Dollars and sense: What we look at in our case study economic reports
The Soils For Life team provides professional assessment of properties that are using regenerative landscape management practices. Our case study program considers the quadruple bottom line of each property by looking at the effects of regenerative agriculture practices on a farm’s production, economics and ecology as well as the social implications of these practices.
Preparing an economic report
To prepare our economic reports, Soils For Life conducts a detailed analysis of each case study farm to investigate how the business has performed over time. Using data from Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), we compare the farm to others in the same industry and climate. Case study participants supply production records and Profit and Loss statements for a 10-year period. We also interview business managers to understand why they do what they do, how they make decisions and what changes they have made. The numbers are crunched by an agribusiness consulting firm to generate indices which make the business performance clear, whilst still protecting the privacy of case study families. This allows like for like comparisons.
Our four key measures
There are four key measures we use to assess business performance.
1. Production and Income
A great way to get an initial picture of activities on a farm is to assess how much was produced and what that earned. By looking at the proportion of income generated by each enterprise we can see what is keeping the business afloat.
Examining expenses allows us to understand what is driving the profitability of farm activities. This is a topical issue in agriculture today with some producers focusing on reducing costs wherever possible and others making significant investments to build resilience and improve outputs. A number of successful farmers have applied both strategies at the same time. To the extent possible we break costs down on a per enterprise basis.
3. Gross Margin
Gross Profit Margin shows how much revenue you keep after accounting for costs. It is an important measure because it indicates how much room there is for mistakes or other things that can’t be controlled. Gross margin also reflects the capacity of a business to make investments in new capital items or other longer term initiatives.
4. Business Profit
At the end of the day this is the bottom line of business performance. Business profit is calculated as total revenue less total direct and overhead costs, like almost all our other measures it is represented on a per hectare basis. Ultimately, profit allows a farm business to provide income on an ongoing basis.
Read about how land managers have improved each of these business criteria on their farms in latest case study reports. You can search them by state or sector here.
Are you farming using regenerative agriculture practices? Why not consider applying to be a case study.