Gross Margin Analysis An essential tool for comparing

Gross Margin Analysis An essential tool for comparing returns from agricultural inputs Simon Leake BSc. Ag(Hons. I) Principal: Sydney Environmental and Soil Laboratory

Product (crop yield) vs Input Typically a polynomial curve. Flat response at low Inputs Return Diminishing return at higher inputs Rising rate with moderate input Input

“Ideal” compost yield curve

Gross Margin on Agrichar • Using data from NSW DPI - zero char gave 1. 2 g/pot grass yield - 10 t/ha gave 1. 6 g/pot grass yield - interpolate other points - set max yield at 11. 7 t/ha of grass - set cost of Agrichar at $70/t spread

Gross Margin Analysis for Grass fed beef using Agrichar t/ha Grass yield t/ha/annum Beef @ $2/kg Gross Margin 20%fce $/ha 0 7. 5 $ 2, 986 2 7. 9 $ 3, 160 $ 3, 020 5 8. 7 $ 3, 464 $3, 114 10 10. 0 $ 4, 004 $3, 304 15 11. 1 $ 4, 456 $ 3, 406 20 11. 7 $ 4, 671 $ 3, 271

Gross Margin vs Input Rate

NPK Fertiliser Gross Margins at $1000/t spread NPK kg/ha Beef at $2/kg lw (20% fce) Gross Margin @ $1000/tonne 0 $ 2, 986 60 $ 3, 100 150 $ 3, 464 $ 3, 313 300 $ 4, 004 $ 3, 704 450 $ 4, 456 $ 4, 006 600 $ 4, 674 $ 4, 071

Compare the two farm inputs

Analyse the price of Agrichar

Conclusions • Using this yield increment curve the nil return cost for Agrichar is $100/tonne spread • Using the same yield increment curve shape NPK fertiliser has a significantly higher gross margin return • These yield curves are theoretical and the conclusions illustrative only

What is needed? • Good incremental yield curve experiments • Understand why Agrichar can increase yield (liming value, potassium content what? ) • Include a greater range of combinations eg compost, agrichar, fertiliser combinations looking for synergistic effects • Use a range of soil types and combinations • Gross margin analysis based on real data • Compare alternative systems eg compost, green manure cropping

Remember • Farmers run businesses, base your claims on things relevant to their business. • Forget the warm glow stuff this has a narrow appeal only. • The modern farmer will believe good trial data and buy products that give genuine positive returns. • Public extension officers will only endorse genuine products giving positive returns.