Generating more profit from your farm business

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Appendix A – Revenue and cost assumptions for the mixed 50/50 crop/sheep business case study

Assumptions on balance sheet, enterprise mix, prices and production rates
Variable Assumption Unit
Effective Ha 2500 ha
Land value 3000 $/ha
Average useful life of plant and equipment 8 years
Capital available (debt + equity) 11.1 $m
Plant and equipment 0.9 $m
Livestock 0.4 $m
Land 7.5 $m
Debt 2.3 $m
Equity (net assets) 6.5 $m
% equity 79% %
Wheat/barley yield 2.8 t/ha
Wheat price Free-in-Store (FIS) 300 $/t
Grain handling farm to port costs (Cartage, receival, freight, EPR, levies, cartage) 46 $/t
Lamb price for 22kg cwt 88 $/hd
Wool price clean 11.50 $/kg
Ewe price 50 $/hd
Ewe stocking rate 6.5 ewe/winter grazed ha
Dry Sheep Equivalent (DSE) stocking rate 9.8 DSE/winter grazed ha
Wool cut/ewe 5 kg/ewe
Ram % 2 % flock
Marking rate 90 %

Assmptions underpinning costs and income for the case study farm business
Income and costs $/ farm ha Assumptions
Grain income 420 2.8t/ha x $300/t x 50% farm area
Lamb income 257 6.5 ewe/ha x 90% marking rate x $88/hd x 50% farm area
Wool income 112 ewes and rams 5kg x 65% clean x 90% clip x $11.50/kg
Culls 33 20% flock at $50/hd
Total income 821 -
Farm overheads 39 Rates, licences, water, elec, gas, admin, insurance, buildings, fences
Seed and treatment 14 85kg/ha + 10% pasture farm @ $30/ha + treatment @ $50/t
Fertiliser and lime 95 Fertiliser: 20kg MOP (2500ha), 55kg Urea (625ha), 110kg Urea (625ha), 55kg DAP (1250ha), 100kg Super (1250ha); plus cartage $23/t. Lime: $40/t x 25% land area
Chemical 36 Planfarm Bankwest Benchmarks
Fuel and oil 30 Planfarm Bankwest Benchmarks
Plant repairs 13 4% machinery value
Permanent labour 28 1 x FTE @ $70 000 including super
Casual labour 4 $30/hr for seeding at 6ha/hr and harvest at 9ha/hr
Contract shearing 23 $7/ewe (includes shed hands, work cover and super)
Contract crutching 6 $0.80/ewe/lamb 4% work cover + 9.5% super
Contract marking 5 $1.30/lamb + $0.20/hd ear tag +4% workcover +9.5% super
Supplementary feed - ewes 31 270g/day barley or equivalent for six months at farm gate price
Supplementary feed - lambs 10 30% lambs sold in nov (not supp feed); 70% lambs feed for two months @400g/day
Animal health 17 Drench: Ewes $0.80/h (two drenches) + lambs $0.60/h (inc vitamin E). Lice $1.40/hd; Jet $0.25/hd. Vaccine lambs @ marking $0.50/hd + vac&drench $0.50/hd
Cartage 68 $3.70/hd freight and yard fees, $8/t grain cartage, wool freight $11/bale + cost of wool pack ($12.50each), CBH receival and freight charges $31.50/t
EPR, levies, commission 34 EPR $3/t. 2% AWI levy, MLA min 2% sale value or $1.50/hd, DPIRD biosecurity $0.12/hd, 1.02% GRDC levy. 4.5% wool selling fees, 5.5% sheep selling fees
Depreciation/machinery allowance 44 Machinery replacement value ($0.9m) / eight year replacement cycle / farm area
Sheep purchases 65 20% rams @ $1000/hd + 3% death replacement of ewes + 20% maidens (ewe replacements) @ $70/hd
Finance costs 60 6.5% interest on term debt
Working capital costs 7

Cost of inputs, feedcosts and overheads carried for four months at 7.5% interest

Total costs 631 -
Net profit before tax and drawings 191 Equivalent to $477 103 over the 2500ha farm
Profit margin 23% Profit before tax and drawings /total income
Return on equity 7% Pre-tax profit divided by equity $6.5m

Contact information

Tamara Alexander