Gross Margin Analysis

An essential tool for comparing

returns from agricultural inputs
Simon Leake BScAg(HonsI)

Principal: Sydney Environmental and Soil Laboratory

 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
“Ideal” compost yield curve
Pasture Yield vs Input

14.0

12.0 y = -0.0005x3 + 0.0106x2

+ 0.1981x + 7.4656
10.0
R2 = 1
Yield t/ha/annum
8.0

6.0 Poly. (Yield

t/ha/annum)
4.0

Grass
2.0 dm/ha/annum

0.0
0 10 20 30
Input
t/ha
 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
 Gross Margin Analysis for Grass
fed beef using Agrichar
Agrichar t/ha Grass yield Beef @ $2/kg Gross Margin
t/ha/annum 20%fce $/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
Gross Margin vs Input Rate
Agrichar Beef return @$70/t

$3,450.00
$3,400.00
$3,350.00
$3,300.00
$3,250.00
$3,200.00
$3,150.00
$3,100.00
Beef return $/ha
$3,050.00
$3,000.00
$2,950.00
0 5 10 15 20 25
Agrichar t/ha
 NPK Fertiliser Gross Margins
at $1000/t spread
NPK kg/ha Beef at $2/kg lw Gross Margin @
(20% fce) $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
Compare the two farm inputs
Fertiliser vs Agrichar

$5,000.00
Fertiliser return
$4,500.00
$4,000.00
$3,500.00
Agrichar return @$70/t
$3,000.00
$2,500.00
$2,000.00
$1,500.00
Beef Return $/ha
$1,000.00
$500.00
$-
0 2 4 6 8
Addition increment
 Analyse the price of Agrichar

Beef return vs cost of Agrichar

$4,000.00
No Agrichar line
$3,500.00

$3,000.00

$2,500.00
Beef return
$2,000.00
Expon. (Beef return)
$1,500.00

$1,000.00
Beef Return $/ha
$500.00

$-
0 50 100 150 200
Cost of Agrichar $/t
 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.