Superior crop sequences a winner for farm profitability
Author: Sarah Jeffrey | Date: 08 Feb 2016
Well-managed crop sequences can almost double the profitability of farming operations in the northern grains region.
That was among the key findings presented by Agripath director Simon Fritsch at last year’s Grains Research and Development Corporation (GRDC) Farm Business Updates at Dalby, Narrabri and Dubbo.
Data presented by Mr Fritsch showed the top performing farms in the northern grains region achieved almost twice the profit of average farmers in the Agripath datasets over two or three years.
The top performing farms are classed as those in the top 20% as ranked by Return on Assets Managed or ROAM.
Mr Fritsch said the top performers had superior crop sequences which made the best use of rainfall, the soil’s ability to store moisture and crop choice to achieve high gross margins in their farming environment.
“When this is combined with good people and business management skills, good profits result,” Mr Fritsch said.
“Cost management also assists profitability on the top 20% of farms while teamwork, labour, safety and machinery decisions are also important.”
For the larger farms in northern New South Wales, ROAM averaged just under 6% while the top farms achieved a profit equal to 10% ROAM. Average profit on smaller farms in the higher rainfall areas with higher land values was 4%.
By comparison, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) survey of farm profit showed an average return on investment of 2.2% for Queensland farms growing wheat and other crops over the same period, while NSW cropping farms averaged 2.7% return.
“In dollar terms, these differences translate into as much as $440,000 per year in additional profit for an average sized farm in the Agripath dataset,” Mr Fritsch said.
Farm size or area cropped was not an important factor in profitability, with the top 20% of farms slightly smaller than average on the whole, but with slighter larger area of crop, according to Mr Fritsch.
He said crop frequency and the planning of crops in accordance with soil moisture was an important part of decision making in northern crop growing regions.
“A high frequency of low yielding crops, with small margins may be less profitable than a well-planned rotation which includes some crops grown on long fallow during the change between summer and winter cropping,” he said.
“For example, a double-crop of chickpea with a yield of 1.0 tonnes per hectare followed by wheat yielding 2.5t/ha might appear profitable, but they may only have a combined margin of around $200/ha.
“A wheat crop on a long fallow with a yield of 4t/ha, would have a margin close to $400/ha and could help to improve overall farm profit.
“Good margins are important and too much opportunity cropping can result in reduced margins and more income variability over the long term.
“Apart from good moisture storage, the main difference between average and top crops is the effect on yield by a number of ‘profit draggers’ such as disease, nematodes, weeds, low nitrogen, timeliness or harvest losses, which in combination affect yield by 20% to 30% and drag down profit by 50% to 60%.
“To manage well requires attention to all the profit draggers, but there is also a need to put time and effort into crop selection and managing rotations, crop frequency and risks.”
Mr Fritsch will discuss soil water management and its impact on farm profitability at the upcoming GRDC Grains Research Updates at Coonabarabran on February 23-24, Walgett on February 25 and Goondiwindi on March 1-2.
Simon Fritsch, Agripath director, Tamworth
Sarah Jeffrey, Senior Consultant Cox Inall Communications
GRDC Project Code APT00001