Primary farm business and sheep industry benchmarks:
The table (below) lists the questions answered and methodology behind these industry benchmarks, and a guide to performance using publicly available references. However, for best results, benchmarking should be done by a service provider applying a standard methodology across a large group of participating farms. Various agricultural consultants provide this service.
Whole Farm
Benchmarks |
Question Answered |
Methodology |
Guide to Performance* |
|
Net Profit Before Tax
|
Will the profits meet your drawing and provisioning requirements?
|
Earnings before interest, lease payments and tax
|
>$90,000 = strong1
|
|
Return on Assets Managed
|
Is the farm meeting its operational efficiency targets?
|
Earnings before interest, lease payments and tax
÷
Total assets under management
|
>4% = strong2
|
|
Return on Equity
|
Is the farm meeting your wealth creation targets?
|
Earnings before tax
÷
Net assets under management
|
>4% = strong3
|
|
Interest Cover
|
Is the farm generating enough profits to meet debt servicing obligations?
|
Earnings before interest, lease payments and tax
÷
Interest and lease payments
|
3 = strong
|
|
Peak Debt
|
Will your finance arrangements cover your working capital requirements?
|
Lowest working account balance for the year
|
N/A
|
|
Expense Ratio
|
Are you generating enough income to meet your ongoing expense needs?
|
Profit before interest and tax
÷
Gross income
|
>30% = strong2
|
* These are provided as a guide only and will vary depending on rainfall (total and seasonality), growing season etc.
1 Farm Management 500 (2006). Business Health Indicators for Professional Farmers.
2 Holmes Sackett and Associates (2006). AgInsights 2005 – Knowing the Past: Shaping the Future. Holmes Sackett and Associates Pty Ltd.
3 Department of Primary industries (2005). Monitor Farm Project 2004/05. The State of Victoria, Department of Primary Industries.
| Enterprise Benchmarks |
Question Answered |
Methodology / 100mm rainfall |
Guide to Performance* |
|
Productivity
|
Is this enterprise as productive as it should be?
|
Quantity of product produced
÷
Grazed hectares
|
>5kg clean wool/ ha/100mm rainfall = strong2,3
>15kg lamb dwt/ ha/100mm = strong2,3
|
|
Price Received
|
Are you getting the price for this product that you should?
|
Gross income for the product
÷
Quantity of product produced
|
N/A
|
|
Cost of Production
|
Is the cost of producing this product more than it should be?
|
Total expenses
÷
Quantity of product produced
|
<$6.50 per kg clean wool = strong2
<$2.50 per kg lamb dwt = strong2
|
|
Stocking Rate
|
Are you running as many sheep as you should be?
|
Stock numbers as DSEs
÷
Grazed hectares
|
>2.0 DSE’s/ha/100mm = strong for wool.2
>2 DSE’s/ha/100mm = strong for prime lamb.2
|
|
Gross Margin
|
Is this enterprise as profitable as it should be?
|
Enterprise Gross Margin
÷
Grazed Hectares
|
>$40/ha/100mm = strong for prime lamb.2,3
>$40/ha/100mm = strong for wool flocks.2,3
|
* These are provided as a guide only and will vary depending on rainfall (total and seasonality), growing season etc.
1Farm Management 500 (2006). Business Health Indicators for Professional Farmers.
2Holmes Sackett and Associates (2006). AgInsights 2005 – Knowing the Past: Shaping the Future. Holmes Sackett and Associates Pty Ltd.
3Department of Primary industries (2005). Monitor Farm Project 2004/05. The State of Victoria, Department of Primary Industries.
Examples of Secondary Enterprise Benchmarks
Wool
|
Lamb
|
|
Price as a % of micron indicator
|
Weaning %
|
|
Kg clean/adult shorn
|
Sale weight
|
|
Average adult fibre diameter
|
kg lamb/DSE
|
|
% DSEs as wethers
|
DSE/labour unit
|
|
Weaning %
|
Enterprise size
|
|
DSE/labour unit
|
|
|
Enterprise size
|
|
Dry Sheep Equivalent (DSE) ratings:
For DSE ratings for a range of livestock and livestock classes, see tool 11.1 in Healthy and Contented Sheep.
|
