Estimating Income Activity
Farmers don't know exactly how much money they will make each year. However, they can make some pretty good estimates.
Remember that in order to calculate the amount of money a farmer will make, she or he will need to determine the total income from the farm minus the total amount of expenses she or he has for the running of the farm. Therefore, the profit = income - expenses.
Some of the typical costs or expenses that the farmer will have to incur include:
- approximately how much their crop will yield, or produce, per hectare (number of tonnes/hectare).
- the price she or he is likely to receive for the crop ($ per tonne).
- the total area that is used to grow the crop (how many hectares?).
- how much the farmer needs to spend on seed, fertiliser, herbicides, and other chemicals.
- how much she or he will get from the livestock on the farm (e.g., meat, wool, etc.).
Jason will be able to get to Japan only if the farm makes a profit on his wheat (most of the farm's income comes from wheat).
Use the figures below to work out how the Jones income might vary depending on conditions they face.
TOTAL COST OF PRODUCING ONE HECTARE OF WHEAT
| Item |
Price ($ per ha) |
| Seed |
15 |
| Fertilizer |
47 |
| Sprays |
15 |
| Machinery running costs |
20 |
| Labour costs, interest payments on machinery |
12 |
ESTIMATED PRICE OF WHEAT PER TONNE
Wheat will sell at between $140 and $180 per tonne, depending on the quality.
ESTIMATED YIELD PER HECTARE
If all goes well, the Jones expect to get a yield of 1.5 tonnes per hectare. If things go wrong their yield could be much lower. 
- CALCULATE the Jones' income per hectare if the quality of their wheat is high (and sells at $180 per tonne) AND their yield is 1.5 tonnes per hectare.
- Work out how much of that income is PROFIT (remember they had to spend money to grow each hectare of wheat).
- Imagine that salt damaged all the wheat roots and so the plants couldn't get enough water at the end of the growing season. The result was a yield of only 0.7 tonnes per hectare. Fortunately the wheat was very high in protein and so still fetched $180 per tonne. CALCULATE the Jones income and their profit.
- Imagine that the yield was 0.7 tonnes per hectare (this time the crop was flattened by a severe hailstorm) and unfortunately the grain showed storm damage as well. The Jones were paid only $160 per tonne for their crop. Calculate the income and profit this time.
- Bad news again for the Jones - interest rates and the cost of fuel have risen, it now costs them an extra $10 per hectare to grow a crop of wheat. Redo questions 1-4 using the new costs.
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