Farmland Profitability

Investment in farmland requires an understanding of the drivers of profitability. What do you wish to produce and where? There are two significant determining factors behind farm profitability: having a good climate for crop growth and proximity to the market. Both of these factors support New Zealand’s position as a leading farming nation.

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  • 100 km

    New Zealand’s maximum distance from the coast, meaning trucking costs are minimal to the export ports

  • 40 ×

    Is the multiple that transport by truck costs (per km) more compared to sea freight

  • 1200mm

    NZ’s climate gives this average rainfall, allowing pasture to grow all year-round making it possible to produce (low-cost) dairy products, which are high value

  • 3 ×

    The multiple that grain feed costs compared to pasture grass

Why does the climate and distance matter?

Because of the climate, particular crops can’t grow in certain regions. Even where a crop can grow, differing climatic conditions cause its potential yield to differ too. By multiplying the yield and the price of the crop at the farm gate it equals the “on farm revenues”.

The key cost impacting these revenues is the transport cost to the market. It’s not necessarily the total distance that entirely matters, but more the mode of transport that does – trucking is very expensive.

Taking in the impact of both the climate and transport costs, the following video outlines the profitability of farming around the world. We hope you enjoy it!

Craigmore Farming and Bidwells Farmland Profitability Model