Comparing cost with the price

Your cost of production only means something when you set it against the price. The gap between the two is your margin per kilogram.

Compare like with like

The weight basis must match. If your cost is per kg of liveweight, compare it with a liveweight price. If it's per kg of carcase, compare it with a carcase price.

Prices are quoted both ways. Saleyard cattle are often sold in cents per kg liveweight. Pigs and many lambs are sold in cents per kg carcase weight, written c/kg cwt.

To convert, use the dressing percentage. MLA gives the formula as carcase weight divided by liveweight, times 100. So a 500 kg steer with a 260 kg carcase dresses at 52%.

Which price to use

For a piggery, NSW DPIRD reported eastern Australia porker prices averaging $4.52/kg carcase weight in 2024-25, with baconers at $4.43/kg. Prices move in cycles, so look at more than one year.

For your own numbers, use your average price over the year, after you've been docked for pigs or cattle outside the grid. A grid is the buyer's price table by weight and fat. Then compare it with your cost.

Two break-even prices

A break-even price is the price you need to just cover your costs. There are two worth knowing.

1. Cost of production. The price that covers all running costs and overheads.
2. Cash break-even. The price that also covers interest, loan repayments and drawings. Drawings are the money the family takes out for living costs. This is the number the bank cares about.

The second one is usually higher. A business can cover its costs and still not have enough cash to meet the bank.

How much room do you have?

Take the price you expect, less your cash break-even. That gap tells you how far prices can fall before you're short of cash. If the gap is small, you have little room for a bad year.

Sort this out before the bank review, not after. Our guide to what the bank looks at in a farm review explains what lenders test. Try the break-even price calculator with your own figures.