James Hillcoat
Having a disciplined approach to variable costs is a crucial aspect of good farm management in any given year. The added pressure of low commodity pricing means having a well considered and robust approach to inputs will be imperative in the coming year.
Some key messages on disciplined variable cost management have been developed by Rural Directions as part of the GRDC project RDP00013 ‘The integration of technical data and profit drivers for more informed decisions’.
- The average grain business in Southern Australia is investing approximately 45% of turnover into variable input costs. The Top 20% grain businesses in Southern Australia are more efficient and are only investing 40% of turnover into variable input costs. The top end of the Top 20% are actually able to limit variable input costs to 35% of turnover. Limiting variable input costs to 35% of business turnover generally involves these growers having a profitable legume crop in their rotational mix.
- The key within a grain business is to achieve excellent crop yields in a cost effective manner. The levers that can be pulled that don’t have to involve additional expenditure are enhanced operational timeliness, improved planning and preparation between harvest and seeding, starting early, identifying ways to overcome bottlenecks and having a crop rotation that is based on sound agronomic principles.
- Excellent operational timeliness across the full calendar year within a grain business also greatly assists with achieving a high level of efficiency from variable cost inputs.
- Top 20% growers are often able to generate an additional 10% to 15% more crop yield from a common investment into fertiliser and chemical costs per hectare. This additional yield from an equivalent or lower per hectare investment into key crop inputs such as fertiliser, is achieved through enhanced operational timeliness and excellent crop agronomy. This additional yield could be achieved as a result of a combination of the following:
- Earlier control of volunteer or summer weeds to conserve additional moisture, preserve nutrients and prevent a green bridge which can otherwise compromise both disease and insect control.
- Improved timeliness of sowing. Top 20% growers are consistently able to complete seeding by their desired completion date as a result of excellent preparation post harvest and having systematised patterns of work which include building in contingency budgets for unexpected weather or machinery breakdown interruptions. This allows them to achieve consistent timeliness outcomes under variable conditions.
- Early identification of weed, disease or insect pressure as a result of excellent crop monitoring. This allows early intervention which can assist with optimising crop yield despite the development of such potential threats.
- Top 20% growers are often able to generate an additional 10% to 15% more crop yield from a common investment into fertiliser and chemical costs per hectare. This additional yield from an equivalent or lower per hectare investment into key crop inputs such as fertiliser, is achieved through enhanced operational timeliness and excellent crop agronomy. This additional yield could be achieved as a result of a combination of the following:
- In most situations, and assuming a DAP price of $770 per tonne and a Urea price of approximately $500 per tonne, it is possible to supply the phosphorus and nitrogen requirements for a crop across the full rotation for $30 per tonne of wheat yield. This means that in a region with a 4 tonne per hectare long term average wheat yield it should be possible to keep the businesses average investment into phosphorus and nitrogen based fertiliser to $120 per hectare. This can be achieved in a sustainable manner and includes a small allocation for soil building. With 25% grain legumes in the rotation it would be possible to get this down to $25 per tonne of wheat yield or $100 per hectare in a sustainable manner. The only exception to this benchmark is in high yielding (ie 4t/ha) regions where the rotation involves cereal and brassica crops only where this may extend to $35 per tonne of wheat yield.
- In practice we see a wide range on fertiliser use efficiency, often anywhere between $20 and $55 per tonne of wheat yield. At the lower end of this range, at $20 per tonne of wheat yield, this is only possible in a sustainable manner if we are seeing close to 50% legumes in the crop rotation. Anything above $40 per tonne of wheat yield is generally a mismatch between applied rates of fertiliser and crop yields removed. This could be a result of:
- Applying high rates of fertiliser to yield compromised crops (ie late sown, weed pressure, disease pressure).
- Having a ‘glossy’ view of in season yield potential without factoring into account late season production shocks.
- An imbalance between starting soil nitrogen, applied rates and long term yields achieved.
- Strategic and tactical management of nitrogen inputs is a real skill and a key profit driver in grain businesses. Long term yield records under different seasonal conditions are often a better indicator of true yield potential than our, often optimistic, within season perspective.
- In practice we see a wide range on fertiliser use efficiency, often anywhere between $20 and $55 per tonne of wheat yield. At the lower end of this range, at $20 per tonne of wheat yield, this is only possible in a sustainable manner if we are seeing close to 50% legumes in the crop rotation. Anything above $40 per tonne of wheat yield is generally a mismatch between applied rates of fertiliser and crop yields removed. This could be a result of:
- Similar principles can also apply to chemical use efficiency. Across the long term it is possible, in most situations, to keep investment into chemicals to between $23 and $25 per tonne of yield removed. Once again, there are strategic and tactical decisions and considerations which are required to achieve this. An integrated weed management approach that includes a robust crop rotation is required to achieve this across the long term.