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					                                                                                                 Sebago Potato GM




Sebago Potato Gross Margin (Fresh Market)
A.W.Hinton and Bill Johnston
Last modified: May 1998

Notes: All tractor operation costs include fuel, oil and repairs & maintenance only (F.O.R.M).

(A) Receipts
Potato Price ($ per 50 kg bag)                                                                                                                  $15.00
Potato Yield (Tonnes per Ha)                                                                                                                     30.00
Potato Gross Receipts ($ per Ha)                                                                                                                $9,000

(B) Variable costs                                Unit        No. Applications      Unit per Ha         $ per Unit   $ per Ha    $ per Tonne   $ per Bag
Ground Preparation
Soil analysis                                    Farm                  1                1.00              $85.00      $85.00       $2.83         $0.14
Liming                                          Tonnes                 1                5.00              $63.00      $315.00      $10.50        $0.53
Deep ripping                                     Hours                 1                1.67              $21.00      $35.07       $1.17         $0.06
Plough/discing                                   Hours                 1                1.25              $21.00      $26.25       $0.88         $0.04
Minispan (100 HP)                                Hours                 1                0.31              $11.00       $3.41       $0.11         $0.01
Fertiliser-DAP                                    Kg                   1               150.00             $0.51       $76.50       $2.55         $0.13
Cutting                                          Hours                 2                0.70              $9.00       $12.60       $0.42         $0.02
Roundup spray                                    Litres                1                3.00              $6.82       $20.46       $0.68         $0.03
Roundup spray-application                        Hours                 1                0.25              $8.00        $2.00       $0.07         $0.00
Rotary hoe                                       Hours                 2                1.25              $21.00      $52.50       $1.75         $0.09
Ripping                                          Hours                 1                1.25              $21.00      $26.25       $0.88         $0.04
Total                                                                                                                 $655.04      $21.83        $1.09
Planting
Potato seed                                      Tonne                 1                3.00             $635.00     $1,905.00     $63.50        $3.18
Treating seed- Rovral aquaflow                   Litres                1                1.20             $71.99       $86.39       $2.88         $0.14
Cutting seed (Tractor & tipper)                  Hours                 1                1.50              $9.00       $13.50       $0.45         $0.02
Cutting seed labour                              Hours                 1                1.50             $11.00       $16.50       $0.55         $0.03
Planting (Tractor & planter)                     Hours                 1                2.50             $20.00       $50.00       $1.67         $0.08
Planting labour (2 casuals)                      Hours                 1                2.50             $22.00       $55.00       $1.83         $0.09
Hilling up & urea application (tractor)          Hours                 1                1.00              $9.00        $9.00       $0.30         $0.02
Total                                                                                                                $2,135.39     $71.18        $3.56
Fertilising
Solubor                                           Kg                   2                0.20              $2.78        $1.11       $0.04         $0.00
Urea                                              Kg                   1               150.00             $0.37       $55.50       $1.85         $0.09
Foliar Zn                                         Kg                   1                0.20              $1.09        $0.22       $0.01         $0.00
Foliar Mg                                         Kg                   2                0.20              $0.58        $0.23       $0.01         $0.00
Q5                                               Tonne                 1                2.50             $330.00      $825.00      $27.50        $1.38
Tractor applications                             Hours                 2                0.25              $9.00        $4.50       $0.15         $0.01
Total                                                                                                                 $886.56      $29.55        $1.48
Irrigation
Setting out                                                           1                   -                  -        $65.00       $2.17         $0.11
Watering                                          Hour                15                3.26              $10.00      $489.00      $16.30        $0.82
Total                                                                                                                 $554.00      $18.47        $0.92
Crop Protection
Sencor (herbicide)                               Litres               1                 1.00              $65.54      $65.54       $2.18         $0.11
Rovral (fungicide)                               Litres               2                 2.00              $37.02      $148.08      $4.94         $0.25
Bravo (fungicide)                                Litres               10                2.60              $13.10      $340.60      $11.35        $0.57
Nitofol (insecticide)                            Litres               6                 0.70              $33.66      $141.37      $4.71         $0.24
IPM                                              Each                  -                  -                  -        $50.00       $1.67         $0.08
Tractor application                              Hour                 4                 0.25              $8.00        $8.00       $0.27         $0.01
Application by air                               Each                 8                   -               $22.00      $176.00      $5.87         $0.29
Total crop protection                                                                                                 $929.59      $30.99        $1.55
Harvesting/packing
Pulverize                                         Hour                 1                0.50              $9.00        $4.50       $0.15         $0.01
Harvesting (Tractor & Harvester)                  Hour                 1                7.50              $33.00      $247.50      $8.25         $0.41
Bag costs                                         Each                 1               600.00             $1.20       $720.00      $24.00        $1.20
Pallet costs                                     Tonne                 1               30.00              $1.00       $30.00       $1.00         $0.05
String costs                                      Roll                 1                3.50              $3.50       $12.25       $0.41         $0.02
Forklift costs                                   Hours                 1                2.50              $8.00       $20.00       $0.67         $0.03
Casual labour costs ( x 6)                       Hours                 6                7.50              $11.00      $495.00      $16.50        $0.83
Total harvesting/packing                                                                                             $1,529.25     $50.98        $2.55

                                                                                                                      $ per Ha   $ per Tonne   $ per Bag
(A) Total Potato Receipts                                                                                            $9,000.00     $300.00      $15.00

(B) Total variable costs                                                                                             $6,689.83    $222.99       $11.15

(A-B) Potato gross margin                                                                                            $2,310.17     $77.01       $3.85


Sensitivity analysis : Effects on gross margin ($ per Ha) due to changes in yield and price.

         Price ($ per 50 kg Bag)                                                            Yield (Tonnes per Ha)
                                                   15                 20                 25             30               35           40           50
                  $5.00                         -$5,190            -$4,690            -$4,190        -$3,690          -$3,190      -$2,690      -$1,690
                  $10.00                        -$3,690            -$2,690            -$1,690         -$690             $310        $1,310       $3,310
                  $15.00                        -$2,190             -$690               $810          $2,310           $3,810       $5,310       $8,310
                  $20.00                         -$690              $1,310             $3,310         $5,310           $7,310       $9,310      $13,310
                  $25.00                          $810              $3,310             $5,810         $8,310          $10,810      $13,310      $18,310
                  $30.00                         $2,310             $5,310             $8,310        $11,310          $14,310      $17,310      $23,310
                  $35.00                         $3,810             $7,310            $10,810        $14,310          $17,810      $21,310      $28,310
                  $40.00                         $5,310             $9,310            $13,310        $17,310          $21,310      $25,310      $33,310
                  $45.00                         $6,810            $11,310            $15,810        $20,310          $24,810      $29,310      $38,310
                  $50.00                         $8,310            $13,310            $18,310        $23,310          $28,310      $33,310      $43,310
                  $55.00                         $9,810            $15,310            $20,810        $26,310          $31,810      $37,310      $48,310




                                                                                                      Page 1
                                                                                                    Tractor costs




Tractor Costs
Fuel cost ($/litre)*       $0.30

                                                                                                                                                              Repair &
                                                       Usage        Trade-in     Depreciation   Fuel Cons                                      Total F & O   Maint (% of    Repair &      Total Tractor   Tractor Cost
         Item            New Price    Life (Years)   (Hours/Year)     Value         ($/hr)        (l/hr)            Fuel ($/hr)   Oil ($/hr)      ($/hr)     new price)    Maint ($/hr)   Cost ($/hr)**      ($/hr)***
MF 150 HP Tractor         $90,000          10            600         $26,100        $10.65          30                $9.00        $0.90          $9.90         75%          $11.25          $31.80           $21.15
MF 290 Tractor            $35,000          10            600         $10,150         $4.14         13.5               $4.05        $0.41          $4.46         75%           $4.38          $12.97            $8.83
JD 3130 Tractor           $40,000          10            600         $11,600         $4.73          18                $5.40        $0.54          $5.94         75%           $5.00          $15.67           $10.94
Potato Cutter             $8,000           20             20            $0          $20.00           0                $0.00        $0.00          $0.00         30%           $6.00          $26.00            $6.00
MF 590 Tractor            $35,000          10            500         $10,150         $4.97           9                $2.70        $0.27          $2.97         75%           $5.25          $13.19            $8.22
Harvester                 $65,000          15             90          $9,425        $41.17           0                $0.00        $0.00          $0.00         50%          $24.07          $65.24           $24.07
Potato Planter            $10,000          15             30          $1,450        $19.00           0                $0.00        $0.00          $0.00         50%          $11.11          $30.11           $11.11
Crate Tipper              $2,000           20             20            $0           $5.00           0                $0.00        $0.00          $0.00         30%           $1.50           $6.50            $1.50

*    Less diesel fuel rebate
** Excludes interest, registration, insurance and shelter allowance.
*** Fuel, oil and repairs & maintenance costs only (F.O.R.M)
Note: The methodology used to calculate the costs of potato machinery is based on the Tractor Performance Handbook (Rickman, 1992)

Trade-in Values for Tractors

Age of Tractor (Years)        %
           1               80.00%
           2               75.00%
           3               67.50%
           4               60.00%
           5               51.00%
           6               46.00%
           7               41.50%
           8               37.00%
           9               33.50%
          10               29.00%
          11               25.50%
          12               22.50%
          13               19.50%
          14               17.00%
          15               14.50%
          16               12.00%
          17                9.00%
          18                6.00%
          19                3.00%
          20                0.00%




                                                                                                       Page 2
1. Introduction

This template aims to assist farmers to make more informed production and business decisions. By using the gross margin gu
product, a farmer may be better able to identify areas within his/her business where the margins can be improved. It should b
adapted to the individual’s situation. Every farmer has different soil types, costs & returns, application rates, and so fort
production and crop selection. Further information and technical assistance is available from local DPI&F officers in your ar

2. What is a Gross Margin?

The Gross Margin (GM) is a financial yardstick used for comparing alternative farm enterprises. The GM is calculated by subtr
gross income received for the sale of the produce. Variable costs include land preparation, fertiliser, planting, seed, chemi
Gross income is that received before any agents commission, levies, freight or other selling costs are subtracted. A Gross Ma
fixed costs of the enterprise. These include rates, operators labour, insurance, interest, depreciation, administration, and
farm overheads (fixed costs). Gross margins for different cropping enterprises can only be compared if they use the same lan
case a more detailed analysis is required.

The Gross Margin is expressed in several ways; per hectare, per carton, or per tonne. Expressing the GM as $ per Megalitre
The basic calculation of a Gross Margin is as follows:

GROSS INCOME (Price x Yield)

Less:      TOTAL GROWING COSTS
          HARVESTING COSTS
          PACKING AND PACKAGING COSTS
          FREIGHT COSTS
          MARKETING COSTS

Gross Margins can also be very useful in the following situations:
• Selecting the most desirable (profitable, time efficient, water efficient, etc.) cropping enterprise or rotation.
• Comparing different farming methods eg. seed v. speedling, or trickle v. flood irrigation.
• Preparing cash-flow budgets.
• Estimating farm profit and loss.
• Calculating costs of production.
• Assisting with investment decisions (which enterprise? on or off farm?)

3. Assumptions

This Gross Margins is based on the following assumptions:

• Fixed or overhead costs are not included.
• Owner’s labour is not included.
• Casual labour is included, but the hours per hectare that are included can vary widely.
• Yields are based on the average for fertilisers, water and chemical inputs.
• Machinery operations are costed for a range of tractors that are required to carry out each particular operation. For examp

          Discing - Requires a 100hp Tractor that uses 22.28L/hour and takes approximately 2.5 hours to disc 1 hectare. The

                    Fuel Cost per hour - $10.03 (Assuming cost of fuel is 45c/L)
                    Oil Cost per hour - $1.50 (15% of fuel cost)
                    Repair and Maintenance per hour - $4.00
                    Total Cost per Hectare (x 2.5 hours) - $38.82

All machinery operations include fuel, oil, repairs and maintenance (F.O.R.M.). This process is followed for all machinery op
insurance, interest, and depreciation are not included.

• Fertiliser and crop protection costs are envisaged to be ‘typical’ for the region in the average season to produce average
• Fertiliser and crop protection costs are envisaged to be ‘typical’ for the region in the average season to produce average
• Crops grown with irrigation have been costed accordingly where this is seen to be the most common practice.
• Input costs are based on retail prices at the time of preparation.

4. Using the Template

Coloured cells
There may be a number of coloured cells in the template provided. The yellow cells indicate where you should enter data. The

Making Data Entries
Data entry in the package is simple. Numbers are entered into the yellow data cells. These figures will be used in formulas t
once the required data has been entered into the appropriate cells. When entering data you can press Enter to store the data

Sensitivity Tables
At the very bottom of the template program you will find two sensitivity tables. One is labelled Yield, and the other Price.
enter data in these tables so that you might see how price and yield changes will effect the gross margin. These tables can b
might have. High ‘sensitivity’ might refer to a large change in gross margin derived from a small change in price or yield. B
risk involved in growing of a certain crop. A crop’s gross margin may be sensitive to one, both or none.

5. Definitions of Headings Used in the Template

Package - Generic term for Cartons, Cases, Trays and Tonnes.

Yield/Ha - Cartons, Cases, Trays or Tonnes produced per hectare.

$/Package - Price received, or expected price, per package. Also represents a break up of costs per package.

$/Hectare - Represents the income per hectare, or cost per hectare.

Operations - Number of times a certain farm machinery operation is carried out.

$/Operation - Represents Fuel, Oil, Repairs and Maintenance (F.O.R.M). These
individual components provide the running costs of the machinery.

Units/Ha - Kilograms, Litres or Number used per hectare.

$/Unit - Represents cost per kilogram, litre or number.

Applications - Number of times a chemical is applied to the crop over its life.

ML/Ha - Amount of water in Megalitres used to irrigate the crop over its life.

$/ML - Cost of water used to irrigate crop.

Hours - Number of man hours required to grow the crop.

$/Hour - Value of one man hour (casual wages)

Metres - Total length of equipment used on one hectare.

$/Metre - Cost per metre of irrigation equipment.

Packages/Hr - The number of cartons, cases, trays or tonnes picked in one man hour.

$/Pallet - The cost of transporting one pallet to a selected destination. Prices vary depending on wether you require refrigerat

Pallets - Number of pallets required to transport the yield of one hectare.
Pallets - Number of pallets required to transport the yield of one hectare.

6. Key Notes

Some trade names are used for the purpose of providing specific information and because growers may be unfamiliar with ac
does not constitute a guarantee, warranty or endorsement by the QDPI&F.

Application rates and frequencies are those found to be most commonly applied (at the time the template was prepared) by pr
Application rates and frequencies are not recommendations by the QDPI&F. Producers should seek further advice regarding
cisions. By using the gross margin guideline, to understand what it costs to grow and sell an agricultural
margins can be improved. It should be emphasised that this template is only a guide and should be
 , application rates, and so forth. It should be used as a framework to determine your own costs of
 om local DPI&F officers in your area.



prises. The GM is calculated by subtracting all variable costs directly incurred by the enterprise from the
n, fertiliser, planting, seed, chemicals, casual labour, picking, packaging, freight, and selling expenses.
ng costs are subtracted. A Gross Margin is not a measure of farm profit as it does not take into account
epreciation, administration, and so forth. You may consider the Gross Margin as a contribution towards
e compared if they use the same land, permanent labour, and machinery resources. If this is not the


 pressing the GM as $ per Megalitre can also be useful as water can be a limiting factor of production.




erprise or rotation.




 ch particular operation. For example,

ately 2.5 hours to disc 1 hectare. Therefore,




ess is followed for all machinery operation costing. The fixed costs of ownership such as registration,


 rage season to produce average yield and quality.
 rage season to produce average yield and quality.
most common practice.




ate where you should enter data. The red cells are locked and secured against tampering.


 e figures will be used in formulas to calculate the $/Package and $/Hectare. These will be calculated
 ou can press Enter to store the data in that cell, or simply move the cursor off that cell.


 lled Yield, and the other Price. You will notice there are yellow cells for data entry. You are able to
 e gross margin. These tables can be used as a tool to observe the effect a fall or rise in price and yield
  small change in price or yield. By knowing the sensitivity you are able to crudely measure some of the
 both or none.




of costs per package.




 ing on wether you require refrigerated transport, or freight can be sent hot.
e growers may be unfamiliar with actual chemical/active ingredient names. Mention of a trade name


me the template was prepared) by producers and/or those recommended by chemical producers.
hould seek further advice regarding chemical and fertiliser rates if they have any queries.

				
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