Breakeven yields of grain crops

Page last updated: Wednesday, 6 September 2023 - 12:59pm

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Before committing resources to late sown or emerging crops, carefully consider its yield potential and risks to achieving that yield. If the expected yield is greater than the variable cost breakeven yield, you will be covering your variable costs and contributing to fixed or overhead costs. If the expected yield is lower than the variable cost breakeven yield, reassess if the inputs planned will be adding value to its yield potential. Inputs also affect grain quality hence price however this analysis focuses on the relationship between yield and inputs.

Discussion

A challenge for growers with a late break is the expected yield of their crops and the impact this could have on their bottom line. It is important to carefully consider the crops yield potential before committing resources to late sown or emerging crops. Yield potential of crops emerging in June can still be reasonable depending on location and seasonal conditions.

With the knowledge of planned variable cost and farm gate price, growers can estimate the breakeven yields for variable costs and returns typical for a grain crop (Tables 1). If the potential yield is greater than the breakeven yield then the crop is covering variable costs and also contributing to fixed or overhead costs. For example, if the farm gate price for a wheat crop is $350 per tonne and the costs of variable inputs is $250 per hectare then the crop needs to yield 0.71 t/ha to breakeven. If the potential yield is higher than this, the enterprise is covering its variable costs and contributing to the fixed or overhead costs. If potential yield is less than 0.71 t/ha then it will be necessary to rethink your input costs.

Treatment of fixed and overhad costs: if  you know what your fixed and overhead costs are per hectare then these can be added to variable costs to work out break even yield to cover total cost. For example:

  • Breakeven yield to cover variable costs:
    • If variable cost = $200/ha
    • Price of grain = $300/tonne
    • Required yield to cover varible cost only is 0.67 tonnes per hectare.
  • Breakeven yield to cover total cost (variable, fixed and overhead)
    • Fixed and overhead costs = $100/ha
    • Variable cost = $200/ha
    • Total cost = $300/ha
    • Price of grain = $300/tonne
    • Required yield to cover total (variable, fixed and overhad) costs = 1.00 tonnes per hectare.
Table 1 Break even yields (t/ha) to cover variable cost, at farm gate prices  between $100 and $600 per tonne (*: Net on farm price)

Variable
Cost

 $250/t*

$300/t*

$350/t*

$400/t*

$450/t*

$500/t*

 $550/t* $600/t* $650/t* $700/t*
$100/ha 0.40 0.33 0.29 0.25 0.22 0.20 0.18 0.17 0.15 0.14
$150/ha 0.60 0.50 0.43 0.38 0.33 0.30 0.27 0.25 0.23 0.21

$200/ha

 0.80 0.67 0.57 0.50 0.44 0.40 0.36 0.33 0.31 0.29

$250/ha

 1.00 0.83 0.71 0.63 0.56 0.50 0.45 0.42 0.38 0.36

$300/ha

 1.20 1.00 0.86 0.75 0.67 0.60 0.55 0.50 0.46 0.43
$350/ha 1.40 1.17 1.00 0.88 0.78 0.70 0.64 0.58 0.54 0.50

$400/ha

 1.60 1.33 1.14 1.00 0.89 0.80 0.73 0.67 0.62 0.57

$450/ha

 1.80 1.50 1.29 1.13 1.00 0.90 0.82 0.75 0.69 0.64

$500/ha

 2.00 1.67 1.43 1.25 1.11 1.00 0.91 0.83 0.77 0.71

$550/ha

 2.20 1/83 1.57 1.38 1.22 1.10 1.00 0.92 0.85 0.79
$600/ha 2.40 2.00 1.71 1.50 1.33 1.20 1.09 1.00 0.92 0.86

Topics

Contact information

Paul Mattingley
+61 (0)8 9368 3960
Email Paul Mattingley

Author

Christine Zaicou-Kunesch

Regions

Great Southern
Mid West
Wheatbelt