Why use this calculator
Yield alone tells you nothing about whether a paddock paid. A five tonne crop on expensive country with a heavy input program can return less than a three tonne crop grown cheaply, and only a gross margin shows it. Working in tonnes per hectare and dollars per tonne, the way Australian grain is actually traded, this puts the four numbers that matter in front of you at once: what the paddock produces, what it earns after cartage, what it returns above variable costs, and the yield you need just to break even.
That break-even figure is the one that changes behaviour. Once you know the paddock needs two and a half tonnes to cover its costs, decisions about a late nitrogen application, a fungicide, or whether to cut a failing crop for hay stop being arguments about agronomy and become arithmetic about risk.
How to use it
- Enter the cropped area from your farm mapping software rather than the title area, since headlands and tree lines are not harvested.
- Enter the yield you expect in tonnes per hectare, taken from your yield map history for that paddock, a hand cut and thresh sample, or a water limited estimate from your stored soil moisture and growing season rainfall.
- Enter the delivered price per tonne for the grade you expect at the delivery point you will use, from today's bids or your contract.
- Enter cartage and levies per tonne, which convert that delivered price into a farm gate price.
- Enter the variable costs for this paddock, meaning seed, fertiliser, chemical, fuel, crop insurance and any contract operations.
- Enter an overhead allocation per cropped hectare if you want a figure closer to profit, or leave it at zero for a conventional gross margin.
What each result means
- Total production
- Tonnes the paddock should deliver, which drives storage, cartage, delivery slots and any contract you have already written.
- Farm gate price
- What a tonne is worth once cartage and levies are taken off the delivered bid. Always compare contracts on this basis.
- Gross income
- Total farm gate value of the crop before any costs, useful for cash flow timing rather than for judging profitability.
- Income per hectare
- Farm gate revenue each hectare generates, the figure to compare against the cost of growing it.
- Gross margin per hectare
- Income less variable costs. The standard measure for comparing crops and paddocks on equal terms.
- Break-even delivered price
- The lowest delivered price per tonne that covers variable costs, overheads, cartage and levies at your expected yield. Bids below it lose money.
- Yield buffer above break-even
- How many tonnes per hectare the yield can fall short of your estimate before the paddock stops covering its costs, or how far short it already is.
- Total gross margin
- What the whole paddock contributes toward overheads, finance and drawings once its own costs are covered.
- Operating margin per hectare
- Gross margin after a share of farm overheads, a much closer estimate of what the paddock actually earns.
- Break-even yield
- The yield needed at this price to cover costs. Compare it against your poorest seasons to see the real risk.
- Cost of production
- Your cost per tonne grown. Any contract price below this loses money no matter how attractive the headline looks.
- Gross margin per acre
- The same margin expressed per acre for comparison with older farm records or overseas benchmarks.
The formula
Farm gate price per tonne = delivered price minus cartage and levies
Total production in tonnes = area in hectares x yield in tonnes per hectare
Income per hectare = yield x farm gate price
Gross margin per hectare = income per hectare minus variable costs per hectare
Operating margin per hectare = gross margin minus the overhead allocation per hectare
Break-even yield in tonnes per hectare = (variable costs + overheads) divided by the farm gate price
Cost of production per tonne = (variable costs + overheads) divided by the yield in tonnes per hectare
How this number is used in practice
Cost of production per tonne is the single most useful number a grower can carry in their head through a marketing season. It converts a wall of daily price movements into one question: is this bid above my cost of production or not. It also sets a sensible limit on forward selling.
Contracting grain you have not grown at a price below your cost of production locks in a loss, and contracting too high a share of an unharvested crop in a district where a dry spring is common is how growers end up buying grain back at a higher price to fill a contract.
Many advisers suggest limiting early forward sales to a share of the most conservative yield you would expect, and lifting that share as the season and the crop become more certain.
Break-even yield changes what you do in the paddock in spring. If the crop is clearly going to fall short of break-even, the arithmetic on a late fungicide or a top up of nitrogen changes, and the case for cutting it for hay, grazing it or making silage gets stronger while the crop still has feed value.
That decision has a window measured in weeks. Working it out in September, with a realistic yield estimate and the hay price actually on offer in your district, is a much better process than realising at harvest that the header cost more to run than the grain was worth.
Gross margins vary enormously by district and season and should never be lifted from a published table without adjustment. A canola gross margin in a high rainfall zone with reliable spring finishes looks nothing like one in a low rainfall district where the same crop is a risk play.
Cartage is a bigger share of the price the further you are from port, so an inland grower and a coastal grower looking at the same delivered bid are not looking at the same farm gate return. Use your own paddock records, your own freight rates and your own input costs, and rebuild the numbers each season rather than carrying last year's forward.
Worked examples
250 ha of wheat at 3.2 t/ha, $360 a tonne delivered less $25 cartage, $560 variable costs and $300 overheads
800 t produced, $512 a hectare gross margin, $128,000 total and a break-even yield of 2.57 t/ha
180 ha of canola at 1.9 t/ha, $780 a tonne less $30 cartage, $700 variable costs and $320 overheads
342 t produced and $725 a hectare gross margin, with a cost of production of $536.84 a tonne
A dry season: 400 ha of barley cutting out at 1.6 t/ha, $300 a tonne less $28 cartage, $520 variable costs already spent
A gross margin of negative $84.80 a hectare, because the break-even yield was 2.94 t/ha
When people use it
- Comparing gross margins between wheat, barley, canola and pulses on the same paddock
- Setting a floor price for forward contracts using your own cost of production
- Deciding in spring whether a failing crop is worth taking to harvest or cutting for hay
- Building a paddock by paddock cropping budget for the bank or a farm business plan
- Testing whether an extra input such as a late nitrogen application can pay for itself
Tips
- Always work on a farm gate price. Cartage and levies can be ten per cent of a delivered bid and they come out of your return, not the buyer's.
- Know your cost of production per tonne before the marketing season starts. It turns price watching into a simple yes or no.
- Limit early forward sales to a share of a conservative yield estimate, then add to them as the season becomes clearer.
- Rebuild the budget each season. Input costs and freight move enough that last year's numbers quietly mislead.
- Compare crops on gross margin per hectare, not on yield or on price, because the highest yielding crop is often not the most profitable.
- Run the low yield row of the table before you commit inputs. A committed cost in a failed season is the hardest money you will ever spend.
What it assumes, and where it stops being accurate
- Assumes one grade and one price for the whole crop. Downgrades from weather damage, screenings or protein shortfalls will move the average price received.
- Assumes the yield entered is realised. This is an estimate before harvest, not a measurement, and a yield estimate made before flowering is particularly uncertain.
- Excludes the value of stubble, grazing, the rotational benefit to the following crop and any nitrogen left behind by a legume.
- Not accurate where a crop is cut for hay, grazed or fails, since income then comes from a different market entirely with different costs.
- Assumes overheads spread evenly across cropped hectares. Land costs, finance and machinery are lumpy and are not really per hectare costs.
- Ignores storage costs, interest on carried grain, price movements after harvest and the timing of payment, which all affect the return actually banked.
Terms used on this page
- Gross margin
- Income from an enterprise less the variable costs of producing it, the standard basis for comparing crops.
- Farm gate price
- The delivered price less freight, receival and levies, meaning what the grower actually receives per tonne.
- Cost of production
- Total costs divided by tonnes produced, the price below which a contract loses money.
- Break-even yield
- The yield at which income exactly covers costs at a given price.
- Basis
- The difference between a local cash price and the futures price, driven by freight, storage and local supply and demand.
Questions people ask
- What is the difference between a gross margin and a profit?
- A gross margin is income less variable costs, which are the costs that change with the decision to grow that crop. Profit also subtracts overheads such as machinery, labour, insurance, finance and land costs. Gross margins compare enterprises fairly, but only a whole farm budget tells you whether the business made money.
- How do I estimate yield before harvest?
- Use your own yield map history for that paddock as the starting point, adjusted for the season. A water limited estimate based on stored soil moisture plus growing season rainfall gives an upper bound. Closer to harvest, hand cut and thresh a measured area in several spots and average them.
- Should I use a delivered price or a farm gate price?
- Enter the delivered bid and the cartage separately so the calculator works out the farm gate price for you. Comparing a delivered bid at one site with a farm gate offer at another without adjusting for freight is one of the easiest ways to accept the worse of two prices.
- Why is my break-even yield so high?
- Either the input program is expensive relative to the price, or the price is low, or the overhead allocation is heavy. Break-even yield rises as costs rise and falls as price rises, which is why locking in a price early changes the risk of a high input program as much as the agronomy does.
- Does this work for hay, cotton or sugar?
- The structure works for any crop sold by weight if you enter the right units and price. Hay is usually traded in tonnes and works directly. Cotton is traded in bales and sugar on a sugar content basis, so both need their own conversions before the figures here mean anything.
- Should I include my own labour and machinery?
- In a conventional gross margin, fuel and contract operations are variable costs while owned machinery, depreciation and your own labour sit in overheads. If you want the paddock to carry its full cost, put a realistic machinery and labour allocation into the overheads field.
Use this with
Crop Yield Estimator answers one part of the question. These pick up where it stops: Cost Per Hectare Calculator, Harvest Yield Estimator, Seed Rate Calculator, Fertiliser Application Calculator and Break-Even Calculator.
Where these figures come from
Figures and rules on this page follow Australian law and ATO guidance.
- Grains Research and Development Corporation. Farm business management, gross margin and risk management resources
- ABARES, Department of Agriculture, Fisheries and Forestry. Australian crop production, farm performance and commodity forecasts
- Primary Industries and Regions South Australia. Farm gross margin and enterprise planning guide for broadacre crops
Crop Yield Estimator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.