A risk-averse, disciplined approach to expenditure on farm machinery and labour has helped position South Australian growers Todd and Jeff Niejalke among Australia's top croppers.
This is the finding of GRDC-invested research that identified the Niejalkes in the top 20 per cent of grain growers as part of benchmarking analysis looking at more than 300 cropping operations nationally.
The study showed that machinery investment and labour use were the main profit drivers in high-performance businesses, including the Niejalke family's 2100-hectare property at Pinnaroo, about 240 kilometres east of Adelaide.
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Drawing on five years of data, the research led by Rural Directions in the SA Mallee region showed top-tier operators kept total plant machinery and labour (TPML) costs below one-quarter of annual business turnover. Average business operators, however, had TPML costs equivalent to 35 per cent of turnover.
Helping the Niejalkes limit this combined cost to less than 25 per cent of turnover is their investment in second-hand machinery, which Todd says provides a 50 to 75 per cent cost-saving compared with investment in new machinery.
He says data and benchmarking targets gleaned from the research have provided an important measure of structural efficiency in their low-cost business model which, in turn, has sharpened their business acumen.
For example, they use a machinery investment to income ratio of between 0.7 to 0.8:1 calculated under the research to better inform their decisions on machinery outlay. Applying this ratio, for every $1 of business turnover, the Niejalkes aim to invest no more than 70 to 80 cents in machinery.
The Niejalkes also exceed the benchmark target for profitable labour, which is to generate more than $600,000 of annual turnover per full-time-equivalent (FTE) labour unit, standardised at 40 hours per week.
Todd and Jeff each do the work of 1.8 FTE labour units, meaning the father-and-son team do the work of more than three people, averaging 140 hours a week. This workload includes machinery manufacture, modification and repair.
Analysis of the main profit drivers in different agro-ecological zones across Australia has also set new benchmark targets for expenditure on cropping inputs, particularly fertiliser and herbicide, Todd says.
GRDC Research Code RDP00013
More information: Todd Niejalke, email@example.com, 0429 308 253