Disaggregating farm performance statistics by size, 2017–18

Christopher Boult and Thomas Jackson

47%. Output from the largest 10% of broadacre farms. Disaggregating farm  performance by size. Farm performance varied significantly for farms of  different sizes

Summary

  • Across all industries and sectors, larger farms tend to be more profitable than their smaller counterparts, using on average more capital and other inputs to produce greater levels of output.
  • In the broadacre industries, the largest 10% of farms produced just under half of total output and the smallest 50% just over 10% in the 3 years to 2017–18.
  • The beef industry was the most concentrated broadacre industry, with the largest 10% of farms producing over half of total industry output in the 3 years to 2017–18. This is especially true for beef farms in northern Australia, where farms in the top decile are around three times larger than their counterparts in southern Australia.
  • Farm size differences were largest in the vegetable industry. Those in the largest decile used around 20 times more capital and produced around 200 times more output than farms in the smallest decile in the 3 years to 2017–18.
  • Output was most equally distributed in the dairy industry. Nonetheless, the largest 10% of farms produced around nine times more output than the smallest 10% of farms in the 3 years to 2017–18.

Size is an important indicator of farm business performance. Previous ABARES research has found that larger farms are generally more profitable, invest more and generate higher rates of return on capital (Jackson & Shafron 2018). Larger farms also tend to carry higher levels of debt in absolute terms and as a proportion of total capital.

This article presents farm performance statistics for 10 size categories. Each category represents 10% of the farm population within each industry and region, ranked from smallest to largest according to total farm receipts. Farm returns vary significantly from year to year, reflecting factors such as seasonal conditions and commodity prices. Data are averaged over 2015–16 to 2017–18 to provide a more meaningful picture of farm performance than would be provided by data from a single year.

This article provides statistics sourced from the following ABARES farm surveys:
  • Australian Agricultural and Grazing Industries Survey (AAGIS)
  • Australian Dairy Industry Survey (ADIS)
  • Survey of Australian Vegetable Growing Farms

Farms in the broadacre, dairy and vegetable industries are separated into size deciles based on farm total cash receipts—a measure of total revenue received by the business in a given financial year. Statistics for the broadacre industry are further split into the sub-industries of wheat and other crops, beef, sheep, mixed cropping–livestock, and sheep–beef. The cropping industry is separated into the Grains Research and Development Corporation Western, Northern and Southern regions (Map 1) and the beef industry into the Meat & Livestock Australia Northern and Southern regions (Map 2). Data are presented in 13 tables according to classification by industry and region.

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Farm characteristics and performance

Over much of the past three decades, Australian agriculture has been characterised by a trend towards fewer and larger farms. This is because larger farms are typically more productive and profitable than their smaller counterparts (Jackson, Hatfield-Dodds & Zammit 2018). An important consequence of this trend is that industry-level changes in farm output and performance are increasingly driven by the performance of the largest farms.

The distribution of output across farm size deciles varies markedly between agricultural industries. In the three years to 2017–18, deciles were most unequal in the vegetable industry (Figure 1). It has a large number of small farms that produce relatively little output due to many farms being situated in areas close to urban centres where farm land prices are generally high. As a result, owners of these farms have little capacity or incentive to increase farm size and may supplement farm income with off-farm earnings. Some small vegetable farms produce specialised vegetables and the market size is relatively small.

Figure 1 Output share, by decile and industry, Australia, 2015–16 to 2017–18
This bar chart  represents the output share of farms across different Australian agricultural  industries (broadacre, dairy and vegetables) by their size (measured by decile)  from 2015-16 to 2017-18.
Source: ABARES Australian Agricultural and Grazing Industries Survey, ABARES Australian Dairy Industry Survey, ABARES Survey of Australian Vegetable Growing Farms

Output is most evenly spread across size deciles in the dairy industry. The average dairy farm in the top decile produces around nine times more output than the average farm in the smallest decile. The relative size equality of dairy industry farms primarily reflects the more homogenous structure of Australian dairy farms. Many dairy farms use a similar input mix, face similar capital requirements (including costs of entry and exit), produce a similar output mix and receive similar output prices.

The distribution of output by farm size decile in the broadacre sector (non-irrigated cropping and livestock farms) reflects the distributions of individual sub-industries. The sheep, cropping and mixed cropping–livestock sub-industries all have a similar distribution of output across farm size deciles. In the beef industry, the largest 10% of farms account for substantially more output than in other broadacre sectors (Figure 2).

Figure 2 Output share, by decile and broadacre industry, Australia, 2015–16 to 2017–18
This bar chart represents the output share of farms across different Australian  agricultural industries – cropping, beef, sheep, mixed, and sheep-beef – by  their size (measured by decile) from 2015-16 to 2017-18.
Source: ABARES Australian Agricultural and Grazing Industries Survey

In the beef industry, output structure with respect to farm size is characterised by a very large number of small farms producing small amounts of output. This is driven by the relatively small economies of scale that exist in the beef industry (Boult et al. 2018). Many small beef farms are located in areas with high rainfall and/or relatively close to major urban centres. This may discourage or prevent owners of these farms from expanding.

More capital is used by larger farms, particularly those in the largest size decile. In the broadacre industry, farms in the second-smallest size decile use around 14% more capital than those in the first size decile, and farms in the largest size decile use around twice as much capital as those in the ninth-largest size decile. This reflects a clustering of the very largest corporate farms in the top size decile for each industry. These farms operate relatively large land areas (accounting for the majority of farm capital) and tend to use large-scale, technologically advanced production systems that require a relatively high level of capital (Figure 3).

Figure 3 Total average capital, by industry, Australia, 2015–16 to 2017–18
This bar chart represents the total average value of capital by agricultural  industry in Australia (broadacre, dairy and vegetables) by their size (measured  by decile) from 2015-16 to 2017-18.
Source: ABARES Australian Agricultural and Grazing Industries Survey, ABARES Australian Dairy Industry Survey, ABARES Survey of Australian Vegetable Growing Farms

Larger farms are more profitable than their smaller counterparts in absolute terms and per unit of capital used. In the broadacre industries, the average rate of return for the smallest size decile was –1.6%. The rate of return is increasingly higher for each next decile, through to a rate of return of 9.3% for the largest broadacre size decile. In the dairy industry, the rate of return was positive and relatively steady across the size deciles (Figure 4). The relatively similar rate of return across size deciles reflects the homogenous structure of many dairy farms.

Figure 4 Rate of return, by decile and industry, Australia, 2015–16 to 2017–18
This bar chart represents the average rate of return (in percentage terms) of  Australian agricultural industries (broadacre, dairy and vegetables) by their  size (measured by decile) from 2015-16 to 2017-18.
Source: ABARES Australian Agricultural and Grazing Industries Survey, ABARES Australian Dairy Industry Survey, ABARES Survey of Australian Vegetable Growing Farms

In the vegetable industry, the smallest 80% of vegetable farms have either relatively low or negative capital additions, indicating a low level of willingness for these farms to engage in significant expansion. Moreover, the rate of return for the smallest 30% of vegetable farms is negative. However, even on these nominally unprofitable farms, cash losses are relatively small—reflecting the significant role of owner labour in operating these farms. Owners of these farms may also supplement their income with off-farm sources.

Farm debt tends to increase with farm size in absolute terms and as a proportion of total capital (Figure 5). The greater profitability of larger farms generally allows owners to service more debt than for smaller farms. In the broadacre industry, the average equity ratio of farms in the smallest size decile is close to 100%, indicating a very low level of borrowing against farm business capital. Across all industries, average farm business equity ratio decreases as farm size increases, indicating increasingly higher levels of borrowing. This is likely driven by economies of scale, allowing larger farms to produce proportionally more output and receive a higher return per unit of input. Larger farms may also have lower equity ratios because they have used debt to fund expansion.

Figure 5 Farm business equity ratio, by decile and industry, Australia, 2015–16 to 2017–18
This bar chart represents the average business equity ratio for Australian  agricultural industries (broadacre, dairy and vegetables) by their size  (measured by decile) from 2015-16 to 2017-18.
Source: ABARES Australian Agricultural and Grazing Industries Survey, ABARES Australian Dairy Industry Survey, ABARES Survey of Australian Vegetable Growing Farms

Farm managers may seek to expand their business operations because of the productivity and profitability advantages associated with larger-scale operations. Larger farms have more capacity to reduce their marginal costs through scale and a greater ability to invest in productivity-enhancing capital additions. As a result, farm performance varies markedly between farms of different size categories. The size structure of Australian farms will continue to be an important predictor of industry performance as the trend of fewer but larger farms continues to characterise Australian agriculture.

Statistical tables

Broadacre industries

Table 1 Broadacre farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
10.948,98551,560–53,1791,692,855–11,803–1.694.0
21.380,09865,843–38,6621,931,857–10,6611.497.0
32.2127,17390,393–22,4022,681,141–6,5682.295.1
43.1182,216122,254–8,7212,731,7806,5732.295.8
54.0241,728163,8759,0602,993,73150,3414.294.6
65.4325,323210,85227,5033,503,13010,4305.593.4
77.8466,226304,47192,1964,676,80641,6436.189.3
811.1667,394420,046154,5846,438,767104,4326.989.5
917.31,038,939676,712281,7258,587,664204,2398.186.4
1047.12,818,3791,896,537847,09017,481,985529,0919.381.2

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 2 Wheat and other crops farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
10.894,42283,215–51,9881,660,439–120,0210.288.3
22.2222,804163,586–15,1201,927,62412,4541.194.4
32.3368,627270,26223,6803,283,118–34,9636.384.2
44.2517,773383,69091,5183,646,21415,0348.786.0
55.3646,682443,702123,2044,850,447164,0226.581.4
66.9851,366572,756204,1366,446,77985,0807.584.8
79.71,183,999811,175292,8697,652,998318,7318.382.3
813.51,643,4301,179,669426,73310,079,278417,09810.381.7
918.62,307,2391,571,167624,67412,360,159488,8138.880.4
1036.64,499,5723,019,7851,467,10120,857,001843,13010.776.3

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 3 Beef farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
11.243,66946,239–51,4532,178,365–51,367-3.296.3
21.359,60855,850–40,6721,788,5438,173-1.298.3
32.286,65171,923–30,2902,168,49821,5291.196.1
42.6117,17982,122–25,1423,342,7105,7341.397.9
53.4140,01894,815–21,7192,691,72414,9791.595.2
64.5188,081128,9261,9423,346,939–16,8901.795.9
75.8242,456164,06733,4704,063,19321,3933.094.1
89.1378,535228,35767,8485,103,60962,4244.993.5
914.2614,649393,302144,7727,401,14767,7465.791.7
1055.92,361,8781,514,906755,80620,667,011326,1027.586.3

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 4 Sheep farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
12.056,55154,762–42,5211,412,35613,4346.993.0
22.070,62963,658–71,3521,733,1054,2057.095.2
33.1114,19573,943–21,7111,628,1604696.994.4
44.6162,685123,115–17,0972,318,058–54,423–0.390.4
56.7217,087147,31611,4302,466,673140,2034.296.3
67.3251,887180,52014,1572,488,30339,2928.892.9
79.7312,338194,23225,9483,033,337–4,4188.894.8
810.7388,458231,25276,5134,591,363–11,2785.092.7
918.2600,802358,144134,3035,345,18271,9606.491.8
1035.81,260,433783,905383,87410,215,223127,85310.388.4

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 5 Sheep–beef farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
11.990,26082,401–31,5422,066,8197162.494.6
22.9168,67093,070–23,4562,189,9348,6593.995.6
34.0217,898118,06922,4691,652,3605,9107.295.4
45.0254,895145,047–15,5343,660,62844,8432.398.1
56.9305,621223,294–27,8873,410,10037,8620.797.7
66.1389,885243,46638,9333,358,420–57,2629.490.6
79.0480,412300,75594,4825,066,791116,4937.590.2
811.7633,848410,714144,8565,865,707150,36611.686.3
916.5874,147569,041226,04210,360,99036,5608.887.8
1035.91,971,3831,336,819542,69216,710,364147,22510.486.9

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 6 Cropping–livestock farms, Australia, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
10.954,85146,653–47,2321,271,05222,396–4.995.9
21.7130,586104,836–49,4891,981,6538,8450.994.8
32.9219,539152,9408,7052,354,23827,4685.094.0
44.2318,142214,52212,2883,024,98665,3584.090.8
56.0428,842245,45592,3313,847,28934,1085.390.3
68.2570,163351,633141,1284,789,89656,6065.891.0
79.4724,237485,783119,1477,630,496106,9274.988.7
813.7931,054589,727219,8136,556,960233,3666.784.3
917.11,304,284833,178398,4488,327,931265,01710.984.2
1035.92,704,7951,876,389789,65515,952,805823,3349.679.8

Source: ABARES Australian Agricultural and Grazing Industries Survey

Broadacre regional differences

Map 1 Grains Research and Development Corporation regions
This map shows three  regions – Northern, Southern and Western. The Northern region encapsulates all  of New South Wales, the Australian Capital Territory, and most of the Eastern  half of Queensland. The Southern region encapsulates all of Tasmania and  Victoria, as well as the coastline and south-east of South Australia. The  Western region includes the southernmost quarter of Western Australia.
Source: Grains Research and Development Corporation
Table 7 Wheat and other crops farms, Western region, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
11.7189,876118,762–8,3542,183,635–101,0541.197.5
22.4287,055222,35311,4012,532,2553,0192.195.1
32.9380,561286,9275,4334,791,84089,3080.785.8
44.8492,445337,151102,7033,871,07532,6734.795.1
54.3615,827354,063213,1064,469,891–20,0825.498.5
66.4787,690482,844172,7586,513,214104,9305.788.8
78.71,087,045707,906340,5685,731,419126,3686.977.8
813.01,560,5311,156,297331,1787,439,086601,7236.277.7
919.72,363,8571,642,658543,92710,250,453512,6636.179.6
1036.04,397,5592,931,2401,425,66116,979,312450,98311.776.1

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 8 Wheat and others crops farms, Northern region, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
11.071,16270,212–51,8722,113,9577,8849.994.3
21.9138,229103,878–34,6742,011,4514,9654.395.2
32.8217,965166,385–25,5502,468,40336,8282.996.3
43.5278,203192,490–15,4393,658,23946,7554.094.9
54.9374,506227,04435,7843,714,16924,9468.991.7
66.9522,788378,44174,8014,672,754122,8497.381.8
78.9676,539417,031139,5476,248,790110,0277.086.3
811.3860,534545,501192,4697,458,068137,1048.385.7
917.31,301,502909,845329,53410,218,484299,48510.083.0
1041.73,248,2262,304,497913,74019,375,129731,06710.977.1

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 9 Wheat and other crops farms, Southern region, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
11.055,92358,430–54,7681,114,875–56,748-6.387.3
22.1131,365109,735–58,5012,102,2578,0413.196.2
33.0185,040127,44716,2532,660,24020,8691.891.5
43.7234,027170,1224,7303,469,21561,7633.592.3
54.7301,855172,98341,5562,995,28850,0734.994.2
66.9417,807274,81371,5394,208,96792,8075.690.1
79.3588,657392,677129,3435,138,49975,6296.588.7
812.4778,716530,114158,4618,414,483140,1265.891.4
918.41,139,874738,941332,2458,775,563199,4079.484.6
1038.62,400,2881,600,725810,13217,532,045637,6129.085.5

Source: ABARES Australian Agricultural and Grazing Industries Survey

Map 2 Australian beef cattle industry, Northern and Southern regions
This map shows two regions – Northern and Southern. The Northern region  encapsulates almost all of Queensland, much of the Northern Territory, and the  north and north-west regions of Western Australia. The Southern region includes  the south-west of Western Australia, the north, south and east of South  Australia, eastern Tasmania, almost all of Victoria, and almost all of New  South Wales.
Note: Regions based on aggregations of ABS statistical local areas.
Source: Meat & Livestock Australia
Table 10 Beef and other crops farms, Northern region, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
10.635,39951,441–50,4611,766,8546,143-2.087.3
21.065,97667,491–42,2412,358,19034,643-1.296.6
31.492,76583,816–26,3822,402,2899,7740.091.0
42.3154,447127,233–30,2403,666,67516,6562.997.5
53.4219,997140,285–7,2553,987,59338,9413.094.7
64.2309,259196,84560,5254,490,182–14,3255.090.2
76.3430,101234,305148,5326,265,24551,7175.693.0
88.8592,444384,083132,6498,004,021–29,1375.289.3
914.0949,495535,019329,41211,537,127237,7165.491.0
1058.13,988,8742,520,3141,229,84231,844,906296,5267.283.2

Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 11 Beef and other crops farms, Southern region, 2015–16 to 2017–18
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
12.449,20344,927–50,7802,447,058–77,400–3.599.6
21.656,33660,174–60,1961,245,40411,741–2.699.3
33.584,75461,545–18,0362,107,26311,4562.698.5
44.2112,71165,2222,5163,785,1649301.799.5
55.1131,12181,555–40,1062,280,2949,2320.391.9
65.6151,673118,986–17,4673,426,22921,5700.395.6
77.2199,107115,51319,1422,897,347–34,2223.798.4
88.6240,786179,78831,7933,661,090–12,4492.293.2
915.3408,514284,88028,8415,003,859128,8573.794.5
1046.41,244,380842,302394,40011,516,216294,3329.089.4

Source: ABARES Australian Agricultural and Grazing Industries Survey

Dairy and vegetable industries

Table 12 Dairy farms, Australia, 2015–16 to 2017–18
Size DecileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
13.5249,808255,115–88,6134,503,714–107,5356.191.4
23.4322,657303,579–90,9023,403,050–458,9945.381.0
35.2429,598361,35842,6623,141,03117,6302.184.0
46.1525,293417,98489,5622,869,92482,3155.978.6
58.3619,838490,90059,1864,035,40892,4673.280.7
67.7750,856642,37999,2244,272,390170,5714.279.8
711.6900,491745,714139,3375,326,39774,4783.274.4
811.71,065,465865,840240,1715,548,585124,8465.177.7
916.01,349,8411,076,767260,9107,181,805154,1076.178.6
1026.62,234,3721,852,170466,22510,659,758166,8826.275.9

Source: ABARES Australian Dairy Industry Survey

Table 13 Vegetable farms, Australia, 2014–15 to 2016–17
Size decileOutput share (%)Cash receipts ($)Cash costs ($)Profit ($)Capital ($)Net capital additions ($)Rate of return (%)Equity ratio (%)
10.343,37132,336–36,020767,8651,080–3.790.3
20.796,97283,001–59,3591,327,3701,768–4.496.9
31.1146,254118,049–43,2931,842,1229,156–1.392.8
42.1263,351189,3204,3343,882,2746,1792.797.3
52.6338,317259,878–8,7911,728,3165,8422.993.5
63.5467,283334,24522,6463,109,096–14,5971.390.6
74.5638,427431,01996,7033,122,751–47,9856.487.4
87.1923,581635,525183,6635,392,624–1566.189.2
912.81,718,3221,289,740307,4187,784,495131,5677.684.8
1065.38,796,6357,094,9371,572,28915,435,915356,55811.478.7

Source: ABARES Survey of Australian Vegetable Growing Farms

References

Boult, C, Valle, H, Zhao, S, & Jackson, T 2018, Productivity in Australia's broadacre and dairy industries, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, September.

Jackson, T & Shafron, W 2018, 'Disaggregating farm performance statistics by size', in Agricultural commodities: March quarter 2018, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

Jackson, T, Hatfield-Dodds, S & Zammit, K, 2018, ‘Snapshot of Australian agriculture', Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

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Last reviewed:
05 Mar 2019