Summary of gross margins
Figures 4.1-4.4 provide a summary of the gross margin performance of dryland and irrigated crops over the period from 2018 (adjusted to account for actual yields and crop prices) to 2025 (2024 and 2025 are projected). It is important to note that the gross margins only consider direct costs and exclude overhead costs, and that the presented gross margins will differ based on the timing when producers have purchased agricultural inputs (fertilisers, fuel & chemicals) and when marketing takes place. Furthermore, uncertainty remains regarding the forecasted El Nino and its effect on yields. For the gross margins presented in this report, target yields were assumed.
Relative to 2022/23, average dryland gross margins across 6 crops in 7 agro-ecological regions are projected to decline marginally for the 2023/24 production season, while the average irrigation gross margins across 4 crops are expected to increase slightly (assuming trend yields, lower crop prices and lower input costs).
Oilseed crops are projected to outperform maize in 2024 and 2025. The average gross margin across 7 agro-ecological regions for maize and soybean are expected to decline by 27% and 28% respectively from the 2022/23 to the 2023/24 production season. While sunflower gross margins are projected to increase by 9%, assuming a shift back to trend yields. 2023/24 margins are expected to be lower than the gross margins in 2020 to 2023, but higher than 2018 and 2019 (these years were associated with drought and low commodity prices).
All dryland gross margins (except for sunflower) are expected to decrease in the upcoming seasons, mainly driven by a consolidation in commodity prices and lower yields compared to the previous La-Nina seasons. For the 2023/24 production season, dryland gross margins are expected to decrease by 34% for maize in the eastern production region, 45% for maize in the western production region, 23% for soybeans in the eastern production region, 51% for soybeans in the western production region, while sunflower gross margins are expected to increase by 14% (compared to the 2022/23 production season).
The average gross margins for crops under irrigation followed an upward trend from 2018 to 2022, and decreased in 2023 following high cost of inputs. Irrigated gross margins are expected to remain at a similar level as in the 2022/23 production season.
