Work out gross margin per acre instantly with clear inputs, formula shown and shareable results.
Gross margin is revenue minus variable cost and is the right measure for comparing crops on the same land, because fixed costs are unchanged by the choice. Straw, stover and other by-product income belongs in revenue. A benefit-cost ratio below about 1.5 leaves little buffer for a bad season.
Gross margin
Gross margin = yield x price + by-product income - variable cost
Benefit-cost ratio
BCR = gross revenue / variable cost
Allocating fixed costs such as land, buildings and machinery ownership between crops is arbitrary. Gross margin isolates the decision that is actually being made.
Anything that changes with the crop or area grown: seed, fertiliser, chemicals, casual labour, fuel, contract operations, irrigation power and marketing charges.