Practices for profits in the eastern wheatbelt

Author: Melissa Williams | Date: 13 Feb 2014

A strong business in the eastern wheatbelt needs to:

  • Have a low break even yield at average grain prices.
  • Be able to capitalise on good seasons/prices when they happen.
  • Be conservatively geared to cope with the inevitable poor season. 

Greg Kirk, Planfarm.

Controlled traffic farming (CTF), variable rate technology (VRT), liming and fallow are key management practices to boost cropping profitability in WA’s eastern wheatbelt.

This was identified from a GRDC-funded analysis of 14 top and 20 low performing businesses in the region carried out by Planfarm director Greg Kirk.

It found future profit opportunities in the eastern wheatbelt are most likely to come from rapid advances in technology to overcome production constraints and drive labour and machinery efficiencies. 

Business performance

Greg’s analysis for the years 2006-12 showed top businesses in the eastern wheatbelt generated $42.56/hectare more than the average of those in the Planfarm Bankwest Benchmarks for the region.

This translated into an extra $243,485 per annum in operating surplus – 60 per cent higher than the average for the region.

But even the top operators were not immune from operating losses. 

Some growers in this group experienced operating losses in one or more of the years 2007, 2009, 2010 and 2011.

This meant, as a group, they were unable to meet all of their financial commitments in poor seasons. But they had enough financial strength to overcome these challenging years.

Greg said, despite receiving no extra growing season rainfall, the top performers fared better financially and produced crops with higher yields per hectare in good and bad seasons compared to the low performing group. 

Characteristics of the top performing businesses

  • Average land use was 65% cereal crops, 20% pasture (for sheep), 8% canola and a balance of oats, lupins, fallow, triticale or field peas.
  • 84% income from crop.
  • 80% had a sheep enterprise. 
  • About 25% of the annual cropping program was sown dry.
  • Autosteer technology was used by 95% of the group.
  • Adoption of CTF and/or VRT was low.
  • Average equity at the start of 2013 was 84%.
  • There was a conservative approach to debt.
  • Efficiency of labour and machinery was important.
  • They took opportunities when presented.

Characteristics of the low performing businesses

  • Average farm size of 4201ha – 27% lower than top performers.
  • 78% income from crop.
  • Average wheat yield did not exceed 1.7t/ha in any year.
  • Average operating surplus was $42.92/ha in 2006-12.
  • They had an overly aggressive approach to expansion through lease or land purchase that was mostly debt funded.
  • 68% equity at start of 2013.
  • Higher frequency of operating deficits.

Opportunities to lift profits in the eastern wheatbelt

Grain yield and price drive farm profitability and offer the biggest potential for gains.

Greg said improvements in water use efficiency are important, but may not translate into additional yield if growing season rainfall continues to trend downwards.

For this reason, he said cost savings across all aspects of the business need to be a key priority. This is a low risk way to significantly improve overall profitability.

Grain prices

Greg said aiming for 5% higher grain prices was a realistic target and required attention to detail at harvest and with grain quality and marketing.

He said if prices increased 5%, farm profits could rise by about 32%.

Grain yields

Greg’s analysis showed profits could increase by $27.81/ha if top performing businesses increased grain yields by 10% - not an easy task in a lower rainfall environment, but not impossible.

He said this 10% target would require some investment.

Some potential practices to reach this goal included:

  • Use of autosteer – potential benefits of $7-10/ha.
  • CTF – potential benefits of $30-50/ha (if using autosteer).
  • VRT - particularly for lime and possibly for fertiliser – potential benefits of $10-40/ha.
  • Liming – can cost $80-85/ha for 2t/ha but can be cheaper with targeted application/VRT.
  • Fallow – reduces weeds and costs.
  • Dry seeding – potential benefits depend on season and frost.
  • In furrow seeding – potential benefits of up to $100/ha depending on season.
  • Weed detection technology – can save up to $10/ha.
  • Harvest moisture management - reduces losses and lifts quality 

Reducing costs

The Planfarm analysis identified the main prospective cost saving areas for growers in the eastern wheatbelt were:

1. Fertiliser

Top performing businesses surveyed had reduced fertiliser inputs and machinery replacement costs in recent years.

Average phosphorus rate was 8.6kgP/ha and average nitrogen rate was 28kgN/ha – but in some years no additional N was applied post-seeding.

One third of top farmers applied no N at seeding (other than that in compound fertiliser) and 27% applied all nitrogen up front.

Greg said a 10% increase in fertiliser efficiency could boost profits by $5.05/ha - or about 10% - for the top performers and higher still for average eastern wheatbelt growers.

2. Freight and post farm gate costs

Grain freight is high due to the distances involved, but Greg said there was some potential for savings in back-loading.

CBH handling charges had also effectively dropped 14% in 2013.

3. Labour/Contract/Drawings

A 10% improvement in this cost component could increase profits by about $3.80/ha.

This could potentially be achieved through improved efficiencies and additional scale where appropriate.

4. Weeds ​

​Weed control costs have started to climb in recent years as new, more expensive chemistry has been adopted for grass and broad leaf control. Greg said there was an extra $3.30/ha in profit available if chemical efficiency could be improved by 10%. 

He said the adoption of weed detection technology offered potential for significant savings in summer weed and fallow weed control.

For those who are already at the top of their game – where to now?

Greg said for those eastern wheatbelt farmers who were already at the top of the pack, the key messages from this study were:

  • Continue to search for more machinery and/or labour efficiencies.
  • Drive higher water use efficiency through:
  • Strategic liming and targeting this expensive input where it works best
  • VRT to achieve better fertiliser efficiency through placement
  • CTF to achieve better water use efficiency through less compaction.
  • Not to get complacent. To closely assess opportunities for lease or expansion. To consider growing low-cost canola as a genuine option to broaden rotations.

Greg Kirk will be presenting and discussing the results from the GRDC project ‘How to Farm Profitably in the Eastern Wheatbelt of WA’ at the Agribusiness Crop Updates in Perth on Tuesday February 25. For registrations go to: www.giwa.org.au/2014-crop-updates

Greg will also be speaking at the Bodallin Catchment Group’s Regional Crop Update on Monday March 17 at the Moorine Rock tennis club. For information contact: Rebecca Maddock, 08 9049 1001, admin@yilgarn.wa.gov.au

ENDS

For Interviews

Greg Kirk,

Planfarm,

0427 428 400,

Greg@Planfarm.com.au

GRDC Project Code PLN00009

Region West, North, South