
$60 $288 $96
$1,073 $1,327 $442
$89
22
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $155 9 10 11 12 13 14 15 $418 $541 $664 $787 $910 $1,033 $1,156 $170 $553 $691 $829 $967 $1,105 $1,243 $1,381 $185 $688 $841 $994 $1,147 $1,300 $1,453 $1,606 $200 $823 $991 $1,159 $1,327 1,495 $1,663 $1,831 $215 $958 $1,141 $1,324 $1,507 $1,690 $1,873 $2,056 $230 $1,093 $1,291 $1,489 $1,687 $1,885 $2,083 $2,281 $245 $1,228 $1,441 $1,654 $1,867 $2,080 $2,293 $2,506
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Oats (Hay) Drainage: Soil structure: Crop rotation: Ensure layout allows irrigation and drainage within 15 hours. Moderate soil structure. 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. Use fallow or pre-irrigation (recommended at the rate of 1Ml/ha) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of at least 250 plants per square metre for hay crops. Apply N and P according to paddock history, soil test results and target yield removal figures. Use pre and post emergent herbicides and pesticides to ensure minimal yield loss. 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.
23
5.9
YIELD PRICE
Sorghum (Hay)
YEAR: 2009-10 14 tonnes per ha $150 per tonne on farm $/ha 14 t/ha @ $150 per t $2,100
Your Figures
INCOME COSTS Seed bed preparation (includes urea application) Sowing Seed Fertiliser D. A. P. Urea (application via irrigation) Application Post-emergent herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage Harvesting Cutting and raking (contractor) Baling (contractor) Cartage to shed on farm (500-600 kg bales) Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE 2 passes
2.5 ha/hr @
$76 per hr
$61
2.0 ha/hr @ 12 kg/ha @
$38 $87
125 kg/ha @ 200 kg/ha @ 4 ha/hr @
$1,346 per t $825 per t $76 per hr
$168 $165 $19
$5 6 ha/hr @ 7.5 Ml/ha @ $76 per hr $50 per Ml $13 $375
1 ha 14 t 14 t
@ @ @
$60 per ha $24 per t $8 per t
$60 $336 $112
$1,439 $661 $88
$103
24
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $135 11 12 13 14 15 16 17 $142 $245 $348 $451 $554 $657 $760 $140 $197 $305 $413 $521 $629 $737 $845 $145 $252 $365 $478 $591 $704 $817 $930 $150 $307 $425 $543 $661 $779 $897 $1,015 $160 $417 $545 $673 $801 $929 $1,057 $1,185 $170 $527 $665 $803 $941 $1,079 $1,217 $1,355 $180 $637 $785 $933 $1,081 $1,229 $1,377 $1,525
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Sorghum (Hay) Soil temperature Adequate nutrition: Grazing Prefers warmer soils than millet (soil temperature > 18C) Provide adequate Phosphorus (up to 40 kg P/ha) and Nitrogen (up to 200 kg N/ha for the season) Prussic acid poisoning is a risk with all sorghum. Dont 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.
25
5.10
YIELD PRICE
Soybean
YEAR:
2009-10
Your Figures
3 tonnes per ha $610 per tonne on farm $/ha
INCOME COSTS Seed bed preparation 2 passes
3.0 t/ha
$610 per t
$1,830
2.5 ha/hr
$76 per hr
$61
Sowing (direct sowing) Seed + inoculation Fertiliser Triple super Application Pre-emergent herbicides to control: Broadleaf and grass weeds Application/incorporation Irrigation and drainage Post-emergent herbicides to control: Broadleaf weeds Application/incorporation Insecticides Aerial application Crop dessication Aerial application Harvesting Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
2 ha/hr 90 kg/ha
@ @
$38 $117
200 kg/ha 4 ha/hr
@ @
$975 per t $76 per hr
$195 $19
6 ha/hr 7.5 Ml/ha
@ @
$25 $13 $375
6 ha/hr
$76 per hr
$25 $13 $24 $15 $35 $15 $110 $21 $1,100 $730 $97
$15 per ha
@ 2.5 ha/hr @ @
$15 per ha $275 per hr $11.40 per $'000
$367
26
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $460 1.5 2 2.5 3 3.5 4 4.5 ($397) ($170) $58 $285 $512 $740 $967 $510 ($323) ($71) $181 $433 $685 $937 $1,190 $560 ($249) $28 $305 $582 $858 $1,135 $1,412 $610 ($175) $127 $428 $730 $1,031 $1,333 $1,634 $660 ($101) $226 $552 $878 $1,204 $1,531 $1,857 $710 ($26) $325 $675 $1,026 $1,377 $1,728 $2,079 $760 $48 $423 $799 $1,175 $1,550 $1,926 $2,302
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Soybeans Drainage: Soil structure: Sub-soil moisture: Sown on time: Crop establishment: Adequate nutrition: Ensure layout allows irrigation and drainage within eight hours. Good soil structure. Use pre-irrigation to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of 35 to 40 plants per square metre. 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. Use pre and post emergent herbicides and pesticides to ensure minimal yield loss. Check constantly for insects from emergence to maturity. Check to ensure timely irrigation. Ensure plants have adequate available water for the entire growing season. Desiccants can be useful for an early harvest and to achieve a quality high yielding crop.
Control weeds, pests & diseases: Soil moisture: Harvest:
27
5.11
YIELD PRICE
Triticale
YEAR: 2009-10 5.5 tonnes per ha $250 per tonne on farm $/ha
Your Figures
INCOME COSTS Seed bed preparation Sowing Seed Fertiliser D.A.P. Urea Application Post-emergent herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage 1 pass
5.5 t/ha
$250 per t
$1,375
2.5 ha/hr 2.0 ha/hr 120 kg/ha
@ @ @
$30 $38 $77
@ @ @
$1,346 per t $825 per t $76 per hr
$162 $124 $19
$5 6 ha/hr 3.5 Ml/ha @ @ $76 per hr $50 per Ml $13 $175
Harvesting Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
2.5 ha/hr
@ @
$275 per hr $11.40 per $000
$110 $16 $768 $607 $173
$140
28
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $220 4 4.5 5 5.5 6 6.5 7 $117 $226 $335 $444 $552 $661 $770 $230 $157 $271 $384 $498 $612 $725 $839 $240 $196 $315 $434 $552 $671 $790 $908 $250 $236 $360 $483 $607 $730 $854 $977 $260 $275 $404 $533 $661 $790 $918 $1,047 $270 $315 $448 $582 $715 $849 $982 $1,116 $280 $355 $493 $631 $770 $908 $1,047 $1,185
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Triticale Drainage: Soil structure: Crop rotation Ensure layout allows irrigation and drainage within 15 hours. Moderate to good soil structure. 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. Use fallow or pre-irrigation (recommended at 1.5 Ml per hectare) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of 200 250 plants per square metre. Apply N and P according to paddock history, soil test results and target yield removal figures. Use pre and post emergent herbicides and pesticides to ensure minimal yield loss. 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 preirrigation of 1.5 Ml per hectare.
29
5.12
YIELD PRICE
Wheat
YEAR: 2009-10 5.5 tonnes per ha $270 per tonne on farm $/ha 5.5 t/ha @ $270 per t $1,485
Your Figures

(includes urea application)
1 pass
2.5 ha/hr
$76 per hr
$30
Sowing Seed Fertiliser D.A.P. Urea Application Post-emergent herbicides to control: Broadleaf weeds and grasses Application Irrigation and drainage Harvesting Insurance Total Variable Costs GROSS MARGIN PER HECTARE GROSS MARGIN PER MEGALITRE
2 ha/hr 100 kg/ha
@ @
$38 $65
@ @ @
$1,346 per t $825 per t $76 per hr
$168 $165 $19
$5 6 ha/hr 3.5 Ml/ha 2.5 ha/hr @ @ @ @ $76 per hr $50 per Ml $275 per hr $11.40 per $'000 $13 $175 $110 $17 $805 $680 $194
$146
30
Effect of price and yield on gross margin per hectare Price ($ per tonne) Yield (tonne per hectare) $240 4.5 5 5.5 6 6.5 7 7.5 $161 $280 $399 $517 $636 $754 $873 $250 $201 $324 $448 $572 $695 $819 $942 $260 $240 $369 $497 $626 $754 $883 $1,011 $270 $280 $413 $547 $680 $814 $947 $1,081 $280 $319 $458 $596 $735 $873 $1,011 $1,150 $290 $359 $502 $646 $789 $932 $1,076 $1,219 $300 $399 $547 $695 $843 $992 $1,140 $1,288
Notes:
1 2
KEY CHECKS FOR MAXIMISING YIELD Wheat
Drainage: Soil structure: Crop rotation
Ensure layout allows irrigation and drainage within 15 hours. Moderate to good soil structure. Sow wheat 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. Use fallow or pre-irrigation (recommended at 1.5 Ml per hectare) to achieve adequate soil moisture at sowing. Sow recommended varieties within the preferred sowing window for your location. Aim at a plant population of 200 to 250 plants per square metre. Apply N and P according to paddock history, soil test results and target yield removal figures. 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. 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 preirrigation of 1.5 Ml per hectare.
31
6.
6.1
Appendices
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 machines 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.
Contact ATO or your accountant about calculating depreciation under the GST System.
32
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) 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
33
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) PP SV LS SS R&M $110,000 $27,500 10 6m x 8m $50 5%
Purchase price Salvage value Life span (in years) Shed space Registration Repairs and maintenance
Overhead cost = depreciation + opportunity cost + shelter cost + insurance + registration Depreciation = ($110,000 $27,500 ) = $8,250 10 Opportunity cost = ($110,000 $27,500)x 0.10 = $6,875 2 Shelter = Insurance =
6x 8x $5 = $240
( $110,000 + $27,500 ) 1000 $6 = $413 2
Registration = $50 Total overhead cost (per 870 hours) = $15,828
34
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
2 3
R & M cost of a tractor is a difficult costing concept as the timing of major repairs is indeterminate. This rate would be insufficient to cover all costs in a pure contracting business, eg consider local business workshop cost.
35
6.2
Appendix B - Planting Guide for Optimum Yield of Irrigated Crops in Northern Victoria Rob Fisher and Damian Jones DPI, Kerang
Crop type Barley Canola Faba Bean Lucerne Maize grain or silage Millet Oats Rice Sorghum Soybean Triticale Wheat
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Forage
Grain
Optimal Planting Time

Satisfactory Planting Time 36

Northern Victoria: Irrigated Cropping

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Northern Victoria

Northern Victoria Irrigated Cropping

Department of Sustainability and Environment Department of Primary Industries

Northern Victoria Irrigated Cropping

ISBN 978-1-74217- 489-1 Acknowledgment:

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Table of Contents Contents

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

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

The Irrigation Areas of Northern Victoria

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Calculating and Using Gross Margins

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

$1,485 $680 $194

Northern Victoria Irrigated Cropping

Total Farm Income

Total Variable Costs

Total Farm Gross Margin

Net Farm Income

Owner/operators salary, interest & lease charges

Farm Business Profit (before tax)

Loan principal repayments

Additional owner drawings

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Target Prices - Profitable Prices!

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Target Price Calculation

Irrigation and drainage Machinery Cultivation Sowing Fertiliser application Spraying

Contract harvesting Other Insurance

2.5 ha/hr $11.40 per $1,000

early season value $200/t

TOTAL VARIABLE COSTS/HA VARIABLE COSTS/TONNE (B A)

$ 804 $146 $804 5.5

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

SCALE OF BUSINESS D E OVERHEAD COSTS

PROFIT MARGIN INCLUDING ANNUAL FINANCE AND LIVING COSTS

ON-FARM TARGET PRICE PER TONNE

$146 + $38 + $58

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Crop Gross Margin

$38 $19 $25 $38 $59

3 ha/hr @ 2 ha/hr @ 95 kg/ha @

$76 per hr $76 per hr $0.63 per kg

125 kg/ha 150 kg/ha

$1,346 per t $825 per t $76 per hr

$168 $124 $38

* A deep soil N test is recommended at approximately $60 per test

Gross Margin 2009-10

Northern Victoria Irrigated Cropping

Subsoil moisture: Sown on time: Crop establishment: Adequate nutrition:

Control weeds pests & diseases: Soil moisture: