OPERATING AND FINANCIAL REVIEW (CONTINUED) 4. Farming Operations 5. Wholesale Beef Operations 6.  Other Cost Areas 7.  Shareholder Returns 18 Australian Agricultural Company Limited The Company derives its returns from its two main asset holdings, cattle and land. Cattle provide earnings/cash flow and land provides potential for  capital growth. Underlying capital growth in land is not shown in net profit after tax but is reflected in the Statement of Comprehensive Income and  directly into equity in the Statement of Financial Position. These cost increases have also come about due to increased compliance costs, the further progress of the Darwin abattoir project, IT infrastructure  costs, as well as increased satellite usage and other telecommunication costs. Some of these cost increases are transitionary and as systems are  developed the Group expects to enjoy increased productivity per indirect cost person. Overheads in the three months to 31 March 2013 have increased over the prior corresponding period due in part to the expansion of the senior  management team as operations are being established and expanded to manage the Darwin abattoir and the expanded sales in the Beef Group that  will arise from the anticipated abattoir production. The development of an integrated supply chain from the feedlots to the wholesale beef operations continues. This development will be furthered  with the commencement of the Darwin abattoir operations and provide the Group’s wholesale beef division with broader market access. The division continues to perform on lower than desired margins due mainly to the high AUD/USD exchange rate. AACo’s Wholesale Group had a 65 per cent increase in kilograms sold for the first quarter. The major contributors were larger numbers of AACo’s  signature “1824” beef brand and improved inventory management due to new customer and market development. The accounting standard for Agriculture only permits the value of the 15,120 bales of cotton harvested, but not yet ginned or delivered, to be  recognised in these financial statements. This value recognition is derived from market spot prices at the time of harvest. The estimated 2013  cotton harvest at 31 March 2013 is forward sold at an average bale price that is $22 per bale above the spot market at the time of harvest. Farming yields continued to perform and farmgate prices were within budget expectation. The table below sets out the crops harvested:  (1)  Cotton harvest in 3 months to 31 March 2012 was delayed due to seasonal conditions. (2)  Ginning is yet to be completed on the 2013 cotton harvest. The yield estimates are based on current cotton ginning turnouts. (3)  Wheat, chickpeas and sorghum not harvested in the three months to 31 March 2013. Cotton (bales) Harvested 3 months to 31 Mar 13 15,120 3 months to 31 Mar 12 (1) Nil Wagyu (kg) Shortfed Grain  Finished (kg) Average Selling  Price (per kg) on  total sales 3 months to 31 Mar 13 1,909,227 2,386,270 $8.76 3 months to 31 Mar 12 1,834,132 769,162 $9.00 DIRECTORS’ REPORT CONT.