The demand for on-farm fertiliser storage has grown over the past twelve to eighteen months, as cropping enterprises aim to reduce the impact that volatile fertiliser prices and unreliable supply have on their operation.
In other words, storing fertiliser on-farm has become more than just a convenience – it is a smart investment.
In this article we discuss the benefits of a fertiliser shed, factors that influence the payback period, how to maximise return on investment (ROI) and important considerations such as pricing and design.
5 Benefits Of A Fertiliser Shed For On-Farm Storage
There are several significant benefits of storing fertiliser on-farm, from decreasing external risks to helping to future-proof your business.
Sheds are a smart way to take full advantage of these benefits. Here are five benefits to consider when weighing up whether building a fertiliser shed is the right decision for your operation.
1
Save You Money
Fertiliser sheds save you money by allowing you to buy fertiliser in bulk when prices are lower and helping you to avoid the transport cost of multiple deliveries.
With fluctuating fertiliser prices and increased transport costs these savings can quickly add up.
2
Save You Time
A fertiliser shed will save you time, increase efficiency and avoid delays in your cropping program by allowing you to secure your fertiliser ahead of time when demand is lower and there is good supply.
As a result, you are not dictated by third-party deliveries. Instead, you have access to the fertiliser when you need it – it’s always better to be looking at your fertiliser and not looking for it!
Plus, a smart fertiliser shed design will save you time by making loading, unloading and handling fertiliser much more straightforward and efficient.
Remember the saying that time is money, and this is particularly true at important times of the year like cropping!
3
Keep You Safe
One of the reasons why fertiliser sheds have become popular over the last few years is because sheds are the safest way to store granular fertiliser.
While silos are often viewed as an alternative storage option to sheds, there is always the risk of silo collapse. This risk is increased for fertilisers such as DAP and DAP blends. In fact, fertiliser manufacturers and suppliers such as Incitec Pivot strongly advise against silo storage for these fertilisers.
So, storing your fertiliser in a shed could save your life!
You can learn more about this here – Fertiliser Sheds Versus Fertiliser Silos
4
Make You Money
As well as saving you money, a fertiliser shed could help you maximise your profitability.
Storing your fertiliser on-farm provides flexibility and opens opportunities in your cropping program.
For example, having the fertiliser on hand allows you to take advantage of favourable growing conditions and apply the fertiliser at the right time for maximum results.
5
Provide Good Value For Money
Fertiliser sheds aren’t just a safe storage option, they are also very versatile assets meaning you get more bang for your buck.
For example, a fertiliser shed can prove to be good value for money when repurposed for machinery storage or short-term grain storage. This maximises ROI and helps reduce the payback period.
The shed design will influence the functionality of your shed and how it can be repurposed.
So, read on to find out how to take full advantage of your fertiliser shed and maximise the ROI.
How To Make The Most Of Your Fertiliser Shed
There are several steps you can take to make sure you capitalise on the benefits of a fertiliser shed.
Firstly, design your shed to maximise ROI and reduce the payback period. One way to do this is to choose a cost-effective design, however, it is important to make sure you are not cutting corners when cutting costs.
A good starting point is the standard fertiliser shed designs, which were developed with functionality and cost-effectiveness in mind. Details like concrete aprons in the loading and unloading areas can also increase efficiency.
And remember to consider your future storage requirements. This might mean upsizing your fertiliser shed, however, typically the bigger the shed, the more cost-effective it is per tonne.
You could also consider a versatile and multi-use shed design. For example, an open-front storage shed with several concrete bays is a popular option.
Watch the video below to learn about John Bennett’s versatile hay shed.
The benefits of a fertiliser shed are impressive! But what does this all mean for your bottom line? Do the numbers stack up?
As we briefly mentioned above, decreasing the payback period and maximising the ROI is one way to capitalise on the financial benefits of a fertiliser shed.
So, how do you do that? What is ROI? What does the payback period mean?
Read on to find out!
What Is The Payback Period Of A Fertiliser Shed?
The payback period of an asset is simply the time it takes to recover the initial cost of the investment or, in other words, pay for itself. This could also be referred to as the break-even point of the asset.
There will be a few factors that impact the payback period of your fertiliser shed including:
- The overall cost of your project. For example, remember to factor in costs like site preparation and council permits.
- The size and design of the shed. For example, the size will determine how much fertiliser you can buy ahead of time at a lower price (remember, a larger shed will also cost less per tonne). Similarly, some designs are more cost-effective than others and versatile sheds will provide more opportunities to reduce the payback period.
- The efficiency of the shed. For example, a well-designed shed can streamline fertiliser handling, saving time and reducing labour costs. This could be as simple as increasing the shed height and pitch to allow tipping inside the shed.
- The market conditions. How much fertiliser prices fluctuate over a period of time will impact how much money you can save and therefore influence how quickly your shed pays for itself.
- The seasonal conditions. For example, in a good year, the conditions will be right to apply fertiliser to increase yields and maximise profitability. And vice versa.
- Any farm infrastructure grants, low-interest loans or government funding available for your project. For example, you may be eligible for the RIC Farm Investment Loan.
So, how do you calculate payback?
How To Calculate The Payback Period Of A Fertiliser Shed?
Asset payback is usually calculated by simply dividing the initial investment cost by the payback over a set time e.g. a year.
FERTILISER SHED PAYBACK =
Cost Of Fertiliser Shed / Payback In A Year
We have provided a simple example of how this works below.
Example – How Quickly Can A Cropping Operation Payback A Fertiliser Shed?
Please note, that this example is general only and does not necessarily reference current fertiliser prices (largely because there is no transparent fertiliser pricing in Australia). This example is also only based on potential savings from buying and storing bulk fertiliser at lower prices ahead of cropping. It does not consider any other uses of the shed or other factors that would reduce the payback period.
- In July, Peter from Peter’s Cropping Company built a 1,000-tonne fertiliser shed for $265,000 including GST, installation and concrete slab. For example, the standard 18m (W) x 24m (L) x 6.75m (H) design.
- In August, Peter buys 1,000 tonnes of DAP at around $650 per tonne to have on hand ready for cropping – a total outlay of $650,000.
- By December, the price for DAP has increased to around $900 per tonne. By buying his DAP earlier when prices were lower, Peter has saved around $250,000:
$950,000 (current DAP value) – $650,000 (initial DAP value) = $250,000 (total savings). This means Peter has paid off 94% of his $265,000 fertiliser shed in the first year.
We have also calculated the payback period for the full amount below:
$265,000 (cost of fertiliser shed) / $250,000 (payback in year 1) = 1.06 years before the shed is paid off in full.
And, as we mentioned earlier, Peter could reduce this payback period further by using his shed after cropping to store hay, taking advantage of farm infrastructure grants or even by selling any excess fertiliser at the higher market price.
If you are considering designing a fertiliser shed that can also be used to store hay (like John Bennett’s versatile shed shown earlier) you might also like this article – How Quickly Can I Pay Off A Hay Shed? What Is The ROI?
Next up we discuss the ROI of a fertiliser shed.
What Is The ROI Of A Fertiliser Shed?
Return on Investment, commonly referred to as ROI, is a way to measure the financial effectiveness of an investment. Or in other words, how much money you make from an investment.
This is a useful calculation for you to evaluate an investment and can help you make financial decisions going forward.
While the payback period is a time frame, ROI is usually expressed as a percentage.
ROI is calculated by using the formula below.
FERTILISER SHED ROI =
Total Revenue and Savings / Initial Investment x 100%
Like the payback period, there are several factors that influence the ROI of a fertiliser shed.
These include the total project costs, the shed use, cost savings, potential revenue gains and how the shed is financed such as using a grant for farm infrastructure.
Example – What Is The ROI Of A Fertiliser Shed For A Cropping Operation?
Using the example of Peter and Peter’s Cropping Company from earlier in the article, here’s how the ROI of a fertiliser shed could play out.
Please note, that this example is general only and does not necessarily reference current fertiliser prices This example is also only based on potential savings from buying and storing bulk fertiliser at lower prices ahead of cropping. It does not consider any other uses of the shed or other factors that would improve the ROI.
Peter builds a $265,000 fertiliser shed and saves $250,0000 in fertiliser costs by buying DAP ahead of time when prices were lower.
$250,000 (total savings) / $265,000 (cost of fertiliser shed) = 0.94
x 100% = 94% ROI
And the ROI could be improved further by designing the shed for multiple uses throughout the year or selling excess fertiliser at the higher market price.
So, along with the benefits of fertiliser sheds, these payback period and ROI examples certainly make a fertiliser shed seem like a no-brainer!
But is it the right decision for your operation? What else do you need to know?
Is Building A Fertiliser Shed A Smart Business Decision? What Else Do You Need To Know?
It is important to keep in mind that calculating the ROI and payback periods are just two ways to evaluate an investment.
There will be other factors and tools that will help determine whether you should invest in a fertiliser shed, for example:
- Cash flow
- Business debt
- Long-term business goals
- Risks and risk mitigation
- Opportunity cost
- Operating expenses
It is also important to understand fertiliser shed prices and how you can design a cost-effective fertiliser shed without sacrificing functionality.
This is because the cost of your fertiliser shed will have an impact on the payback and ROI.
So, let’s look at fertiliser shed pricing.
How Much Does It Cost To Build A Fertiliser Shed?
The cost to build a fertiliser shed generally ranges from around $400 per tonne for a smaller-scale shed to around $200 per tonne for a larger-scale shed.
For some handy examples, you can download the Standard Fertiliser Shed Price Guide here.
What Factors Influence Fertiliser Shed Prices?
Like any farm shed project, there are several key factors that will influence the cost of your fertiliser shed. These include:
- The size of the shed. For example, some span sizes are more cost-effective than others. (The standard span range is always a great way to create a cost-effective design)
- The configuration of the shed. For example, a longer shed is usually more cost-effective than a wider shed.
- The design of the shed. For example, you might decide to include an outrigger system so that the sliding doors can be stacked out of the way. This will increase the functionality, and likely the cost of the shed.
- The materials used. For example, the hot dip galvanized UB column and open web truss frame of an Action shed will usually have a higher initial cost than a painted purlin frame alternative.
You can learn more about the factors that influence the cost of a farm shed build, by browsing our price guides here.
Fertiliser Shed Inspiration Gallery
Looking for ideas for your fertiliser shed? Recent project examples are a great place to start!
Click through the gallery below which includes a range of designs from multi-use sheds to large-scale bulk storage sheds.
From cost savings, improving safety and increasing efficiencies at cropping, a fertiliser shed can be a smart financial and operational investment! We hope this discussion about ROI and payback has been helpful for your decision making.
Sold on the benefits of fertiliser sheds? Ready to take the next step? Contact us for a free project consultation on 1800 687 888 – we would love to work with you!
