Variable operating costs
Inputs
Input costs include fertiliser, chemicals, seed, fuel, repairs and maintenance, supplementary feed and animal health products.
As these costs are variable, and therefore discretionary, farm managers should know the additional return likely, being the farm gate value of the additional production, from each additional dollar spent. If the additional production response, this year and future years (if appropriate), is not likely to be sufficient to cover the additional input cost consider not expending funds.
Some options to reduce and manage input costs include:
Systems and management
- Monitor the season and budget regularly, that is, monthly/fortnightly, to match spending to production potential as the season unfolds. Implement a plan of action for a variety of seasons and be flexible to avoid overspending in the poor/dry years or underspending in the favourable years.
- Seek out quality advice from specialist advisors, field days, training events and other farmers.
- Focus on additional return (or savings) on investment of the additional expenditure. Do not include costs already incurred or revenue that would have been received regardless of the additional investment.
- Rotation can reduce costs of weeds and disease as well as the risk of resistance.
- Legumes and pastures can reduce the need for nitrogen fertiliser in the following year; but weed control in the following crop can be a challenge.
- Reduce waste, for example install auto-steer technology to avoid overlap and thereby reduce costs of fertiliser, chemicals, fuel and time (labour);
- Calculate feed budgets to available pasture and calibrate trail feeders to prevent over or under feeding.
- Use decision support tools to make informed decisions regarding inputs, particularly nitrogen, phosphorous, potash and trace elements.
- Put in place effective strategies to manage resistance, particularly weeds, worms and other pests and diseases.
- Consider tendering out your business each year with suppliers.
- Consider bulk buying for a discount, or if a smaller business try bulk-buying with other farm businesses. Shop around.
- Ensure action is timely. For example monitoring crops and treating earlier (when rates, and therefore costs are lower) rather than later when the disease/pest/weed has spread or is more advanced. Be pre-emptive in your approach and strike early. Effective monitoring helps enormously with this approach.
- Find cheaper ways of doing things. For example, look for substitutes, new technology, consider sharing expensive equipment that is not time critical to operations.
Crop specific
- Increase efficiency or optimising returns (production response) on inputs – for example soil testing and implementing variable rate management techniques so that more fertilizer can be applied to areas where the yield response rates will be highest and reducing application rates where response may be limited due to another limiting constraint.
- Regularly service plant and equipment to reduce delays to time critical tasks, lower repair and maintenance costs and/or fewer breakdowns at critical times.
- Apply treatments as specified on the label and don’t scrimp. When treating weeds, diseases and pests in crops and animals always apply adequate rates to achieve the highest levels of control possible. If not, resistance or re-infection may develop and therefore further treatment costs are incurred.
- Make sure the boomspray, spreader etc are calibrated correctly.
Sheep specific
- Incorporate precision feeding – assess supplement quality, calibrate feed carts to monitor how much sheep are offered, assess pasture quality and availability, condition score animal, set targets for different classes of animals, feed budgeting to determine what supplementation is needed to achieve targets.
- Preg-scan ewes to identify dry/single/multiple-lamb ewes - separating the dry, single and twin ewes so that feed rations match energy requirement to maintain condition thereby optimising feed costs as well as maximising lambing percentage.
- Consider using contractors – reduce costs of plant repairs and maintenance and frees up you time to do other management tasks.