Physical and financial performance benchmarks for grain …data.daff.gov.au/data/warehouse/pe_abares99001788/Grains... · 2011-02-22 · New South Wales north-east and Queensland

Physical and financial performance benchmarks for grain producing

farms, New South Wales north-east and Queensland south-east

agroecological zone

Australian Bureau of Agricultural and Resource Economics and Sciences

Australian Government

www.aba re s . gov. auS c i e n c e a n d e c o n o m i c s f o r d e c i s i o n - m a k e r s

ABARES report prepared for the Grains Research and Development Corporation

Stephen Hooper and Caroline Levantis

February 2011

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© Commonwealth of Australia 2011

This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgment of the source is included. Major extracts or the entire document may not be reproduced by any process without the written permission of the Executive Director, ABARES.

The Australian Government acting through the Australian Bureau of Agricultural and Resource Economics and Sciences has exercised due care and skill in the preparation and compilation of the information and data set out in this publication. Notwithstanding, the Australian Bureau of Agricultural and Resource Economics and Sciences, its employees and advisers disclaim all liability, including liability for negligence, for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon any of the information or data set out in this publication to the maximum extent permitted by law.

Hooper, S and Levantis, C 2011, Physical and financial performance benchmarks for grain producing farms, New South Wales north-east and Queensland south-east agroecological zone, ABARES report prepared for the Grains Research and Development Corporation, Canberra, February.

Australian Bureau of Agricultural and Resource Economics and Sciences Postal address GPO Box 1563 Canberra ACT 2601 Australia Switchboard +61 2 6272 2010 Facsimile +61 2 6272 2001 Email [email protected] Web abares.gov.au

ABARES project 43145

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) was formed following the merger of the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Bureau of Rural Sciences (BRS) in 2010–11.

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ContentsIntroduction 1

Broadacre production in the New South Wales north-east and Queensland south-east zone 3

Farm financial performance 4

Socioeconomic benchmarks 5

Farm performance benchmarks 7

Survey methods and definitions 16

Maps1 GRDC agroecological zones 1

Tables1 Agricultural production in the New South Wales north-east and Queensland

south-east zone 3

2 Summary of financial performance: New South Wales north-east and Queensland south-east zone 5

3 Socioeconomic benchmarks: New South Wales north-east and Queensland south-east zone 6

4 Physical performance benchmarks and prices: New South Wales north-east and Queensland south-east zone 14

5 Financial performance benchmarks: New South Wales north-east and Queensland south-east zone 15

Figuresa Farm business profit, New South Wales north-east and Queensland south-east zone 4

b Rate of return on capital at full equity, excluding capital appreciation, New South Wales north-east and Queensland south-east zone 6

c Annual rainfall, New South Wales north-east and Queensland south-east zone 7

d Land use intensity, New South Wales north-east and Queensland south-east zone 9

e Average grain yield per hectare sown, New South Wales north-east and Queensland south-east zone 10

f Average price received for grain, New South Wales north-east and Queensland south-east zone 10

g Water use efficiency, New South Wales north-east and Queensland south-east zone 11

h Total cost to value of output ratio, New South Wales north-east and Queensland south-east zone 13

New South Wales north-east and Queensland south-east ABARES

1

IntroductionIn May 2010 the Grains Research and Development Corporation (GRDC) commissioned ABARE (now ABARES) to use data from its extensive Australian agricultural and grazing industries survey (AAGIS) to develop a range of physical and financial performance benchmarks for each GRDC agroecological zone (map 1). The objective of this study is to enhance grain producers’ and consultants’ awareness of the financial performance of grain producing farms’, and some of the key factors driving the stronger results of the better performing farms.

The analysis has been conducted separately for each of the 13 agroecological zones (map 1) for the three-year period 2006–07 to 2008–09. In addition, data for the period 1978–79 to 2008–09 are presented for selected variables to provide a longer term perspective. This report presents the results of the analysis for the New South Wales north-east and Queensland south-east agroecological zone.

The current analysis divides the grain industry into two sectors—specialist grain producing farms and mixed enterprise grain producing farms. Farms classified as being in the wheat and other crops industry (box 1) are referred to as specialist grain farms. Any broadacre farm surveyed by ABARES that is not classified as being in the wheat and other crops industry but that planted more than 40 hectares of grain crops is classified as a mixed enterprise grain farm.

ABARES (formerly ABARE) has conducted the AAGIS annually since 1977–78 to collect detailed physical, financial and socioeconomic data from broadacre farms. In addition to the standard farm financial performance variables reported in ABARES publications, additional benchmarks from the existing database were developed to enable a comparison between farms of different scales of operation. These benchmarks fall into three broad categories:

GRDC agroecological zonesmap 1

WA Mallee and Sandplain

WA northern

WA eastern

WA central

SA mid-north – lower Yorke and Eyre

SA Vic Mallee

SA Vic Bordertown–Wimmera

Vic high rainfall and Tas grains area

NSW Vic slopes

NSW central

NSW north-west Qld south-west

Qld central

NSW north-east Qld south-east

2


• Whole-of-farm benchmarks—including farm size, rainfall, land use intensity, enterprise mix, rate of return and a range of farm financial performance variables expressed on a per hectare operated basis to enable a direct comparison between farms of different scales.

• Enterprise-specific benchmarks—including grain yields, livestock reproduction rates, wool production per head shorn and the average price received for each commodity produced.

• Socioeconomic benchmarks—covering the age, education and off-farm employment of the operator and spouse. In addition, the total off-farm income of the operator and spouse is estimated.

This report comprises four main sections, starting with a brief discussion of the value of broadacre agriculture in the New South Wales north-east and Queensland south-east zone. This is followed by a discussion of farm financial performance (covering farm cash income, farm business profit and rate of return) and socioeconomic benchmarks. The main body of this report contains a detailed discussion of the main performance benchmarks of the top performing farms in the zone.

Performance benchmarks for the average and top performing farmsIn this research, the GRDC was interested in obtaining an increased understanding of the factors driving the performance of top performing farms. To address this, the top performing farms in each sector were identified by ranking the surveyed farms by rate of return on capital excluding capital appreciation. For all zones, the top performing farms were defined as the top 10 per cent of farms based on rate of return within the specified three-year period. In some zones the top 10 per cent was not a representative sample, so the cut-off was increased to the top 20 or 30 per cent of farms. Where the top 30 per cent of farms did not result in a representative sample, the analysis of the top performing farms was not undertaken.

The superior financial performance of the top performing farms in each group is likely to be the result of a number of factors, including differences in the scale of the farm, the natural resources on the farm lands and management decisions and practices. The effect of these differences may be reflected in the farm’s overall production, enterprise mix, prices received

box 1 Broadacre farms’ industry classification

Wheat and other crops industry (ANZSIC06 Class 0146 and 0149) includes farms engaged mainly in growing rice, other cereal grains, coarse grains, oilseeds and/or pulses.

Mixed livestock–crops industry (ANZSIC06 Class 0145) includes farms engaged mainly in running sheep, beef cattle or both and growing cereal grains, coarse grains, oilseeds and/or pulses.

Sheep industry (ANZSIC06 Class 0141) includes farms engaged mainly in running sheep.

Beef industry (ANZSIC06 Class 0142) includes farms engaged mainly in running beef cattle.

Sheep–beef industry (ANZSIC06 Class 0144) includes farms engaged mainly in running both sheep and beef cattle.


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or cost of production. To investigate this further, a series of physical and financial performance benchmarks were used for each of the four groups:

• specialist grain farms• top performing specialist grain farms• mixed enterprise grain farms• top performing mixed enterprise grain farms.

Broadacre production in the New South Wales north-east and Queensland south-east zoneIn the three years to 2008–09, there were an estimated 4313 broadacre grain producing farms in the New South Wales north-east and Queensland south-east agroecological zone (table 1). One-third of these farms were classified as specialist grain farms and two-thirds as mixed enterprise grain farms. During this period, grain farms in the zone produced grain crops worth an estimated $965 million a year. Wheat and grain sorghum were the two most commonly grown grain crops, accounting for 44 per cent and 28 per cent of the total value of crop production, respectively. Grain producers in the zone also sold significant quantities of beef cattle, worth an estimated $592 million a year. Specialist grain farms accounted for almost 70 per cent of the value of grain production in the zone, while mixed enterprise grain farms accounted for 88 per cent of the value of livestock and wool sales.

1 Agricultural production in the New South Wales north-east and Queensland south-east zone average per financial year over the period 2006–07 to 2008–09

specialist mixed enterprise all broadacre grain farms grain farms grain farms

contribution contribution contribution all farms of top 10% a all farms of top 10% a all farms of top 10% a

Average number of farms 1 423 2 891 4 313 Sample number 143 251 394

Gross value of: $m % $m % $m %Grain crop sales 672 22 293 38 965 26– wheat 280 24 143 31 424 26– grain sorghum 195 27 71 39 266 30– barley 59 11 38 58 98 30– oats 1 0 3 50 4 34– oilseeds 44 13 8 38 52 17– pulses 60 15 24 38 84 22– other grain crops 33 18 5 38 38 20Hay sales 4 4 24 37 28 32Other crop sales 26 12 71 7 98 8

Livestock sales 85 3 621 8 706 7– beef cattle 76 4 517 8 592 8– sheep and lambs 6 0 59 5 65 5– wool 3 0 46 4 49 4

a Contribution of the top 10 per cent of farms (according to rate of return, excluding capital appreciation) to the sector in the zone. Source: ABARES, Australian agricultural and grazing industries survey.

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When farms in both sectors of the grain industry were distributed by rate of return excluding capital appreciation, the top 10 per cent of farms in the zone contributed a disproportionately large share of the value of agricultural production by broadacre grain producing farms. The top performing specialist grain farms accounted for a large share of the value of wheat and grain sorghum production, but a relatively small share of beef cattle production. Similarly, in the case of the mixed enterprise grain farms, the top performing farms contributed a disproportionately large share of the value of all types of grain crops grown in the zone and a relatively small share of the value of livestock production.

Farm financial performanceDuring the three years to 2008–09, specialist grain producing farms in the New South Wales north-east and Queensland south-east agroecological zone realised high farm cash incomes and modest annual business profits (table 2). On average, these farms generated annual total cash receipts of almost $656 000 a farm, with 77 per cent derived from the sale of grain crops (table 2).

In comparison, mixed enterprise grain producing farms realised a more modest annual farm cash income and a farm business loss. Annually, these farms generated average total cash receipts of almost $405 000 a farm, with 44 per cent derived from the sale of beef cattle and 33 per cent from grain crop production (table 2).

While specialist grain farms, on average, have realised small profits in most years since 1979–80, mixed enterprise grain farms have realised small losses (figure a). Furthermore, there is no apparent trend towards higher or lower profits in either sector. In contrast, the top performing farms in both sectors realised a strengthening in farm profits during the 2000s.

Farm business pro�t, New South Wales north-east and Queensland south-east zone

2008–09$‘000

a

–100

100

200

300

400

500

600

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to 2

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09

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91

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94

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97

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981–

82

1982

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984–

85

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1997

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999–

2000

2000

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91

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981–

82

1982

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984–

85

specialist grain farms mixed enterprise grain farms

top 10 per centaverage


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Although the profitability of the top performing farms strengthened over the past decade, so too did the average value of farm capital. Consequently, producers’ rate of return on capital, excluding capital appreciation, showed considerable volatility but no sustained improvement during this period (figure b).

Socioeconomic benchmarksIn the three years to 2008–09, the average age of operators of the top performing specialist farms, and their spouses, was the same as those in the specialist sector overall (table 3). Proportionately, more of the operators of the top performing specialist farms, and their spouses, had completed a trade apprenticeship or technical college course. However, a smaller proportion of these farmers had undertaken tertiary education, compared with the sector overall. During this period, the operators of specialist farms, and their spouses, earned an average of almost $35 000 a year from off-farm income sources, predominantly from salaries earned by the operator’s spouse.

2 Summary of financial performance: New South Wales north-east and Queensland south-east zone, 2006–07 to 2008–09, by industry average per farm

mixed enterprise specialist grain farms grain farms

average top 10% a average top 10% a

Farm cash receipts $ 655 829 (11) 1 012 911 (16) 404 587 (10) 1 019 192 (20)

– beef cattle $ 53 194 (23) 16 934 (37) 178 716 (20) 207 602 (35)

– crops $ 506 484 (12) 936 994 (17) 135 373 (12) 617 234 (21)

– sheep and lambs $ 4 396 (27) 0 (0) 20 255 (13) 15 272 (67)

– wool $ 2 015 (52) 0 (0) 16 029 (14) 8 436 (80)

less Farm cash costs $ 527 155 (11) 551 304 (11) 368 057 (12) 669 419 (23)

– contracts $ 35 323 (16) 27 664 (21) 19 952 (14) 65 478 (24)

– crop and pasture chemicals $ 59 636 (11) 71 141 (19) 21 122 (14) 59 022 (27)

– fuel, oil and grease $ 56 191 (14) 58 198 (10) 27 762 (9) 41 841 (16)

– fertilisers $ 48 542 (11) 84 519 (22) 18 480 (13) 55 879 (29)

– interest payments $ 71 317 (20) 87 405 (19) 51 351 (13) 58 632 (16)

– repairs and maintenance $ 51 247 (14) 52 611 (17) 29 044 (10) 39 207 (18)

Farm cash income $ 128 675 (25) 461 606 (32) 36 531 (31) 349 773 (20)

plus build-up in trading stocks $ 12 170 (131) 109 963 (36) 4 733 (199) 59 333 (55)

less depreciation $ 59 113 (6) 68 754 (11) 36 547 (6) 55 164 (13)

less imputed cost of family labour $ 55 794 (4) 61 828 (15) 51 607 (3) 51 086 (18)

Farm business profit $ 25 937 (111) 440 988 (32) –46 890 (23) 302 856 (21)

Farm business profit at full equity $ 112 287 (30) 536 254 (26) 12 859 (80) 368 152 (17)

Rate of return at full equity – excluding capital appreciation % 2.2 (26) 10.2 (21) 0.3 (78) 6.2 (14)

– including capital appreciation % 6.4 (18) 15.4 (20) 3.7 (30) 7.7 (24)

a Ranked by rate of return at full equity, excluding capital appreciation. Note: Figures in parentheses are relative standard errors (RSEs), which are standard errors expressed as a percentage of the estimate provided. A guide on how to use RSEs is in the survey methods and definitions section.

6


Rate of return on capital at full equity, excluding capital appreciation,New South Wales north-east and Queensland south-east zoneb

–5

%

5

10

15

20

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91

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94

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97

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82

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85

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09

1997

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2000

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82

1982

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85specialist grain farms mixed enterprise grain farms


3 Socioeconomic benchmarks: New South Wales north-east and Queensland south-east, 2006–07 to 2008–09, by industry


average top 10% a average top 10% aOperator

Average age yr 55 (2) 55 (2) 57 (1) 61 (4)

Education – primary school % 0 (85) 2 (85) 4 (20) 12 (65)

– 1–4 years high school % 39 (15) 41 (51) 40 (12) 31 (48)


– trade apprenticeship/technical college % 20 (21) 44 (50) 12 (25) 6 (59)

– tertiary % 24 (26) 6 (55) 19 (18) 2 (92)

Weeks of work off farm wks 4 (39) 1 (173) 4 (26) 0 (0)

Spouse Average age yr 53 (2) 54 (2) 56 (1) 57 (4)

Education – primary school % 1 (94) 0 (0) 1 (69) 0 (0)



– trade apprenticeship/technical college % 12 (51) 31 (52) 10 (20) 8 (89)

– tertiary % 41 (18) 14 (25) 37 (12) 48 (34)

Weeks of work off farm wks 18 (15) 12 (51) 15 (11) 18 (41)

Operator and spouse off-farm income $ 34 455 (14) 24 953 (29) 37 910 (11) 25 420 (24)



7

In the mixed enterprise grain sector, the average age of operators of the top performing farms, and their spouses, was similar to those in the mixed enterprise sector overall (table 3). However, proportionately more of these operators and spouses had completed high school education. Compared with the mixed enterprise sector overall, proportionately fewer of the top performing farms’ operators had undertaken a tertiary course; however, the reverse was true for the spouses. In the three years to 2008–09, the operators of mixed enterprise farms, and their spouses, generated an average $38 000 a year from off-farm income sources, mostly from the spouse’s off-farm earnings.

Farm performance benchmarksFarm financial performance in the New South Wales north-east and Queensland south-east zone has been influenced by a range of factors that have affected the farms’ underlying profitability (including input and output prices, seasonal conditions, farm productivity and management decisions), as well as producers’ capital investments to boost the scale of the farming business by acquiring additional land. In this section, ABARES survey data are used to investigate the effect of changes in farm scale and farm profitability to improve the industry’s understanding of the factors driving the superior performance of the top performing farms in both sectors of the grain industry.

In the three years to 2008–09, the superior performance of the top 10 per cent of farms in both the specialist and mixed enterprise sectors of the grain industry is unlikely to have been to the result of farm size, since the area operated by these farms was essentially the same as the sector average (table 4). Also, in the three years to 2008–09, there was only a small difference in the annual rainfall (see box 2) received by farms in the specialist and mixed enterprise sectors (figure c). However, the timing of rainfall, not just the annual quantity, is an important factor influencing farm performance.

Annual rainfall, New South Wales north-east and Queensland south-east zonec

mm

500

600

700

800

900

2006

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82

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On average, the top performing farms in both sectors of the grain industry are more intensively operated than other farms in the sector, as measured by the farms’ sheep equivalents per hectare operated (see box 2). While this pattern has persisted since 1979–80, in the mixed enterprise sector the top performing farms have increased land use intensity significantly during the 2000s (figure d). This has allowed the operators of the top performing farms to sow a greater proportion of the farms’ area to crops while also having a large sheep flock or beef cattle herd.

In addition to planting proportionately more land to grain crops, in the three years to 2008–09, the top performing specialist grain producers, on average, responded to favourable grain sorghum prices by sowing proportionately more area to grain sorghum and less to most of the other grains (table 4). In contrast, the top performing mixed enterprise grain producers sowed proportionately less area to lower value oats and more to almost all other grains.

Two other factors influencing farm production and receipts are the average grain yield (see box 2) achieved and the average grain price (see box 2) received. These reflect differences in the market price of the different grains, as well as the mix of grains grown. For example, pulses realised a lower yield than wheat but a higher price in the three years to 2008–09 (table 4). Consequently, the benchmarks for a farm producing proportionately more pulses would show a lower average grain yield but a higher average grain price relative to a farm producing proportionately more wheat.

box 2 Definitions of key terms and concepts

Land use intensity A proxy of the total resources used by agriculture is the measure ‘sheep equivalents’, which converts the resources used to produce sheep, beef cattle, dairy cattle and crops into a single unit. Insights into a farm’s land use intensity can be gained by expressing the sheep equivalent measure on a per hectare operated basis.

Average grain yield For each farm surveyed, this is calculated as the weighted average yield realised across all crop types grown.

Average grain price For each farm surveyed, this is calculated as the weighted average price received across all crop types grown.

Water use efficiency Provides insights into how successfully a farm operator has converted rainfall into farm production. It is defined as farm cash receipts plus the build-up in the value of trading stocks per hectare per 100 millimetres of rainfall.

Ratio of the value of Quantifies total outlays on all farm inputs to produce one dollar of output. inputs to outputs Changes in the ratio of inputs to outputs over time provide insights into changes in the farm’s profitability that are independent of changes in farm size. The value of farm inputs is calculated as total cash costs plus depreciation and the imputed value of unpaid family labour. The value of farm outputs is defined as farm cash receipts plus the build-up in the value of farm trading stocks.


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Since the late 1970s, the top performing farms in both sectors of the grain industry in the New South Wales north-east and Queensland south-east agroecological zone realised a higher average grain yield per hectare sown to crops (figure e). Also, these producers achieved a higher rate of growth in the average grain yield. The survey data suggest that this is a result of these producers, on average, increasing the proportion of the cropping area sown to higher yielding crops like grain sorghum, as well as steady underlying growth in the yield realised by all types of crops grown in the zone over time. The combined effect of more land being sown and higher grain yields resulted in the top performing specialist and mixed enterprise grain farms annually harvesting and selling between two and four times more grain, respectively, than the sector average in the three years to 2008–09.

Over the past three decades the average real grain price received in the New South Wales north-east and Queensland south-east zone has weakened slightly, although this trend reversed sharply in the three years to 2008–09 (figure f ). However, there is no consistent trend in terms of the top performing farms consistently realising higher (or lower) prices. The higher average grain price realised in the three years to 2008–09 largely reflects international market developments, such as lower global cereal stocks relative to consumption, increased use of grain to produce ethanol and increased use of vegetable oils to produce biodiesel.

In addition to growing grain crops, broadacre grain producing farms’ financial performance in the New South Wales north-east and Queensland south-east zone was influenced heavily by developments in the sheep meat, wool and beef cattle industries, particularly for mixed enterprise grain farms. In the three years to 2008–09, the top performing farms in both sectors of the grain industry were less dependent on livestock than other farming businesses in the

Land use intensity, New South Wales north-east and Queenslandsouth-east zoned

0

2

4

6

8

10

12

shee

p eq

uiva

lent

s pe

r hec

tare

ope

rate

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1997

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85specialist grain farms mixed enterprise grain farms


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Average grain yield per hectare sown, New South Wales north-east andQueensland south-east zonee

t/ha

1

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3

4

5



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Average price received for grain, New South Wales north-east andQueensland south-east zone

2008–09$/t

f

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zone, with these farms selling markedly fewer animals. However, the top performing farms realised higher prices for livestock during this period. For example, relative to the sector average, the top performing mixed enterprise farms realised 42 per cent more for adult sheep, 13 per cent more for lambs and 15 per cent more for beef cattle, but realised 2 per cent less for wool.

The financial performance of a producer’s land allocation and production decisions is affected by more than just relative prices and yields. Seasonal conditions, particularly rainfall, affect crops and livestock differently. Crops depend on rain during a narrow growing season, while rain is generally needed over a longer period for pasture growth for livestock production. Although poor rainfall during the grain growing season can result in crop failure or low yields, poor pasture growth because of a lack of rainfall can be supplemented with purchased (or stored) grain and fodder. In any year, maintaining or improving a farm’s financial performance depends on how effectively a producer can take into account rainfall patterns when making farming decisions (about enterprise mix between crops and livestock and the mix of crop types and cultivars sown). Water use efficiency (see box 2) is one benchmark that provides insights into how effectively a producer’s farming practices convert rainfall into output. For this analysis, rainfall data were sourced from the Bureau of Meteorology, with each farm’s annual rainfall assumed to be the same as that observed at the nearest rainfall data collection point.

In the three years to 2008–09, the top performing farms in both sectors of the grain industry consistently generated more revenue per hectare per 100 millimetres of rain (table 5, figure g). While this is not a recent development, the top performing farms’ relative water use efficiency

Water use e�ciency, New South Wales north-east and Queenslandsouth-east zone

2008–09dollars

g

40

80

120

160

200

dolla

rs p

er 1

00 m

m p

er h

ecta

re

2006

–07

to 2

008–

09

1997

–98

to 1

999–

2000

2000

–01

to 2

002–

03

2003

–04

to 2

005–

06

1985

–86

to 1

987–

88

1988

–89

to 1

990–

91

1991

–92

to 1

993–

94

1994

–95

to 1

996–

97

1979

–80

to 1

981–

82

1982

–83

to 1

984–

85

2006

–07

to 2

008–

09

1997

–98

to 1

999–

2000

2000

–01

to 2

002–

03

2003

–04

to 2

005–

06

1985

–86

to 1

987–

88

1988

–89

to 1

990–

91

1991

–92

to 1

993–

94

1994

–95

to 1

996–

97

1979

–80

to 1

981–

82

1982

–83

to 1

984–

85



12


has improved over the past decade. For example, during the 1980s and much of the 1990s, relative to the sector average, the top performing farms’ water use efficiency averaged 33 per cent higher for specialist farms and 21 per cent higher for mixed enterprise farms. In the three years to 2008–09, water use efficiency was 66 per cent higher for the top performing specialist farms and 173 per cent higher for the top performing mixed enterprise grain farms. The relatively stronger growth in water use efficiency realised by the top performing farms largely reflects the rising land use intensity and the growth in average grain yields realised by these farms during this period.

The higher water use efficiency of the top performing farms in both sectors of the grain industry is an important factor and likely partially explains the stronger financial performance of these farms. However, differences in producers’ cost of production can also be a significant factor driving farm cash incomes and profits.

In the three years to 2008–09, expenditure on farm inputs per hectare operated by the top performing farms in both the specialist and mixed enterprise grain sectors was considerably higher than the sector average. The composition of these costs also differed from the sector average (table 5). During this period, the top performing specialist grain farms spent $365 per hectare operated on farm inputs, more than 6 per cent higher than the sector average. Expenditure on inputs by these producers was proportionately higher for fertilisers, crop and pasture chemicals, interest payments and freight, but proportionately lower for contracts, hired labour and livestock purchases.

In the case of the top performing mixed enterprise grain farms, expenditure on farm inputs averaged $344 per hectare operated—86 per cent more than the sector average. Proportionately, expenditure by these producers was higher on fertilisers, crop and pasture chemicals, contracts, fuel and fodder, but lower for interest payments and livestock purchases (table 5).

While the costs of farm inputs per hectare operated were higher for some farms, this could reflect either inefficiencies in the use of these inputs or a range of factors, including differences in farms’ enterprise mix or land use intensity. Another method of comparing the relative costs of farms with different scales of operation and enterprise mix is the ratio of the value of inputs to outputs (see box 2). A ratio of 80 indicates that the producer spent 80 cents on inputs to produce one dollar of output. Growth in the value of a farm’s output achieved through a smaller (greater) corresponding growth in expenditure on inputs is reflected in a lower (higher) ratio and stronger (weaker) farm financial performance. Furthermore, to maintain a stable value of inputs to outputs ratio, growth in the value of outputs needs to occur to offset increases in input prices that occur over time.

Over the past three decades, farm survey data indicate that the ratio of inputs to outputs has varied considerably in both the specialist and mixed enterprise grain producing sectors, but there is no trend toward higher or lower costs per dollar of output produced (figure h). This suggests that the growth in the value of output on grain producing farms during this period in the New South Wales north-east and Queensland south-east zone has been largely matched by increased expenditure on inputs.


13

Total cost to value of output ratio, New South Wales north-east andQueensland south-east zoneh

25

50

75

100

125

0

cent

s sp

ent o

n in

puts

per

dol

lar o

f out

put

(200

8–09

dol

lars

)

Total costs include total cash costs plus the imputed cost of family labour and depreciation. Value of output equals total cash receipts plus the build-up in the value of trading stocks.

2006

–07

to 2

008–

09

1997

–98

to 1

999–

2000

2000

–01

to 2

002–

03

2003

–04

to 2

005–

06

1985

–86

to 1

987–

88

1988

–89

to 1

990–

91

1991

–92

to 1

993–

94

1994

–95

to 1

996–

97

1979

–80

to 1

981–

82

1982

–83

to 1

984–

85

2006

–07

to 2

008–

09

1997

–98

to 1

999–

2000

2000

–01

to 2

002–

03

2003

–04

to 2

005–

06

1985

–86

to 1

987–

88

1988

–89

to 1

990–

91

1991

–92

to 1

993–

94

1994

–95

to 1

996–

97

1979

–80

to 1

981–

82

1982

–83

to 1

984–

85



14


4 Physical performance benchmarks and prices: New South Wales north-east and Queensland south-east, 2006–07 to 2008–09, by industry average per farm



Annual average rainfall mm 614 (2) 648 (2) 612 (1) 613 (3)

Total area operated, 30 June ha 1 547 (11) 1 552 (11) 1 990 (9) 1 984 (15)

Land use intensity (sheep equivalents) hd/ha 7.2 (8) 8.3 (8) 4.0 (7) 7.3 (7)

Total labour used wks 128 (6) 132 (10) 108 (3) 116 (18)

– sheep equiv. per labour unit dse/labour unit 4 211 (7) 4 653 (19) 3 499 (6) 5 975 (20)

Proportion of land sown to crops % 54.7 (9) 67.7 (8) 17.3 (10) 42.7 (16)

Total area sown to grain crops ha 810 (12) 1047 (15) 290 (10) 670 (16)

– wheat % 49.8 (10) 49.4 (22) 43.9 (7) 43.2 (18)

– barley % 14.3 (17) 6.4 (41) 15.0 (15) 16.5 (56)

– oats % 1.7 (30) 0.8 (47) 18.2 (13) 8.9 (36)

– grain sorghum % 19.7 (13) 32.9 (21) 14.5 (16) 19.8 (32)

– oilseeds % 3.3 (31) 1.7 (84) 1.1 (37) 1.8 (58)

– pulses % 8.4 (20) 7.1 (33) 5.1 (28) 8.5 (27)

Grain production t 1 674 (11) 3 426 (22) 422 (13) 1 808 (20)

Number of sheep, 30 June no. 122 (30) 0 (0) 665 (11) 260 (78)

Sheep and lambs sold no. 62 (26) 0 (0) 296 (11) 172 (68)

– lambs sold no. 41 (28) 0 (0) 152 (15) 58 (98)

Number of beef cattle no. 115 (16) 31 (47) 384 (11) 497 (29)

Beef cattle sold no. 68 (21) 17 (103) 215 (15) 217 (33)

Wool production kg 555 (30) 0 (0) 2 688 (12) 1 539 (83)

Yields Average grain yield t/ha 2.1 (8) 3.3 (8) 1.5 (9) 2.7 (12)

– wheat t/ha 1.7 (14) 2.6 (17) 1.5 (12) 2.1 (14)

– barley t/ha 1.5 (17) 2.1 (10) 1.6 (17) 3.2 (7)

– grain sorghum t/ha 4.0 (6) 5.1 (8) 3.0 (14) 5.0 (14)

– oilseeds t/ha 1.7 (10) 2.3 (3) 1.5 (19) 2.0 (13)

– pulses t/ha 1.2 (9) 1.4 (18) 1.3 (15) 1.5 (14)

Calves branded per 100 cows mated % 87.0 (3) 88.0 (2) 84.9 (2) 88.8 (4)

Lambs marked per 100 ewes mated % 90.9 (8) na 81.2 (5) 76.7 (26)

Wool clip per head shorn kg/hd 4.3 (10) na 4.1 (4) 3.8 (6)

Prices received Average grain price $/t 300 (4) 298 (8) 290 (4) 320 (6)

– wheat $/t 323 (6) 330 (13) 304 (5) 347 (9)

– barley $/t 258 (7) 309 (6) 271 (6) 300 (5)

– grain sorghum $/t 242 (5) 245 (11) 246 (8) 288 (13)

– oilseeds $/t 754 (10) 864 (2) 549 (12) 650 (17)

– pulses $/t 511 (10) 562 (10) 439 (16) 490 (24)

Adult sheep $/hd 45 (28) na 62 (11) 88 (25)

Prime lambs $/hd 85 (16) na 78 (4) 89 (4)

Wool c/kg 501 (14) na 573 (5) 560 (17)

Beef cattle $/hd 777 (6) 989 (67) 831 (6) 957 (10)

a Ranked by rate of return at full equity, excluding capital appreciation. na Not applicable. Note: Figures in parentheses are relative standard errors (RSEs), which are standard errors expressed as a percentage of the estimate provided. A guide on how to use RSEs is in the survey methods and definitions section.


15

5 Financial performance benchmarks: New South Wales north-east and Queensland south-east, 2006–07 to 2008–09, by industry average per farm



Farm cash receipts $/ha 426 (8) 672 (8) 203 (10) 524 (17)

Receipts from the main agricultural activities – crops $/ha 327.4 (11) 603.9 (10) 68.0 (14) 311.1 (19)

– beef cattle $/ha 34.4 (22) 10.9 (31) 91.2 (17) 113.6 (33)

– sheep and lambs $/ha 2.8 (29) 0.0 (0) 10.2 (16) 7.7 (61)

– wool $/ha 1.3 (52) 0.0 (0) 8.1 (16) 4.3 (74)

Water use efficiency $/100 mm/ha 75 (8) 124 (10) 34 (9) 93 (18)

Farm cash costs $/ha 343 (8) 365 (11) 185 (10) 344 (21)

– administration $/ha 13.5 (20) 12.4 (28) 5.7 (10) 8.4 (28)

– beef cattle purchases $/ha 12.5 (27) 0.0 (144) 28.0 (31) 33.8 (60)

– contracts $/ha 22.8 (11) 17.8 (22) 10.0 (14) 33.0 (20)

– crop and pasture chemicals $/ha 38.6 (13) 45.9 (12) 10.6 (15) 29.8 (27)

– fertilisers $/ha 31.4 (14) 54.5 (17) 9.3 (15) 28.2 (28)

– fodder $/ha 2.5 (28) 0.0 (0) 15.2 (28) 40.8 (89)

– freight $/ha 13.2 (15) 20.8 (21) 1.7 (21) 8.1 (41)

– fuel, oil and grease $/ha 36.3 (10) 37.5 (9) 14.0 (10) 21.1 (14)

– handling and marketing $/ha 11.1 (22) 14.6 (61) 4.6 (14) 8.4 (33)

– hired labour $/ha 18.0 (18) 13.5 (22) 7.4 (12) 13.7 (45)

– interest $/ha 46.1 (16) 56.3 (17) 25.8 (12) 29.6 (18)

– repairs and maintenance $/ha 33.1 (10) 33.9 (21) 14.6 (10) 19.8 (16)

– shearing and crutching $/ha 0.4 (30) 0.0 (0) 1.6 (16) 0.7 (86)

– sheep purchases $/ha 0.6 (36) 0.0 (0) 1.4 (30) 0.4 (111)

Farm financial performance Farm cash income $/ha 83.6 (25) 306.0 (24) 18.3 (34) 179.9 (15)

Farm business profit $/ha 16.8 (108) 284.2 (26) –23.6 (25) 152.7 (19)

Total cost to value of output ratio cents/$ of output 96.1 (4) 60.7 (13) 111.5 (3) 71.9 (5)

Total farm capital $/ha 3 415 (7) 3 793 (8) 2 163 (8) 3 114 (9)

Rate of return on capital at full equity – excluding capital appreciation % 2.2 (26) 10.2 (21) 0.3 (78) 6.2 (14)


Farm equity $/ha 2 503 (11) 3 014 (6) 1 779 (8) 2 520 (13)

Return on farm equity – excluding capital appreciation % 0.7 (111) 9.4 (26) –1.3 (24) 6.1 (17)



16


Survey methods and definitionsABARES has conducted surveys of selected Australian agricultural industries since the 1940s. These surveys provide a broad range of information on the economic performance of farm business units in the rural sector. This comprehensive set of information is widely used for research and analysis which forms the basis of many publications, briefing material and industry reports. The annual broadacre Australian agricultural and grazing industries survey (AAGIS) commenced in 1978–79.

Target populationsThe AAGIS is designed from a frame (population list) drawn from the Australian Business Register (ABR) and maintained by the Australian Bureau of Statistics. The ABR-based frame provided to ABARES consists of agricultural businesses registered with the Australian Taxation Office, together with their corresponding statistical local area, industry classification and a size of operation variable.

ABARES surveys target farming establishments that make a significant contribution to the total value of agricultural output (commercial farms). Farms excluded from the ABARES target population will be the smallest units, and in aggregate will contribute less than 2 per cent to the total value of agricultural production for the industries covered by the surveys.

Reliability of estimatesThe reliability of the estimates of population characteristics published by ABARES depends on the design of the sample and the accuracy of the collection of characteristics for the individual sample farms.

Sampling errorsOnly some of the farms in a particular industry are surveyed. The data collected from each sample farm are weighted to calculate population estimates. Estimates derived from these farms are likely to be different from those that would have been obtained if information had been collected from a census of all farms. Any such differences are called ‘sampling errors’.

The size of the sampling error is mostly influenced by the survey design and the estimation procedures, as well as the sample size and the variability of farms in the population. The larger the sample size, the lower the sampling error is likely to be. Hence, national estimates are likely to have lower sampling errors than industry and state estimates.

To give a guide to the reliability of the survey estimates, standard errors are calculated for all estimates published by ABARES. These estimated errors are expressed as percentages of the survey estimates and termed ‘relative standard errors’ (RSEs).


17

Calculating confidence intervals using relative standard errorsRSEs can be used to calculate ‘confidence intervals’ that give an indication of how close the actual population value is likely to be to the survey estimate.

To obtain the standard error, multiply the relative standard error by the survey estimate and divide by 100. For example, if average total cash receipts are estimated to be $100 000 with a relative standard error of 6 per cent, the standard error for this estimate is $6000. This is one standard error. Two standard errors equal $12 000.

There is roughly a two in three chance that the ‘census value’ (the value that would have been obtained if all farms in the target population had been surveyed) is within one standard error of the survey estimate. This range of one standard error is described as the 66 per cent confidence interval. In this example, there is an approximately two in three chance that the census value is between $94 000 and $106 000 ($100 000 plus or minus $6000).

There is roughly a 19 in 20 chance that the census value is within two standard errors of the survey estimate (the 95 per cent confidence interval). In this example, there is an approximately 19 in 20 chance that the census value lies between $88 000 and $112 000 ($100 000 plus or minus $12 000).

Comparing estimatesWhen comparing estimates between two groups, it is important to recognise that some of the differences are subject to sampling error. As a rule of thumb, a conservative estimate of the standard error of the difference can be constructed by adding the squares of the estimated standard errors of the component estimates and taking the square root of the result. An example is given below.

Suppose the estimates of total cash receipts were $100 000 for the specialist grain producing sector and $125 000 for the top performing specialist grain farms—a difference of $25 000—and the relative standard error is given as 6 per cent for each estimate. The standard error of the difference can be estimated as:

(6 x $100 000 / 100)2 + (6 x $125 000 / 100)2 = $9605

A 95 per cent confidence interval for the difference is:

$25 000 ± 1.96 x $9605 = ($6174, $43 826)

Hence, if a large number (towards infinity) of different samples is taken, in approximately 95 per cent of them, the difference between these two estimates will lie between $6174 and $43 826. Also, since zero is not in this confidence interval, it is possible to say that the difference between the estimates is statistically significantly different from zero at the 95 per cent confidence level.

18


Definitions of itemsTotal area Includes all land operated by the farm business, whether owned or rented operated by the business, but excludes land sharefarmed on another farm.

Owner manager The primary decision-maker for the farm business. This person is usually responsible for the day-to-day operation of the farm and may own or have a share in the farm business.

Labour Measured in work-weeks, as estimated by the owner manager or manager. It includes all work on the farm by the owner manager, partners, family, hired permanent and casual workers and sharefarmers but excludes work done by contractors.

Hired labour Excludes the farm business manager, partners and family labour, and work undertaken by contractors. Expenditure on contract services appears as a cash cost.

Capital The value of farm capital is the value of all the assets used on a farm, including the value of leased items but excluding machinery and equipment either hired or used by contractors. The value of ‘owned’ capital is the value of farm capital excluding the value of leased machinery and equipment.

ABARES uses the owner manager’s valuation of the farm property. The valuation includes the value of land and fixed improvements used by each farm business in the survey, excluding land sharefarmed off the sample farm. Residences on the farm are included in the valuations.

Livestock are valued at estimated market prices for the land use zones within each state. These values are based on recorded sales and purchases by sample farms.

Before 2001–02, ABARE maintained an inventory of plant and machinery for each sample farm. Individual items were valued at replacement cost, depreciated for age. Each year, the replacement cost was indexed to allow for changes in that cost.

Since 2001–02, total value of plant and machinery has been based on market valuations provided by the owner manager for broad categories of capital such as tractors, vehicles and irrigation plant.

Total cash Total of revenues received by the farm business during the financial year, receipts including revenues from the sale of livestock, livestock products and crops, plus the value of livestock transfers off a property. Total cash receipts include revenue received from agistment, royalties, rebates, refunds, plant hire, contracts, sharefarming, insurance claims and compensation, and government assistance payments to the farm business.


19

Total cash costs Payments made by the farm business for materials and services and for permanent and casual hired labour (excluding owner manager, partner and other family labour). Total cash costs include the value of livestock transfers onto the property as well as any lease payments on capital, produce purchased for resale, rent, interest, livestock purchases and payments to sharefarmers. Capital and household expenditures are excluded from total cash costs.

Farm cash The difference between total cash receipts and total cash costs. income

Build-up in The closing value of all changes in the inventories of trading stocks during trading stocks the financial year. It includes the value of any change in herd or flock size or in stocks of wool, fruit and grain held on the farm.

Depreciation Estimated by the diminishing value method, based on the replacement cost of farm and age of each item. The rates applied are the standard rates allowed by improvements, the Commissioner of Taxation. Calculation of farm business profit does not plant and account for depreciation on items subject to a finance lease because cash equipment costs already include finance lease payments.

Imputed An estimate of the labour input of the owner manager, partners and their labour cost families is calculated in work-weeks and a value is imputed at the relevant Federal Pastoral Industry Award rates.

Farm business Farm cash income plus build-up in trading stocks, less depreciation and the profit imputed value of the owner manager, partner and family labour.

Profit at Farm business profit, plus rent, interest and finance lease payments, less full equity depreciation on leased items.

Rate of return Calculated by expressing profit at full equity as a percentage of total opening capital. Rate of return represents the ability of the business to generate a return to all capital used by the business, including that which is borrowed or leased.

Sheep A proxy of the total resources used by agriculture that converts all of the equivalents resources used to produce sheep, beef cattle, dairy cattle and crops into a single unit. It is calculated as:

Sheep equivalents = number of sheep + 12 x area sown to crops + 12 x number of dairy cattle + 8 x number of beef cattle

The higher the estimated sheep equivalents per hectare, the more intensively a farm’s resources are being used.

Documents

Physical and financial performance benchmarks for grain …data.daff.gov.au/data/warehouse/pe_abares99001788/Grains... · 2011-02-22 · New South Wales north-east and Queensland