DATA & RESOURCES
We have brought together some publicly available benchmarking data for you to begin to gauge your business profitability against others.
Please note we have categorised the data into different farming enterprises and regions, however care must be taken when comparing your results, as you may be comparing "apples" with "oranges".
The State-wide average Return on Capital (ROC) of 8.2% was the highest in recent years and was welcomed off the back of the 2012-13 result of 1.1% ROC. The Top 25% of surveyed businesses had a result of 15.3% which was indicative of capitalising on a good season and prices. This result is roughly three times higher than what was achieved in 2012 (BankWest).
The following is a set of observations arising from my involvement first in surveying grazing enterprise profitability in western Queensland in the 1980s, and subsequently in performing options analysis for northern Australian beef businesses until 2011.
Another lesson learned from ten years of data was the importance of one really good or bad decision in determining full term ranking within the group.
The best explainers of comparative performance were the gross margins, the management practices that went to make them, and the obvious judgement and application of the owners.
This modelling has shown almost universally that in North Queensland the profit centre of the herd is the steers. Another way of looking at this is to say that the market price for weaner steers falls short of what they are really worth to the breeder as stores for his own growing and fattening operation... Read more (Bill Holmes, Future Beef)
Long term trends for farm costs and income for Northern NSW show that cost trends have more than doubled from 1989 to 2012. Income generated for the same period has also increased at a similar rate. This analysis indicates that farmers now spend twice as much to maintain the same profit margins they were a generation ago. 'Rolling a much bigger dice' at the start of the season has put pressure on today’s farmers to deliver the income needed to offset higher costs (Phil O'Callaghan, GRDC)
Since 2007 farm income in Northern NSW varied from $600,000 to $2,000,000, confirming the importance of managing income between seasons when maintaining financial health. Fluctuating income and related losses in low income years require farms to hold financial buffers including equity in fixed assets such as land, or in liquid assets such as Farm Management Deposits or off-farm investments (Phil O'Callaghan, GRDC).
"A recent study conducted by ORM for the Birchip Cropping Group’s Grain & Graze II project, used Ag Profit data and analysis to illustrate how benchmarking can help individual businesses understand both their own performance and that of their enterprise mix.
This comparative study focussed on the role of livestock in cropping systems, and therefore used livestock income to determine the subsets for comparison" (Phil O'Callaghan, GRDC).
Data analysis from southern Australia indicates a number of general trends (Phil O'Callaghan, GRDC):
- Cropping every paddock every year is less profitable than ‘spelling’ some paddocks.
- Low income years result in bigger losses when you’re trying to ‘buy your way out’ of problem paddocks.
- Be generous with inputs to your good paddocks.
- Livestock can complement cropping.
- Good management equals good profit. Cost efficiency is a measure of management and is more important than scale and farming system.
Red Sky have benchmarking data sets available for retrieval. They have over 350 diary farms and over 90 sheep and beef farms in the database. Their software (Red Sky):
- develops annual accounts into relevant and useable management information;
- develops annual budgets and business plans;
- provides benchmarking measures for continuing business improvement
- allows individuals to form and join groups over the internet to share data e.g. a 'discussion group' of like minded farmers could decide to share their individual data to look intensively at their comparative performance; and
- efficiently processes complex financial information and reduces it to readily understandable performance measures that make business decisions easier for farmers.
Understand water use efficiency and how benchmarking can be used to compare performance indicators or management process
"Calculating recognised water use indices and irrigation efficiencies will give you a standard calculation which can then be compared spatially (to another field, another farm, another region, another country) or over time (season, years). The advantage of using standard performance measures is to ensure meaningful comparisons." (More Profit Per Drop)
"Do you want to compare your sheep & beef farming business? Are you leaving money on the table?
The farm benchmarking web tool is the first step to providing a sheep and beef farm benchmarking toolset that allows you to select farm data relevant to your situation. It aims to simplify existing spreadsheet and quintile analysis." (Beef + Lamb NZ)