A gross margin is determined by deducting the direct costs of growing a crop from the gross income for a crop. Direct costs include those associated with crop production operations, harvesting and marketing. Gross margins do not include overhead costs such as rates, living costs, insurance, that must be met regardless of whether or not a crop is grown. For this reason gross margins are not a measure of the profit of a particular enterprise. However, they do provide a useful tool in terms of farm budgeting and estimating the likely returns or losses of a particular crop. When estimating whole farm profit it is necessary to consider these overhead costs in addition to enterprise gross margins.
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