What’s your cost of production?
Cost of production is a key factor affecting profitability, and a new resource for woolgrowers that calculates those costs has been launched online. By understanding cost of production, producers can identify areas where improvements in business performance can be made.\
Available at the Woolcheque website, the Cost of Production (CoP) Calculator tells growers how much it costs to produce each kilogram of clean wool. Woolcheque is an online pricing tool available exclusively to woolgrowers and the CoP Calculator has been added to further improve it.
The calculator is split into several sections where growers simply fill in details based on their own flock and financial records, including labour and overheads, over a 12-month period of their choosing. The calculator does the rest. Results can be compared year-on-year and with others in the wool industry, to reveal if there is scope for improvement or if the business is performing well. Improvements can come from increasing productivity or decreasing costs or both.
Key functions of the CoP Calculator
- Measure the performance of your wool enterprise year-on-year.
- Compare the efficiency of your enterprise annually with other wool producers and find out if there is scope for improvement, or if your enterprise is already performing well.
- Use the cost of production information to help with wool marketing decisions.
AWI’s program manager for sustainable systems, Lu Hogan, says the program has an ideal home on the Woolcheque website where it can be used alongside the successful wool-pricing program to maximise returns and performance and help with wool marketing decisions. “Once you know your cost of production, you can determine whether the current value of your wool is sufficient to give you an appropriate margin above those costs,” she says.
The calculator is a tool in the upcoming ‘Making More from Sheep’ package, developed by Ms Hogan’s department at AWI and MLA to maximise sheep business performance. To be launched mid-2007, the package contains 11 modules covering key aspects of wool production systems, including business planning, people management, pastures, soils, animal health, genetics, marketing and ‘Planning for Success’, where the calculator tool is located. Growers will be able to order a folder of printed materials or download information relevant to their business from the package. It will be supported by seminars, forums and training.
“Each module has a set of key procedures that are the major things you need to focus on for a profitable and successful business,” Ms Hogan says. “It also has a range of tools you can use to undertake those procedures: the Cost of Production Calculator is one of those tools, as is Woolcheque.”
Go to www.woolcheque.com.au to price your wool and use the AWI Cost of Production Calculator.
More information: Lu Hogan, AWI, 02 9299 5155, luhogan@woolinnovation.com
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