Australian grain growers could learn a thing or two from the “top 20 per cent” of growers and lift profitability, as recent research findings showed how top growers mix low risk with high margins.
The study commissioned by the Grains Research and Development Corporation (GRDC) – used a minimum of three and up to five years of benchmarking data from more than 300 cropping businesses nationally to identify key profit drivers.
It found that four primary profit drivers separated the top 20 per cent of grain businesses – which consistently retain 30 per cent of turnover as net profit – from average businesses in the GRDC’s southern region (Victoria, South Australia and Tasmania).
These drivers are gross margin optimisation; low-cost business model; people and management; and risk management.
According to Tony Craddock from Rural Directs, the organisation that led the study, gross margin optimisation is all about managing yield cost-effectively.
“The top 20 per cent are often generating 10 per cent more crop yield per hectare from a common or lower overall investment into variable costs per hectare,” Mr Craddock said. This enabled them to generate gross margins 15-20 per cent stronger than average.
Developing a low-cost business model also opens up profitability.
“The top 20 per cent maintain a 0.7 to 1.0 machinery investment to income ratio while also generating more than $600,000 of turnover per full time equivalent (FTE) labour unit,” Mr Craddock said.
“The average businesses often had a machinery investment to income ratio of more than 1.0 to 1.0 and the average level of turnover per FTE is less than $450,000 across the full dataset.”
Learnings from the project are being detailed at GRDC’s Opportunity for Profit workshops that will be conducted throughout 2018. Check for seesion near you at: https://grdc.com.au/events/list/2018/03/opportunity-for-profit-workshop
