25 years of data - how the numbers have changed, what are the big lessons
NW NSW ProfitFocus over time
What have we learnt:
1. Top performing farms consistently outperform their peers, it’s not a fluke it’s their attention to timing and detail and forward thinking that gives them the edge. This results in them achieving a higher gross margin.
2. Crop choice is a profit driver and every great farm has pillar crops that are essential to generating high margin. This could be cotton, sorghum, or double crop chickpeas.
The foundations of good rotations are profitable pillar crops (crops that are able to deliver high margin), stubble cover, break crops to allow for cheaper grass control, reduced incidence of fusarium and nematodes, and adequate recharge time to fill soil moisture profiles.
3. Do what is agronomically right, produce the yield and let the market sort itself out. What you plant this year will impact next year’s crop.
- The data shows that growing cereal on cereal reduces yield by 1 t/ha on average. That means that fields that are back-to-back cereals in the north are starting with a $350+ gross margin penalty. The average gross margin for wheat is $410/ha. Wheat following cereals on average can only be expected to generate $60/ha. The average business overhead is $90/ha meaning that these fields are not contributing positively to the business.
- All crops have their day in the limelight. Never lose sight of the importance of crops in the rotation to set up a pillar crop, and deal with agronomic issues. Chickpeas are a great example in that they have been maligned in recent years due to harvest issues, price, and mould. However, they play an important role and for many have been a major contributor to margin historically.
- The numbers don’t lie – historically if one crop is outperforming an alternative crop i.e. wheat vs. barley, it’s an expression of the environment you are in. Often these differences can be $100- 200/ha each year which adds up over time.
- Things go wrong – when they do it’s important to plant the next most profitable crop that won’t cause issue for the next crop in the sequence. This means that if we miss a summer crop because it’s too dry to plant then we need to be planting a break crop instead of a cereal if the crop in the following year was scheduled to be a cereal.
- Having to spray grass weeds out of cereals is a red flag that things that things are not right agronomically.
4. Our data and its analysis is increasingly demonstrating that top performers invest more in Nitrogen. This is driven in part by confidence that they have things agronomically right and can invest with confidence, but also the belief that if it isn’t used this year it will be utilised somewhere in the following crops.
5. Farm storage – gives the flexibility to sit on grain, blend and allows for timely harvest – these are vital issues in building resilient farming business.
6. Total plant and machinery costs are important. Some growers give up $100/ha before they plant a seed just simply on the choice they have made around kit. As businesses expand it is easy to fall into the trap of just increasing the machinery when utilizing contractors to meet the demand may be more beneficial.
7. Chickpeas need to be harvested on time – delaying chickpea harvest can cost enormously.
8. With land prices at record highs it’s important to focus on getting every square metre as productive as possible. Attend to drainage, ameliorate soils, and improve harvest access to ensure that you are getting the most out of country. After the Oct 22 season, some farms which had addressed drainage were able to successfully double crop drowned winter crop country to summer crop where others struggled. The difference was 2 - 3% roam or $2 - $3 Million in operating profit on the average farm.
9. Debt has been a friend - low interest rates meant that businesses were able to expand and leverage through capital appreciation of their assets. This party may be over and businesses now need to focus on ensuring they can meet the interest expenses going forward. Management of rates at sustainable levels is an important risk management tool.
10. Row spacings – on sorghum plant solid, if season is good you will benefit if its poor it will make very little difference to the result. On cotton row spacing will increase the lower the rainfall and hotter the conditions to ensure fibre quality is maintained.
11. Plant at the front of the window for each variety to get best yields.
12. Invest in a good team of trusted advisors – use them to make the right decisions and ensure they are working to add value to your business.