How to use this calculator
- Enter or choose crop area.
- Enter or choose area and figures per.
- Enter or choose yield.
- Enter or choose price per unit.
- Enter or choose other output (optional).
- The gross margin for the crop updates as you type. Use Copy result or Share to keep it.
Method
Output = Yield × Price + Other output; Gross margin = Output − Variable costs; Total = per-area figure × Area
- Variable costs
- costs that rise and fall with the crop area
- Area
- crop area in the chosen unit
Worked example
- Output = 6 t × $220 = $1,320/ha; variable costs = 120 + 260 + 90 + 110 + 80 + 40 = $700/ha.
- Gross margin = 1,320 − 700 = $620/ha (46.97% of output).
- For 20 ha: $12,400.
The crop leaves a gross margin of $620 per hectare, or $12,400 across 20 ha, to cover fixed costs and profit.
What the result means
A positive gross margin contributes to fixed costs (rent, depreciation, permanent staff) and profit. Compare margins per hectare when choosing between crops.
Assumptions and limits
- All figures are per the same area unit.
- Fixed costs such as rent, depreciation and overheads are excluded by definition.
- Gross margin is not profit; it ignores fixed costs and the farmer’s own labour.
Questions
What is the difference between gross margin and net profit?
Gross margin subtracts only variable costs. Net profit also subtracts fixed costs such as rent, machinery depreciation, interest and overheads.
Is my own labour a variable cost?
Usually not; casual or contract labour hired for the crop is. Keep your own time as a fixed cost or account for it separately.