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Peter Martin, Sarah Crooks and Paul Phillips
According to preliminary estimates of farm financial performance from ABARE’s farm surveys program, the financial performance of Australian broadacre farms is projected to decline, on average, in 2009-10, reversing the improvement recorded in 2008-09.
Nationally, farm cash incomes are projected to decline, mainly as a consequence of lower grain, oilseed and pulse prices in combination with a return to dry seasonal conditions in many parts of Queensland and New South Wales. Winter crop production increased markedly in areas with better seasonal conditions in 2009 compared with 2008 (maps 1 and 2), particularly in South Australia and Victoria. As a result, average farm cash incomes are projected to increase in these states in 2009-10. However, in other states, winter grain production has either been reduced or is insufficient to offset the effect of lower grain prices on farm receipts.
Receipts from beef cattle, sheep and lambs are expected to remain strong in 2009-10, but receipts from wool are projected to fall on the back of reduced production.
Despite reductions in expenditure on fertiliser, fodder and interest paid, overall an increase is projected for farm cash costs in 2009-10. Farmers are projected to increase expenditure on harvesting and marketing, because of a larger winter grain crop, as well as on farm labour, fuel and sheep purchases.
Nationally, average farm cash income for broadacre farms increased from $64 400 in 2007-08 to $74 400 in 2008-09 and is projected to decline to $62 000 in 2009-10, which is around 20 per cent below the average of $77 000 (in real terms) for the 10 years to 2008-09.
In 2007-08, average farm cash income for broadacre farms increased from the historical low recorded in 2006-07, a year of severe widespread drought.
In 2008-09, farm cash income improved further, particularly in northern Australia and in grain growing areas of northern New South Wales, Queensland and Western Australia. The improvement was because of increased winter and summer grain production and increased livestock production as a result of improved seasonal conditions in combination with relatively high grain prices and strong prices for sheep, lambs and beef cattle. However, farm financial performance remained low in southern New South Wales, Victoria, Tasmania and South Australia. Farm financial performance was particularly poor in irrigation areas, including the southern Murray-Darling Basin where availability of irrigation water was low.
The financial performance of Australian dairy farms is projected to fall sharply in 2009-10 because of a reduction in milk prices, particularly for milk used for manufactured dairy products, combined with a small decrease in milk production. The large reduction in milk receipts is projected to be partly offset by reductions in expenditure on fodder and fertiliser as a consequence of lower prices for these inputs. Expenditure on interest paid is expected to fall because of lower interest rates in 2009-10 relative to the higher interest rates applying in the second half of 2008. While feed grain and fodder prices are forecast to be lower in 2009-10, overall expenditure by dairy farms on fodder is still expected to remain relatively high in historical terms, particularly in northern Victoria and southern New South Wales because of continued dry conditions and low availability of irrigation water.
Nationally, average farm cash income for dairy farms fell from a high of $130 650 in 2007-08 to $89 700 in 2008-09 and is projected to fall to $44 000 in 2009-10, which is well below the average for the 10 years to 2008-09 of $91 000 and similar to the average farm cash income recorded in the drought of 2002-03 (in real terms).
| Farm cash income = total cash receipts – total cash costs | ||||
| total revenues received by the farm business during the financial year | payments made by the farm business for materials and services and for permanent and casual hired labour (excluding owner manager, partner and family labour) | |||
| Farm business profit = farm cash income + changes in trading stock – depreciation – imputed labour costs | ||||
Broadacre and dairy farms account for 67 per cent of commercial-scale Australian farm businesses. They are also responsible for the management of more than 90 per cent of the total area of agricultural land in Australia, account for the majority of Australia’s family owned and operated farms, are located in all regions and form a vital part of rural communities and economies across the country.
Each year, ABARE interviews the operators of around 1600 broadacre farm businesses in its annual Australian Agricultural and Grazing Industries Survey (AAGIS) and 300 dairy farm businesses in the Australian Dairy Industry Survey (ADIS), as part of its annual farm survey program. The AAGIS is targeted at commercial-scale broadacre farms; that is, farms which grow grains or oilseeds, or run sheep or beef cattle and which have an estimated value of agricultural output exceeding $40 000. The ADIS is targeted at commercial-scale milk producing farms.
Data provided in this note have been collected via interviews and incorporate detailed farm financial accounting information. The 2009-10 projections are based on data collected via on-farm interviews and telephone interviews in the period October to December 2009. The 2009-10 projections include crop and livestock production, receipts and expenditure up to the date of interview together with expected production, receipts and expenditure for the remainder of the 2009-10 financial year. Modifications have been made to expected receipts and expenditure for the remainder of 2009-10 where significant price change has occurred post interview.
There is considerable variation across states and regions in farm cash incomes projected for 2009-10 and how these incomes rank in historical terms (map 2).
In New South Wales, lower farm cash incomes are projected in 2009-10 for most grain growing areas with the exception of north-western New South Wales where relatively large increases in grain production increased farm receipts. Elsewhere in New South Wales smaller cropping areas, poor spring rainfall and high temperatures resulted in reduced grain production and, in combination with lower grain prices, led to lower farm cash incomes. Farm cash incomes for livestock farms are projected to be maintained in the tablelands areas to the east and to increase in northern areas as turn-off of beef cattle and lambs increases.
Victorian cropping farm cash incomes are projected to generally increase in 2009-10, with improved seasonal conditions leading to large increases in grain production, relative to 2008-09, offsetting lower grain and oilseed prices. Receipts from beef cattle are projected to be reduced, with lower turn-off resulting from the better seasonal conditions compared with 2008-09 combined with lower saleyard prices. However, receipts from sheep and lambs are projected to increase slightly and underpin farm cash incomes for many livestock producers. On average, farm cash incomes for broadacre farms in Victoria are projected to rise to average $81 000 a farm in 2009-10, around 20 per cent above the average farm cash income (in real terms) recorded for the 10 years to 2008-09.
Queensland cropping farm cash incomes are projected to fall significantly in 2009-10 because of substantial reductions in wheat production, combined with lower prices. Prospects for grain sorghum and summer crops remain uncertain at this time, but dry spring conditions, combined with lower feed grain prices, are expected to limit grain sorghum plantings.
Farm financial performance, by state |
||||||||
|---|---|---|---|---|---|---|---|---|
farm cash income |
farm business profit a |
|||||||
 |
|
|||||||
2007-08 |
2008-09 p |
2009-10 s |
2007-08 |
2008-09 p |
2009-10 s |
|||
$ |
$ |
$ |
$ |
$ |
$ |
|||
| Broadacre industries | ||||||||
| New South Wales | 20 360 |
48 400 |
(13) |
27 000 |
–56 680 |
–21 800 |
(29) |
–48 000 |
| Victoria | 79 320 |
42 300 |
(11) |
81 000 |
14 000 |
–28 400 |
(18) |
12 000 |
| Queensland | 68 930 |
68 400 |
(10) |
29 000 |
19 080 |
21 100 |
(43) |
–13 000 |
| Western Australia | 118 130 |
234 200 |
(10) |
138 000 |
24 370 |
120 000 |
(18) |
27 000 |
| South Australia | 75 150 |
60 200 |
(13) |
98 000 |
–15 380 |
–24 700 |
(34) |
13 000 |
| Tasmania | 38 010 |
40 300 |
(26) |
48 000 |
–48 490 |
–25 700 |
(41) |
–3 000 |
| Australia | 64 400 |
74 400 |
(5) |
62 000 |
–10 460 |
1 400 |
(295) |
–11 000 |
| Dairy industry | ||||||||
| Australia | 131 650 |
89 700 |
(11) |
44 000 |
68 170 |
7 900 |
(119) |
–55 000 |
| a Defined as farm cash income plus buildup in trading stocks, less depreciation and the imputed value of operator, partner and family labour. p Estimates for 2008-09 have been revised but remain preliminary pending release of final 2008-09 Australian Bureau of Statistics production and population data. s Provisional estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided. |
||||||||
However, despite lower beef cattle prices, beef cattle receipts are projected to increase in 2009-10, particularly in eastern regions. Following an increase in beef cattle numbers in 2008-09, beef cattle turn-off is projected to increase in 2009-10 as a result of expectations of drier seasonal conditions. On average, farm cash income for broadacre farms in Queensland is projected to fall to $29 000 a farm in 2008-09, with lower crop receipts and increased expenditure on fodder offsetting higher beef cattle receipts.
Western Australian broadacre farm cash incomes are projected to fall in 2009-10, but to remain relatively high in historical terms. Production of wheat is expected to be similar to 2008-09, but production of barley and grain legumes is projected to fall and, in combination with lower grain prices, is projected to reduce crop receipts this season. Receipts from beef cattle are projected to fall slightly but receipts from sheep and wool are expected to be maintained. Substantial pool payments for grain delivered in 2008-09 will boost farm receipts, resulting in a projected average farm cash income for Western Australian broadacre farms of around $138 000. While significantly lower than the record farm cash income estimated in 2008-09 of $234 200, the farm cash income projected for 2009-10 is still around 12 per cent more than the average for the 10 years ending 2008-09.
Despite lower grain prices, South Australian broadacre farm cash incomes are projected to increase substantially as a result of much higher grain production compared with 2007-08 and 2008-09. Beef cattle receipts are expected to fall slightly because of expected lower prices and reduced turn-off as cattle numbers are rebuilt, but receipts from sheep and lambs are expected to be maintained by continued strong prices. Wool receipts are projected to increase.
Tasmanian broadacre farm cash incomes are projected to increase modestly in 2009-10, with improved seasonal conditions following several years in which dry seasonal conditions reduced sheep and cattle numbers and severely constrained crop and livestock production. A small increase is projected in wool receipts because of higher prices, but rebuilding of livestock numbers is projected to result in reduced sheep and cattle turn-off and lower farm cash receipts overall. Improvement to Tasmanian farm cash income is projected to mainly occur through a reduction in farm cash costs as expenditure on fodder and interest paid is reduced, despite increases in livestock purchases as flocks and herds are rebuilt. In addition, the rebuilding of livestock numbers is projected to result in an increase in the value of on-farm inventories and a significant further reduction in farm business losses from those recorded in 2007-08 and 2008-09.