Gross margins will differ from grower to grower, due to differences in machinery, water supply, and various other factors. A gross margin is the difference between the gross income and variable costs of an enterprise. Variable costs include crop operations, harvesting and marketing costs. Gross margins do not take into account overhead costs such as rates, electricity, insurance, capital costs, living costs and interest. These costs should be taken into account when farm budgeting is conducted.
Gross margins are a convenient starting point when budgeting crop enterprises.
They can be used as a basis for comparing enterprises or they can be combined to produce a whole farm budget. Gross margins for different crop enterprises can only be compared with each other if the different enterprises can be operated using the existing resources of land, labour, building, machinery and equipment. Otherwise, a more detailed analysis is needed. The following gross margin was based on a family unit growing papaya under good management. It was assumed papaya took 10 months to grow and was then picked for the following 14 months.