Profitability and economics of cropping

Abstract

The data requirements for an assessment of the profitability of alternative farm management systems are the technical rates of substitution of one enter rise for another, and their price ratios. In a mixed arable system it is necessary to determine relative yields of cash crops, stocking rates and stock performance, and to assess the requirements of these enterprises for variable and fixed resources. While the basis of analysis would usually be average yields and current or expected prices, it is often desirable to explore the effect of variation in the critical parameters. Three methods of analysis are available, partial budgeting, including gross margins analysis, full comparative budgeting, and mathematical programming. This paper is limited to a brief review of the relative profitability of cash crops under current prices, using gross margins as the basis of analysis. In most situations, gross margins per acre are of first importance, although, where operating capital or labour are most limiting, then it will be more appropriate to do the analysis iIi terms of gross margin per unit of capital or labour. These coefficients are usually more difficult to determine.