Case study on Ukrainian farm gross margin and direct cost analysis of wheat production

Abstract

The paper aims to present a case study of profitability analysis based on gross margin calculations to evaluate agricultural measures' financial impact on the final economic figures at Korystivske LLC Farming Company. Based on the information collected from annual financial statements, statistical reports and accounting data from 2011- 2023, the analysis relies on the gross margin method compared to the yield statistics of the main crops grown. The mathematical modelling in correlation and regression models shows the relationship between using fertilizers and pesticides and the resulting yields. Temporary reduction of fertilizer and plant protection intensity will reduce yields to some extent but will avoid deterioration of the financial situation of the analyzed farm. The model shows that intensification of agricultural technologies will not directly increase profits. The relationship between the use of mineral and organic fertilizers, pesticides, herbicides and fungicides and the dynamics of marginal profit is insignificant. It cannot give us specific recommendations on the direct impact of the intensity of agricultural practices on farm profitability. Further modelling of the relationship between agricultural technology and gross margins did not show any acceptable correlation, which proves the importance of forecasting final prices when intensifying fertilizer and pesticide use. The study results showed that high input prices are the most acute problem, and lower output prices are the last obstacle to further intensification of wheat production.