New Arable Tool Aims To Find True Costs

Arable farmers must understand their ‘true cost’ of production to ensure continued financial viability - and Federated Farmers has a new spreadsheet designed to do exactly that.

The cost of production spreadsheet offers growers a unique tool with which to analyse all relevant costs associated with growing ryegrass and white clover seed crops and running the farm.

It even allows for a return on investment.

Its release coincides with a recent Foundation for Arable Research (FAR) gross margin analysis for ryegrass seed production.

That analysis showed a break-even result on seed production but a profit from associated lamb trading.

"Herbage seed production is a risky business. Farmers deserve better than break even" says Federated Farmers Herbage Seed chair, John McCaw.

While the Federated Farmers spreadsheet includes lamb grazing income, McCaw concedes that not all arable farmers are willing or able to trade lambs.

"Grazing lambs requires capital, labour, and infrastructure quite separate to that of seed production.

"Having ryegrass in the system facilitates lamb grazing but this should not be used to justify a lower seed price to growers."

While gross margins have their place, McCaw is concerned they are not the right tool in this instance.

"It’s all about the cost of production," says Methven-based McCaw.

"Gross margin analysis is simplistic and useful only for considering one crop option against another."

"Each crop must carry its fair share of the unseen cost of running a farm including wages of management, rates, insurance, and administration."

Being able to allocate a share of all those ‘other’ costs (approximately $1300 per hectare) to an otherwise simple gross-margin assessment was a lightbulb moment for McCaw.

" I’ve been doing gross margins on our farm for 20 years, thinking I understood our cost of production. I wish I’d had this tool earlier - I think we would be farming very differently now if we had."

McCaw suspects that the plant breeders’ focus on herbage production has come at the cost of seed yield.

Later heading varieties often yield less seed and require additional water and fungicides. Yield gains have plateaued while grower prices have languished. "It’s been happening over many years but now production costs have risen steeply, and we have a ‘cost of living crisis’ in the herbage seed industry."

The extent to which prices must increase to return growers to profit is of concern to both growers and merchants. We need a reset not just an inflation adjustment. The question is how to achieve that without pricing ourselves out of the international market.

Rather than demanding a certain price per kilogram, Feds are looking to raise awareness of the ‘true cost’ of seed production.

The spreadsheet available below or at fedsnews.co.nz helps to achieve that aim by ensuring both sides have the information they need to make an informed decision.

Arable tool kit gross margin

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