Key points

• Calculate the likely profitability of realistic soil amelioration options before starting
• Consider how much of a yield boost is needed to recover costs and how long this will take
• Consider the risk and financial consequences of a less-than-expected yield uplift from amelioration
• In some situations, the yield uplift required to recover costs will be too high to justify amelioration

There is an ever-growing list of ways to ameliorate soil constraints. It can be difficult working out which methods are best for your soils, machinery and situation, even before assessing profitability.

Ranking Options for Soil Amelioration (ROSA), a decision-support tool – even if you use its default parameters – is a good starting point to help work out or eliminate your options. ROSA covers the main amelioration options including claying, deep ripping (more than 40 centimetres), gypsum to address dispersive soil, liming to address topsoil acidity, liming to address subsoil acidity, soil mixing (less than 40cm), wetting agents and combinations of them.

It includes indicative costs for these operations. ROSA estimates yield potential after fixing both single and multiple constraints for the next 10 years. ROSA then ranks which options are most profitable. (Contact the Western Australian Department of Primary Industries and Regional Development for a copy of ROSA).

Some situations are easy to assess. Ameliorations such as deep ripping a compacted sand can give big yield uplifts and profit boosts at low risk. These ‘no-brainers’ tend to be the ones that are highlighted. But other soil ameliorations can result in smaller, even marginal, improvements.

Every situation is different. The best way to assess profitability is to calculate costs and potential revenue for your situation and your business. In its simplest form, this means estimating revenue (yield) uplift from amelioration and subtracting calculated costs.

While there are guides and examples to yield uplifts and amelioration costs, such as Table 1, they should be treated as guides and not used in place of your costings, what you know, have seen and read about locally, nor even your gut feeling. Guides are a starting point if you are gauging these numbers for the first time. Local experience or experience on your farm is far more valuable.

Table 1: Cereal crop yield response  to amelioration (tonnes/hectare)  on water-repellent soil.

Source: Adapted from Table 5 in Davies et al. 2019.

* Very high response on an extremely repellent site.

Yield uplift

Even where the likelihood of success from amelioration is high, the biggest unknowns when calculating the profitability of soil amelioration are the size and longevity of the yield uplift. There are broad assumptions available, for example Table 1, but yield uplift will be specific to your soil type, farm and amelioration capability.

The yield uplift you predict from amelioration needs to be realistic based on your ability to ameliorate your soil types. For instance, liming and ripping an acid, compacted, coloured deep sand can increase production markedly. It is unrealistic to expect the same yield uplift on an acid, pale sand that holds less water or on a more neutral-pH deep loam where roots are already able to get to depth.

Costs

Costs are easier to quantify than yield uplift but can vary depending on how they are calculated. It is common to hear generalised costs such as deep ripping costs $40 to $60 per hectare, whereas your true cost could be markedly different.

Costs should consider all equipment, ameliorants such as lime, labour and parts for the amelioration operation itself, and any pre and post-amelioration work such as rock/stump picking, levelling and rolling. Machinery costs need to cater for depreciation, replacement parts such as tynes, points and discs, and machine repair and maintenance.

Additional costs that are sometimes forgotten include:

• working dry uses more fuel and wears out equipment faster;
• topsoil slotting plates added to rippers increase drag and fuel consumption;
• points wear out more quickly when working faster; and
• tidying up paddocks, which usually takes longer than expected.

One way to gauge the maximum cost is to use a contractor’s rate. To run a profitable business, contractors will include all the costs you should include, plus their margin. However, there may be additional costs to you for work the contractor does not do, such as rock picking or crushing.

Costs are necessary to work out what yield uplift is required to get an acceptable return on the investment. How well costs are calculated can make a big difference to profit expectations from soil amelioration – as well as willingness to undertake amelioration.

The yield uplift required to break even may be deemed unachievable, or uncertainty around amelioration longevity could make the investment riskier. If it is going to take many years to earn back what you have spent, there may be better amelioration practices or places money could be invested.

Table 2: Rough guide to costs and amelioration longevity.

Source: Data compiled from Davies et al. 2020, GRDC 2019 and grower experience

Risk

One key risk is not knowing or lack of confidence about yield uplift and profitability. Profitability varies between regions, seasons and soil types. It depends on capital investments in machinery, which in turn depends on how many hectares those costs can be amortised over.

Profitability is more unpredictable in marginal and riskier areas, such as those prone to frost. Properly calculating costs and assessing suboptimal yield uplift scenarios will help gauge the riskiness of the operation.

There are also risks with the activity itself. More complicated activities such as spading, or poorly planned activities, have a higher risk of mistakes and reduced yield uplift. Poor amelioration can cause yield penalties for many years, significantly reducing or eliminating the profitability of that amelioration activity.

Quick versus detailed calculations

To assess the likely economic benefit from ameliorating soil constraints, the simplest calculation is:

Quick calculations can be suitable for ameliorations that have a high likelihood of making money at low risk, such as deep ripping through a compacted layer in deep sand.

For situations where the benefit is less obvious, it is worthwhile putting in the effort to properly calculate all the costs required for amelioration. The margin can change significantly depending on how well costs are calculated and the complexity of the operation. Using a contractor rate may overestimate the costs, while guessing at the costs can underestimate.

Hidden costs or an unrealistic yield uplift can mean payback takes longer than expected. It is also a good idea to examine the consequences of a less-than-expected yield uplift.

Example calculations: liming, ploughing and rolling

The following comparative examples calculate profitability for liming, ploughing and rolling, using two degrees of cost breakdown. Both examples assume the grower owns and will operate the equipment.

Simple

This calculation indicates a profit of $16/ha  with the benefit starting in year one. The yield uplift required to break even is 0.5t/ha.

If yield uplift was only 0.3t/ha, the margin deficit in year one would be $52/ha and yield uplifts in year two and beyond would be needed to recover costs and make the amelioration profitable.

Detailed calculation

This calculation considers a five-year crop rotation and expected yield uplift each year. It calculates amelioration cost by breaking down each component (liming, ploughing and rolling) into their genuine costs.

The total cost of spreading lime and incorporating using a modified one-way plough then rolling is $164.49/ha. Based on the expected yield uplift in year one, the cost of amelioration outweighs returns in year one but is recovered after the second harvest with returns of approximately $150/ha. To break even in year one, there needs to be a 0.63t/ha yield increase. The total benefit over five years is approximately $475/ha, or 189 per cent.

Costs