GRAIN growers concerned about rising input costs should consider reducing the proportion of their farm under crop next season.
That's the view of consultant Phil O'Callaghan, of Bendigo, Victoria, who has just completed a Grains Research and Development Corporation-funded project on best practice.
He said farmers aiming for best practice should focus on profit, not production.
Analysis of accounts from a sample of Mallee farms from 1999 to 2006 showed most made "reasonable profits" with income of up to $350/ha in the first three years but many recorded losses in the next five years.
Mr O'Callaghan said the worst year was 2004, when income fell to about $150/ha.
Mr O'Callaghan said despite the relationship between annual rainfall and profit being significant, farmers identified input costs as posing the greatest potential risk to their bottom line, followed by commodity prices and climate change.
Interest rates, personal injury and relationship breakdown were deemed less important.
Most farmers continued to use traditional marketing methods of selling grain for cash and on-farm storage, showing less interest in hedging, futures products or forward contracts.
They usually sought information and advice from private agronomists, farming groups and magazines and publications, rather than from other farmers, the internet, family members or government agronomists.
Many had readily adopted to new technology, such as guidance systems and 10cm autosteer.
"The majority of those sampled were quite comfortable with the level of debt carried by their business," Mr O'Callaghan said.
Debt levels had increased nearly threefold in the past 10 years, but weren't a major concern.
"The message is there isn't a best-practice recipe that suits all (people) all the time," he said.
Mr O'Callaghan said business planning was vital to identify opportunities, reduce uncertainty and stress and ensure farmers stayed ahead of challenges.
"On family farms, where we spend 90 per cent of our time doing the work, it is very easy for that to become the focus - whether to change the oil in the tractor or sow a paddock today or tomorrow," he said.
"They're not the big picture (decisions) that will make a difference to the overall profitability or success of the business, so it is worth spending a bit of time on tactical and strategic direction.
"A written plan is important and it should be reviewed regularly."
Mr O'Callaghan said it was important to be conscious of what happened in a bad year.
"It's not necessarily the profit that we make in a good year that determines the overall success of the farming system," he said.
"It's what happens in the tough years - how much we lose in the bad years - that actually takes us those good years to recover from again.
"That's why a farming system at 70 per cent had been coming out better than one at 80 or 90 per cent."
Mr O'Callaghan said he expected more intensive operations to still be OK this year, as long as there was enough rain to produce average yields.
But with farm costs estimated to rise 50 per cent next year to $600/ha - across the whole farm, not just the cropped area - the break-even price for cereals would rise to $290 a tonne at the farm gate.
However, grain prices averaged about $170/tonne for the past 15 years, so farmers would need a major price increase to offset the higher cost of fuel, fertiliser and chemicals.
"Best practice will be looking at ways to manage that," Mr O'Callaghan said.
"We can get costs back to $400/ha in 2009, with fertiliser prices budgeted at $1600/tonne, by bringing crop intensity back to about 60 per cent.
"That also reduces income, but (with a grain price of) $290/tonne we could maintain profit at the same level as it has been previously.
"The reason 60 per cent crop intensity can work and maintain profitability, is if we get a yield response from having fallow or moisture conservation on that other 40 per cent.
"We need a yield response of about 20 per cent to make that work, or 0.4 tonnes/ha, which is achievable but it depends on soil types."
Mr O'Callaghan said the last 10 to 15 per cent of paddocks were "often tired or not performing" and it wasn't necessary to put livestock into the system to achieve a comparable profit.
