How to use this calculator
Some base assumptions have been set up on the calculator. These are for guidance only and should be adapted for your own situation.
- Enter your base yield. A good starting point is your long term average for the area in question. This calculator is base on cereals, so using wheat yield is suggested.
- Enter a grain price – Use the long term net on farm values, say a five year average. Do not use current prices as these are likely to be misleading.
- Enter a cost of sowing the crop. This should include all costs you include in your gross margin calculations (i.e. all direct costs)
- This will leave you with a gross margin for the crop in question.
- Enter the cost of lime landed on your farm and the rate at which you intend to apply the lime.
- Enter your cost of funds. (if you are borrowing money then this should be at the cost of your overdraft. If you have credit funds in the bank this should be at the rate of interest you are being paid, or the rate of return you will get from investing the funds elsewhere)
- Enter the expected change in yields from liming and the timing at which they are likely to occur. This is very subjective and will depend on the condition of the soil prior and the rate of lime applied.
- The model also allows for break crop/pasture/fallow where little or no income is received from the area. Enter a “p” into the no profit column.
The outcome is in 2 forms, an internal rate of return which reflects the effective annual rate of interest you will receive on the funds invested in the liming process. The second measure is the Net present value (in today’s $) of the income stream to you after considering the initial cost.