Gross Margin Analysis

1
Gross Margin Analysis

• An essential tool for comparing returns from
  agricultural inputs
• Simon Leake BScAg(HonsI)
• Principal Sydney Environmental and Soil
  Laboratory

2
Product (crop yield) vs Input

• Typically a polynomial curve-

Flat response at low Inputs
Diminishing return at higher inputs
Return
Rising rate with moderate input
Input
3
Ideal compost yield curve
4
Gross Margin on Agrichar

• Using data from NSW DPI
• - zero char gave 1.2g/pot grass yield
• - 10t/ha gave 1.6g/pot grass yield
• - interpolate other points
• - set max yield at 11.7t/ha of grass
• - set cost of Agrichar at 70/t spread

5
Gross Margin Analysis for Grass fed beef using
Agrichar
Agrichar t/ha Grass yield t/ha/annum Beef _at_ 2/kg 20fce Gross Margin /ha
0 7.5 2,986 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
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Gross Margin vs Input Rate
7
NPK Fertiliser Gross Margins at 1000/t spread
NPK kg/ha Beef at 2/kg lw (20 fce) Gross Margin _at_ 1000/tonne
0 2,986 2,986
60 3,160 3,100
150 3,464 3,313
300 4,004 3,704
450 4,456 4,006
600 4,674 4,071
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Compare the two farm inputs
9
Analyse the price of Agrichar
10
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

11
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

12
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.