Australian grains Outlook for 2015–16 and industry productivity David Mobsby, Christopher Price, Clay Mifsud, Tom Jackson, Astrid Dahl and Haydn Valle

Research by the Australian Bureau of Agricultural and Resource Economics and Sciences

November 2015

© Commonwealth of Australia 2015

Ownership of intellectual property rights Unless otherwise noted, copyright (and any other intellectual property rights, if any) in this publication is owned by the Commonwealth of Australia (referred to as the Commonwealth). Creative Commons licence All material in this publication is licensed under a Creative Commons Attribution 3.0 Australia Licence, save for content supplied by third parties, logos and the Commonwealth Coat of Arms.

Creative Commons Attribution 3.0 Australia Licence is a standard form licence agreement that allows you to copy, distribute, transmit and adapt this publication provided you attribute the work. A summary of the licence terms is available from creativecommons.org/licenses/by/3.0/au/deed.en. The full licence terms are available from creativecommons.org/licenses/by/3.0/au/legalcode. Cataloguing data Mobsby, D, Price, C, Mifsud, C, Jackson, T, Dahl, A & Valle, H 2015, Australian grains: outlook for 2015–16 and industry productivity, ABARES report prepared for the Grains Research and Development Corporation, Canberra, November. CC BY 3.0. ISBN 978-1-74323-266-8 ABARES project 43509 Internet Australian grains: outlook for 2015–16 and industry productivity is available at agriculture.gov.au/abares/publications. Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Postal address GPO Box 858 Canberra ACT 2601 Switchboard +61 2 6272 3933 Email info.abares@agriculture.gov.au Web agriculture.gov.au/abares Inquiries about the licence and any use of this document should be sent to copyright@agriculture.gov.au. The Australian Government acting through the Department of Agriculture and Water Resources, represented by the Australian Bureau of Agricultural and Resource Economics and Sciences, has exercised due care and skill in preparing and compiling the information and data in this publication. Notwithstanding, the Department of Agriculture and Water Resources, ABARES, its employees and advisers disclaim all liability, including for negligence and for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying on information or data in this publication to the maximum extent permitted by law.

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Contents Overview 5

World outlook 7

Wheat 7

Coarse grains 7

Oilseeds 8

Australian crop prospects in 2015–16 10

Seasonal conditions 11

Winter rainfall 11

Spring rainfall and temperatures 11

Crop conditions and production forecasts by state 14

New South Wales 14

Queensland 14

Victoria 15

South Australia 15

Western Australia 15

Productivity in Australia’s grains industry 17

Cropping industry productivity 17

References 20

Tables Table 1 Average annual broadacre productivity growth by industry, 1977–78 to

2012–13 18

Table 2 Average annual cropping total factor productivity growth, by region, 1977–78 to 2012–13 19

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Figures Figure 1 Trends in cropping specialists’ total factor productivity, total inputs and

total outputs, 1977–78 to 2012–13 17

Figure 2 Broadacre total factor productivity growth, by period 18

Maps Map 1 Australian rainfall percentiles, 1 to 31 August 2015 11

Map 2 Rainfall percentiles for September 2015 12

Map 3 Rainfall percentiles for October 2015 12

Map 4 Chance of exceeding the median rainfall, October to December 2015 13

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Overview This publication summarises the forecasts presented in the September 2015 editions of ABARES Australian crop report (ABARES 2015a) and Agricultural commodities (ABARES 2015b) and the 15 October 2015 edition of Weekly Australian climate, water and agricultural update (ABARES 2015c).

The world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to average US$215 a tonne in 2015–16, compared with US$266 a tonne in 2014–15. World wheat supply is forecast to increase, driven by an increase in opening stocks. The world indicator price continues to face downward pressure as a result of limited world import demand and abundant exportable supplies in some producing countries.

The world coarse grain indicator price (US no. 2 yellow corn, fob Gulf) is forecast to average 5 per cent lower in 2015–16 at US$165 a tonne. The world indicator price for barley (France feed barley, fob Rouen) is forecast to average 3 per cent lower in 2015–16 at US$198 a tonne. These forecast lower prices largely reflect relatively high world supply of coarse grains, with large carry-over stocks from the previous season.

The world oilseed indicator price (US no. 2 soybeans, fob Gulf) is forecast to fall by 9 per cent in 2015–16 to average US$380 a tonne. Total world oilseeds production is forecast to fall in 2015–16, but it is still expected to exceed world consumption by around 5 million tonnes. Additionally, high carry-over stocks from 2014–15 are expected to result in ample world supply of oilseeds in 2015–16.

The world canola indicator price (Europe rapeseed, fob Hamburg) is forecast to average US$430 a tonne in 2015–16, up 1 per cent from 2014–15. Lower supply is expected to result in world canola prices averaging higher in 2015–16.

Winter rainfall in many cropping regions in New South Wales and Queensland was average to above average, and Western Australia and South Australia had timely rainfall events. However, conditions were drier than average in all major cropping regions in Victoria during winter.

Based on the generally favourable seasonal outlook for spring issued by the Bureau of Meteorology on 27 August, ABARES forecast in early September that winter crop production would rise by 8 per cent in 2015–16 to 41.4 million tonnes. For the major winter crops, ABARES forecast wheat production to increase by 7 per cent in 2015–16 to 25.3 million tonnes and barley production to rise by 8 per cent to 8.6 million tonnes. In contrast, canola production was forecast to fall by 9 per cent to around 3.1 million tonnes, driven by an estimated 13 per cent fall in planted area.

However, seasonal conditions in the Australian winter cropping regions were generally unfavourable in the first half of spring. Additionally, the Bureau of Meteorology issued a revised seasonal outlook on 7 October 2015 that was significantly less favourable than its previous outlook on which the September edition of Australian crop report was based.

As a result, ABARES revised the forecasts of winter crop production it published in the September issue of Australia crop report. The forecast for total winter crop production was revised down by around 5 per cent from the September forecast of 41.4 million tonnes. The most significant revision among the major crops was for wheat, with production now expected to be more than 1 million tonnes less than the September forecast of 25.3 million tonnes. Revisions to national production of barley and canola were marginal.

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Area planted to summer crops in 2015–16 is forecast to increase by 1 per cent to around 1.1 million hectares, reflecting a forecast increase in area planted to cotton. Total summer crop production is forecast to fall by 2 per cent to 3.9 million tonnes, reflecting an assumed fall in average yields from 2014–15.

Productivity growth is key to maintaining profitability in Australia’s grains industry. Grain growers that can improve the efficiency with which they combine land, labour, capital and other inputs can increase crop production despite limited resources. Cropping industry productivity grew by 1.5 per cent a year, on average, from 1977–78 to 2012–13, underpinning strong output growth of 2.6 per cent a year in tandem with input growth of 1.1 per cent a year. Productivity grew strongly until the early 1990s, averaging 3.6 per cent a year from 1977–78 to 1988–89. Since then, growth has been lower, averaging 1.1 per cent a year from 1988–89 to 2000–01 and 1.4 per cent a year from 2000–01 to 2012–13.

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World outlook Wheat The world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to average US$215 a tonne in 2015–16, compared with US$266 a tonne in 2014–15. World wheat supply is forecast to increase, driven by an increase in opening stocks. The world indicator price continues to face downward pressure as a result of limited world import demand and abundant exportable supplies in some producing countries.

World wheat production is forecast to be largely unchanged in 2015–16 at 723 million tonnes. Among the major exporters, lower production in the European Union, Canada and Argentina is expected to more than offset increased production in the Black Sea region (the Russian Federation, Ukraine and Kazakhstan) and the United States. Outside the major exporting countries, increased production in China, the Middle East and North Africa is expected to more than offset reduced production in other countries, including India and Brazil.

World consumption of wheat is forecast to rise by 1 per cent in 2015–16 to 715 million tonnes, largely reflecting increased human consumption. Human consumption accounts for around 70 per cent of total wheat use and increases broadly in line with world population. Use of wheat for feed is forecast to increase by 3 per cent in 2015–16, following a 5 per cent increase in 2014–15.

The volume of world wheat trade is forecast to fall by 4 per cent in 2015–16 to 152 million tonnes. This reflects increased supplies in many importing countries, which is expected to reduce import demand. In the Middle East and North Africa, wheat imports are forecast to decline by 9 per cent to 48 million tonnes because of higher domestic production.

Lower exports are expected from Canada and the European Union in 2015–16, reflecting reduced exportable supplies. Exports are expected to increase for the third consecutive year from the Black Sea region because of high opening stocks and another large crop this year. Exports from the United States are forecast to rise by 9 per cent in 2015–16, with high carry-over stocks and increased production.

World closing stocks of wheat are forecast to increase by around 4 per cent in 2015–16 to 217 million tonnes. Combined closing stocks in the major exporting countries are expected to rise in 2015–16, driven by a rise in stocks in the United States.

Coarse grains The world coarse grain indicator price (US no. 2 yellow corn, fob Gulf) is forecast to average 5 per cent lower in 2015–16 at US$165 a tonne. The world indicator price for barley (France feed barley, fob Rouen) is forecast to average 3 per cent lower in 2015–16 at US$198 a tonne. These forecast lower prices largely reflect relatively high world supply of coarse grains, with large carry-over stocks from the previous season.

World production of coarse grains is forecast to fall by 1 per cent in 2015–16 to 1 277 million tonnes, reflecting lower corn and barley production in many of the major exporting countries. If realised, world coarse grains production would still be the third-highest on record.

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World corn production is forecast to fall by 2 per cent in 2015–16 to 985 million tonnes, from the record high in 2014–15 of 1 005 million tonnes. Compared with 2014–15, harvests in the United States, Latin America, European Union and Ukraine are forecast to be lower. World barley production is forecast to fall by 2 per cent in 2015–16 to 138 million tonnes as a result of lower yields across the European Union, the Black Sea region and Canada.

World consumption of coarse grains is forecast to increase by 1 per cent in 2015–16 to 1 279 million tonnes. World corn consumption is forecast to increase by 1 per cent to 986 million tonnes. Use of corn as animal feed and for industrial uses is forecast to increase marginally to 605 million tonnes and 380 million tonnes, respectively. Most of the growth in consumption is forecast to come from the United States, China and Brazil. World barley consumption is forecast to fall by 1 per cent in 2015–16 to 139 million tonnes, reflecting lower feed demand.

World trade in coarse grains is forecast to fall by 2 per cent in 2015–16 to 168 million tonnes. This forecast fall largely reflects an expected decline in world trade of barley. Partially offsetting this is an expected small increase in world corn trade.

World trade in corn is forecast to increase by 2 per cent in 2015–16 to 123 million tonnes. This is largely because of an expected 50 per cent increase in imports into the European Union following a forecast 15 per cent fall in EU corn production. World trade in barley is forecast to decline by 17 per cent in 2015–16 to 26 million tonnes as a result of lower supplies in the major exporting regions of the European Union, the Black Sea region and Canada. In China, recent growth in imports of barley is forecast to slow as a result of increased competition from imports of dried distillers grains.

World coarse grain closing stocks are forecast to decline by 1 per cent in 2015–16 to 242 million tonnes. World corn stocks are forecast to decline by around 1 per cent to 195 million tonnes, reflecting a run-down in stocks in many of the large exporting countries, including the United States, Ukraine and Brazil. World barley stocks are forecast to fall by 6 per cent in 2015–16 to 23 million tonnes.

Oilseeds The world oilseed indicator price (US no. 2 soybeans, fob Gulf) is forecast to fall by 9 per cent in 2015–16 to average US$380 a tonne. Total world oilseeds production is forecast to fall in 2015–16, but it is still expected to exceed world consumption by around 5 million tonnes. Additionally, high carry-over stocks from 2014–15 are expected to result in ample world supply of oilseeds in 2015–16.

The world canola indicator price (Europe rapeseed, fob Hamburg) is forecast to average US$430 a tonne in 2015–16, up 1 per cent from 2014–15. Lower supply is expected to result in world canola prices averaging higher than soybean prices in 2015–16.

World oilseed production is forecast to fall by 3 per cent in 2015–16 to 523 million tonnes, with declines expected for all major oilseeds. World soybean production is forecast to fall by 2 per cent in 2015–16 to 313 million tonnes, with lower forecast production in the United States and Argentina more than offsetting expected higher production in Brazil. Production of rapeseed (including canola) is forecast to fall largely because of lower production in the European Union and Canada. World production of sunflower seed is forecast to decline because of expected lower crop production in most major producing countries more than offsetting increased

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production in the Russian Federation. World cottonseed production is forecast to decline, with lower world cotton prices causing a contraction in the area planted to cotton.

World oilseed consumption (largely for oilseed crush) is forecast to grow by 1 per cent in 2015–16 to 518 million tonnes. World soybean crush is expected to rise by 4 per cent to a record 266 million tonnes, with reduced supply of other major oilseeds resulting in increased demand for soybean meal and soybean oil. World crush of cottonseed, rapeseed (including canola) and sunflower seed is forecast to decline.

World oilseed exports are forecast to increase by 1 per cent in 2015–16 to 141 million tonnes because of an expected rise in world soybean exports. This expected rise in world soybean trade reflects a forecast increase in soybean supplies in key exporting countries and an expected increase in demand from key importers. Exports of other major oilseeds (including rapeseed) are expected to decline in 2015–16.

World oilseed exports are forecast to increase by 1 per cent in 2015–16 to 141 million tonnes because of an expected increase in world soybean exports. World soybean exports are expected to reach a record volume of 124 million tonnes, with a forecast increase in exports from Brazil expected to more than offset a forecast reduction in US exports. World rapeseed (including canola) trade is forecast to decline by 14 per cent to 12 million tonnes. This is largely the result of expected falls in exportable supplies in the three major exporting countries (Canada, Australia and Ukraine) and lower priced soybeans.

World closing stocks of oilseeds are forecast to rise by 5 per cent in 2015–16 to 109 million tonnes, with an expected large rise in world soybean closing stocks to more than offset forecast declines in closing stocks of other oilseeds. Total world oilseed production is forecast to fall, but it is still expected to exceed world consumption by around 5 million tonnes. World closing stocks of soybeans are forecast to rise by 10 per cent in 2015–16 to 99 million tonnes. World closing stocks of rapeseed (including canola) are forecast to fall to their lowest volume since 2007–08.

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Australian crop prospects in 2015–16 Seasonal conditions in most cropping regions in Australia during winter were generally favourable. Winter rainfall in many cropping regions in New South Wales and Queensland was average to above average, and Western Australia and South Australia had timely rainfall events. However, conditions were drier than average in all major cropping regions in Victoria during winter.

Based on the generally favourable seasonal outlook for spring issued by the Bureau of Meteorology on 27 August, ABARES forecast in early September that winter crop production would rise by 8 per cent in 2015–16 to 41.4 million tonnes. For the major winter crops, ABARES forecast wheat production to increase by 7 per cent in 2015–16 to 25.3 million tonnes and barley production to rise by 8 per cent to 8.6 million tonnes. In contrast, canola production was forecast to fall by 9 per cent to around 3.1 million tonnes, driven by an estimated 13 per cent fall in planted area.

However, seasonal conditions in the Australian winter cropping regions were generally unfavourable in the first half of spring. Rainfall was generally below average across the major winter cropping regions and daytime temperatures were above average in southern Australia in October. Additionally, the Bureau of Meteorology issued a revised seasonal outlook on 7 October 2015 that was significantly less favourable than its previous outlook on which the September edition of Australian crop report was based.

As a result, ABARES revised its forecasts of winter crop production published in the September issue of Australia crop report. The forecast for total winter crop production was revised down by around 5 per cent from the September forecast of 41.4 million tonnes. The most significant revision among the major crops was for wheat, with its production forecast revised down by more than 1 million tonnes from the September forecast of 25.3 million tonnes. Revisions to national production of barley and canola were marginal.

Area planted to summer crops in 2015–16 is forecast to increase by 1 per cent to around 1.1 million hectares, reflecting a forecast increase in area planted to cotton. Total summer crop production is forecast to fall by 2 per cent to 3.9 million tonnes, reflecting an assumed fall in average yields from 2014–15.

Area planted to grain sorghum is forecast to be largely unchanged in 2015–16 at 651 000 hectares. Assuming a return to average yields, production is forecast to fall by 4 per cent to 2 million tonnes.

Area planted to cotton is forecast to increase by 6 per cent in 2015–16 to 214 000 hectares in response to expected favourable returns from growing cotton, compared with alternative crops. Australian cotton production is forecast to rise by 4 per cent to 470 000 tonnes of cotton lint and 665 000 tonnes of cottonseed.

Area planted to rice is forecast to fall by 7 per cent in 2015–16 to 66 000 hectares, reflecting an expected fall in supply of water available for irrigating rice. Production is forecast to decline by 10 per cent to around 655 000 tonnes, largely reflecting the forecast fall in planted area.

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Seasonal conditions Winter rainfall June 2015 rainfall was generally average to above average for cropping regions in Queensland and New South Wales, and mixed for cropping regions in Victoria, South Australia and Western Australia. Rainfall was average to above average during July 2015 in most cropping regions in New South Wales, southern Queensland and Western Australia, and was mostly below average in central Queensland, Victoria and South Australia.

During August 2015 rainfall was generally average to above average across cropping regions in New South Wales, Queensland, South Australia and Western Australia (Map 1). August rainfall was below average across most cropping regions in Victoria and across parts of eastern South Australia, Western Australia and south-west Queensland.

Map 1 Australian rainfall percentiles, 1 to 31 August 2015

Note: Rainfall percentiles are displayed for cropping regions only. Source: Bureau of Meteorology

Spring rainfall and temperatures September 2015 rainfall was generally well below average to average across large parts of western, central and eastern Australia, with severely deficient rainfall in south-east and south-west Australia and Tasmania. Severely deficient to well below average rainfall was recorded across most of Western Australia, the Northern Territory, much of Victoria, southern Queensland and Tasmania. Meanwhile, average to extremely high rainfall was recorded across parts of northern Western Australia, central areas of north Queensland and coastal New South Wales.

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Map 2 Rainfall percentiles for September 2015

Source: Bureau of Meteorology

October 2015 rainfall was generally well below average to average across much of Australia, with extremely low rainfall in northern, central, south-east and south-west Australia and Tasmania. Severely deficient to well below average rainfall was recorded across large areas of southern Western Australia, South Australia, the Northern Territory, much of Victoria, southern and western New South Wales, central and western Queensland and Tasmania. Average to extremely high rainfall was recorded across parts of northern Western Australia, northern and south-eastern Queensland and coastal and north-eastern New South Wales.

Map 3 Rainfall percentiles for October 2015

Source: Bureau of Meteorology

On 7 October 2015 the Bureau of Meteorology released an update of the national climate outlook because of a significant shift towards a drier October nationwide.

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The rainfall outlook update for October to December 2015 indicates that wetter than average conditions are more likely over much Western Australia, the Northern Territory, western South Australia and extending into western parts of Queensland. For much of north-east and south-east Australia the updated outlook indicates that drier than average conditions are more likely during the October to December 2015 period.

Map 4 Chance of exceeding the median rainfall, October to December 2015

Source: Bureau of Meteorology

The temperature outlook update for October to December 2015 indicated that maximum and minimum temperatures are more likely to be warmer than average across the southern half of Australia, extending into central Queensland. In contrast, parts of northern Australia are more likely to record cooler than average maximum and minimum temperatures (Bureau of Meteorology, 7 October 2015).

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Crop conditions and production forecasts by state New South Wales Seasonal conditions were generally favourable during winter in most cropping regions in New South Wales. In the southern cropping zone, rainfall was well above average when crops were flowering. In the northern cropping zone, crops were not planted in some areas in the north-west because of unfavourable conditions earlier in the season. Crops in the north-east, and those that were planted in the north-west, benefited from rainfall in August.

Total winter crop production in New South Wales was forecast in early September to increase by 14 per cent in 2015–16 to 10.5 million tonnes, reflecting the expectation that increases in production of wheat, barley and pulse crops would more than offset a small forecast fall in canola production.

Following the unfavourable start to spring and the revised seasonal outlook issued by the Bureau of Meteorology on 7 October, winter crop production in New South Wales is now expected to be around 5 per cent lower than the September forecast of 10.5 million tonnes. Prospective crop yields were reduced across the winter cropping regions during early spring by the unfavourable seasonal conditions. In southern and north west New South Wales, warmer than average daytime temperatures have significantly affected crop prospects.

Total area planted to summer crops in New South Wales is forecast to increase by 2 per cent in 2015–16 to 481 000 hectares. Total summer crop production is forecast to be around 2.1 million tonnes. Area planted to grain sorghum is forecast to be largely unchanged at 205 000 hectares. Area planted to rice is forecast to decline by 7 per cent to 65 000 hectares, which reflects an expected decline in supply of water available to irrigate rice. In contrast, area planted to cotton is forecast to rise by 7 per cent to 139 000 hectares, because more favourable returns are expected from growing cotton compared with production alternatives.

Queensland Favourable winter rainfall was received in Queensland. Rainfall in south-western Queensland was above average and was average to below average in most other cropping regions in Queensland.

Total winter crop production in Queensland was forecast in early September to rise by 26 per cent in 2015–16 to 1.8 million tonnes, largely driven by forecast record chickpea production. Total area planted to winter crops is estimated to have risen by 5 per cent in 2015–16 to 1.2 million hectares.

Winter crop production in Queensland is not expected to be significantly below the September forecast of 1.8 million tonnes. Prospective winter crop yields in Queensland were not significantly affected by the drier than average seasonal conditions during early spring because crops were generally well developed.

Area planted to summer crops in Queensland is forecast to be largely unchanged in 2015–16, at 609 000 hectares. Total summer crop production in Queensland is forecast to fall slightly to 1.8 million tonnes. Area planted to grain sorghum is forecast to remain largely unchanged at

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445 000 hectares, while the area planted to cotton is forecast to rise by 4 per cent to 75 000 hectares.

Victoria Seasonal conditions were unfavourable in the major cropping regions in Victoria over winter. Winter rainfall was significantly below average, particularly in August, and soil moisture levels at the end of winter were well below average. Winter rainfall was sufficient for crops to continue developing but yield prospects declined.

Winter crop production in Victoria was forecast in early September to rise by 3 per cent in 2015–16 to 5.7 million tonnes, which largely reflected an expected increase in yields. However, yields were still expected to be below average.

Following the unfavourable start to spring and the revised seasonal outlook issued by the Bureau of Meteorology, winter crop production in Victoria is now forecast to be around 10 per cent lower than the September forecast of 5.7 million tonnes. Yield prospects in all major cropping regions in Victoria were adversely affected by the unfavourable seasonal conditions in early spring, generally to a greater extent than in other states.

South Australia Timely rainfall was received in South Australia in August, following unfavourable seasonal conditions in early winter. Below average rainfall in many cropping regions in June and July resulted in falling levels of soil moisture. Winter temperatures were below average in parts of the Eyre Peninsula and the northern districts, which slowed crop development.

Total winter crop production in South Australia was forecast in early September to be largely unchanged in 2015–16 at 7.5 million tonnes, reflecting an expected decline in average yields. Area planted to winter crops was estimated to be 1 per cent higher in 2015–16, at around 4 million hectares.

Following the unfavourable start to spring and the revised seasonal outlook issued by the Bureau of Meteorology, winter crop production in South Australia is now expected to be close to 10 per cent lower than the September forecast of 7.5 million tonnes. The unfavourable seasonal conditions during spring adversely affected yield prospects, particularly in some central cropping regions. Prospects in the Mallee and much of the south east were already below average at the end of winter.

Western Australia Rainfall in Western Australia during winter was timely and increased soil moisture to favourable levels. It followed generally less than favourable seasonal conditions during June and early July, when rainfall was generally average to below average.

Winter crop production in Western Australia was forecast in early September to increase by 9 per cent in 2015–16 to 15.8 million tonnes. Given the late winter rainfall and the favourable rainfall outlook for spring, at that time, average yields for the state were forecast to be above average. However, crops in some southern regions and earlier sown crops in all regions were expected to achieve around average yields.

Following the unfavourable start to spring and the revised seasonal outlook issued by the Bureau of Meteorology, winter crop production Western Australia is now forecast to be close to

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5 per cent less than the September forecast of 15.8 million tonnes. Prospective crop yields in Western Australia were reduced by the unfavourable seasonal conditions in early spring. Yield prospects in parts of the northern and central regions of the cropping zone—which had relatively low levels of soil moisture at the end of winter—were most affected.

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Productivity in Australia’s grains industry Productivity growth is key to maintaining profitability in the Australian grains industry. Grain growers that can improve the efficiency with which they combine land, labour, capital and other inputs can increase crop production despite limited resources. This enables them to benefit from emerging opportunities in global food markets and to offset long-term declines in their terms of trade.

Productivity growth occurs through multiple channels. Increased productivity may reflect advances in farm technologies and practices or broader uptake of existing technologies. Overall industry productivity growth also reflects improvements in how production is organised across farms. Structural adjustment through farm consolidation, in conjunction with the greater adoption of larger scale production technologies, has boosted productivity in the grains industry.

Cropping industry productivity Cropping industry productivity grew by 1.5 per cent a year, on average, from 1977–78 to 2012–13, underpinning strong output growth of 2.6 per cent a year in tandem with input growth of 1.1 per cent a year. Productivity grew strongly until the early 1990s, averaging 3.6 per cent a year from 1977–78 to 1988–89 (Figure 1). Since then, growth has been lower, averaging 1.1 per cent a year from 1988–89 to 2000–01 and 1.4 per cent a year from 2000–01 to 2012–13.

Figure 1 Trends in cropping specialists’ total factor productivity, total inputs and total outputs, 1977–78 to 2012–13

Productivity growth in the cropping industry has differed from broadacre agriculture as a whole (Table 1). Broadacre productivity growth averaged 1.1 per cent a year between 1977–78 and 2012–13. This reflected declining input use (–1 per cent a year) and modest output growth (0.1 per cent a year).

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Table 1 Average annual broadacre productivity growth by industry, 1977–78 to 2012–13

Category All broadacre Cropping Mixed crop–livestock

Beef Sheep

Total factor productivity

Productivity 1.1 1.5 0.9 1.3 0.2

Outputs 0.1 2.6 –0.8 1.1 –2.6

Inputs –1.0 1.1 –1.7 –0.2 –2.8

Partial factor productivity

Land 1.1 1.2 0.5 1.3 0.0

Labour 2.3 3.4 2.0 1.9 0.8

Capital 1.7 2.8 2.0 0.8 1.3

Materials –1.7 –1.5 –1.5 –1.0 –2.0

Services 1.0 1.8 0.9 1.0 0.2

Input use

Land –0.9 1.4 –1.3 –0.2 –2.6

Labour –2.2 –0.7 –2.8 –0.8 –3.4

Capital –1.5 –0.2 –2.9 0.3 –3.9

Materials 1.8 4.1 0.7 2.1 –0.6

Services –0.9 0.9 –1.7 0.1 –2.7

Productivity growth among broadacre industries has varied considerably (Figure 2). Until 1988–89, broadacre productivity growth was driven by significant gains in cropping (Figure 2). Since then the contribution from specialist livestock producers has been relatively stronger.

Figure 2 Broadacre total factor productivity growth, by period

The cropping industry has made significant productivity gains over the past 35 years, despite periods of adverse seasonal conditions. Advances in technology and changes in industry structure have helped support industry-level productivity growth. Development of more efficient farming systems, particularly those involving new crop varieties, conservation farming and GPS guidance systems, has increased yields and reduced labour use. Improved crop

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chemicals and application technologies have been important drivers of this change (Dunlop, Turner & Howden 2004; Gray, Leith & Davidson 2014; Hughes et al. 2011).

Advances in key cropping technologies have been accompanied by industry consolidation and growth in average farm size, which more than doubled over the past two decades as the number of farms declined by one-third (Dahl, Leith & Gray 2013). Larger farms tend to be more productive because of their greater capacity to adopt new technologies (Sheng, Zhao & Nossal 2011), including investments in equipment better suited to larger farms. A shift to larger and more efficient planting and harvesting machinery in the 1980s and 1990s, facilitated by larger average farm size, was a key contributor to productivity growth during this period (Nossal et al. 2009).

Table 2 Average annual cropping total factor productivity growth, by region, 1977–78 to 2012–13

Category Productivity growth Output growth Input growth

All cropping specialists 1.5 2.6 1.1

Southern region 1.7 3.2 1.5

Northern region 1.6 0.9 –0.7

Western region 1.4 3.5 2.1 Note: All cropping specialists also includes cropping specialists from outside the Grains Research and Development Corporation agroecological regions.

Average growth in cropping productivity has been consistent across the Grains Research and Development Corporation agroecological regions despite significant differences in regional characteristics. In the western and southern regions, productivity growth from 1977–78 to 2012–13 averaged 1.4 and 1.7 per cent, respectively, driven by strong input growth and even stronger growth in outputs. Although similar productivity growth occurred in the northern region (1.6 per cent), this resulted from reduced input use and more moderate output growth.

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References ABARES 2015a, Australian crop report, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, September.

ABARES 2015b, Agricultural commodities: September quarter 2015, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

ABARES 2015c, Weekly Australian climate, water and agricultural update, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, 15 October.

Bureau of Meteorology 2015, National Climate Outlook, 7 October 2015

Dahl, A, Leith, R & Gray, EM 2013, ‘Productivity in the broadacre and dairy industries’, Agricultural commodities: March quarter 2013, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

Dunlop, M, Turner, GM & Howden, SM 2004, Future sustainability of the Australian grains industry: a consultancy report prepared for the Grains Council of Australia and Grains Research and Development Corporation, CSIRO Sustainable Ecosystems, Canberra.

Gray, EM, Leith, R & Davidson, A 2014, ‘Productivity in the broadacre and dairy industries’, in Agricultural commodities: March quarter 2014, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

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