Farm performance: broadacre and dairy farms, 2018–19 to 2020–21

• For cropping farms (wheat and other crops and mixed livestock-crops industries), average farm incomes are projected to be much higher in 2020–21 due to increased crop areas and yields. Strong increases in crop receipts are expected in New South Wales, Victoria, Queensland and South Australia. In Western Australia, yields increased by less than in other states and was insufficient to overcome the effects of lower prices for wheat, barley and oilseeds.
• On average, farm cash income for cropping farms is expected to increase by around 37% in 2020–21 to $286,000 per farm.
• Higher beef prices are also expected to contribute to increased incomes for broadacre farms, partly offset by reduced sales of cattle as many producers begin rebuilding herds, particularly in Queensland.
• Receipts from sheep, wool and lambs are expected to be lower in 2020–21 because of reduced wool production and fewer sheep and lambs sold. Sheep and wool production are being affected by reductions in sheep numbers in previous years and subsequent flock rebuilding in areas where seasonal conditions have improved.
• Better pasture conditions and lower prices for hay and feed-grains will also substantially reduce expenditure on fodder on broadacre farms.
• On average, farm cash income for livestock farms (sheep, beef and sheep-beef industries) is expected to remain unchanged in 2020–21 at around $123,000 per farm.

• In 2019–20, there were very poor financial outcomes for broadacre farms in New South Wales relative to the longer-term average. In other states financial performance varied widely by region relative to the longer-term average (Map 1).
• Higher incomes in 2020–21 are expected to result in most regions across Australia outperforming the longer-term average (Map 2).
• Increases in crop production because of higher rainfall were the main driver of increased incomes for many farms in the cropping regions of New South Wales, Queensland and South Australia.
• Results were mixed in regions dominated by livestock production. Some regions benefited from higher beef cattle prices—including parts of Queensland and the Northern Territory—while incomes were lower than average in other regions as producers begin rebuilding herds and flocks.

Prospects for recovery remain strong

• The overall financial situation for broadacre farms remains strong despite the worst drought in many regions for many years.
• Increases in farm business debt have been matched by increases in land prices, resulting in equity ratios remaining strong at an average of around 88% (Figure 1).
• Historically low interest rates have meant that debt servicing is relatively low across industries (Figure 2).
• Many farms also have substantial holdings of liquid assets relative to farm household income that makes them well placed to withstand short term downturns in income, although there is wide distribution across farms.
• An estimated 52% of broadacre farms were small with turnover of less than $250,000. These farms accounted for 13% of the total value of output in 2019–20. Around 5% of broadacre farms were very-large with turnover of more than $2 million and these farms accounted for 29% of the total value of output (Figure 3).

ABARES usually produces projections of key estimates based on survey responses collected from October to January each year of farmers’ estimates of production, receipts and costs over the remainder of the financial year. In 2020–21, the farm surveys were conducted entirely by phone because of travel and other restrictions related to COVID-19. To reduce respondent burden and complexity of the survey ABARES developed a model-based approach to producing its projections of key estimates.

The latest farm survey projections for 2020–21 presented above are generated using ABARES farmpredict model. Farmpredict is a data driven micro-simulation model developed using historical farm data from ABARES Australian Agricultural and Grazing Industry Survey (AAGIS). The model links information on the characteristics of farm businesses, commodity prices and climate data to produce farm-level predictions of the production of outputs, the use of inputs and changes in stocks (Figure 4). Full details of the model are provided in the working paper by Hughes et al. (2019).

The 2020–21 projections were generated using farmpredict based on AAGIS data up to 2019–20, ABARES forecasts of commodity prices for 2020–21, and the Bureau of Meteorology’s seasonal climate predictions for 2020–21. The results presented above are the mid-point of simulated farm outcomes under 11 climate scenarios representing uncertainty about climatic conditions from March to June 2021. Given the late stage of season, this uncertainty is estimated to have had limited effects on the 2020–21 projections (Figure 5).

• The financial performance of Australian dairy farms was constrained by dry seasonal conditions in 2018–19 and 2019–20. Dairy cow numbers were reduced, milk production declined and expenditure on feed-grains, hay and irrigation water increased. Farmgate milk prices increased in 2018–19 before increasing further in 2019–20 as processors competed for milk supply.
• Higher milk prices in 2018–19 together with improved seasonal conditions after February 2020 resulted in average farm cash income increasing in all states. Nationally, the average farm cash income for dairy farms increased from $120,450 per farm in 2018–19 to $187,100 in 2019–20—an increase of 55%.

• Nationally, the financial performance of dairy farms in 2020–21 reflects the net effects of lower farmgate milk prices in southern regions and the positive impact of increased milk production and the reduced costs of feeding dairy cows. For Australia as a whole, average farm cash income for dairy farms is projected to increase slightly from an average of $187,100 per farm in 2019–20 to $190,000 in 2020–21.
• Farm business profit, which includes changes in on-farm inventories, capital depreciation and the value of unpaid family labour is projected to increase slightly more due mainly to increase in dairy cattle numbers. Nationally, farm business profit is projected to increase from an average of $60,800 per farm in 2019–20 to $66,000 in 2020–21.

• In 2020–21, farmgate milk prices are forecast to decline in southern Australian dairy regions where milk is predominantly utilised for manufacturing. Favourable seasonal conditions have resulted in increased on-farm feed production and low hay and grain prices.
• Milk production has increased in all states except Queensland and Western Australia and dairy farms have been able to reduce expenditure on purchases of grain, hay and irrigation water. However, increases in milk production and lower expenditure on purchased feeds and are not projected to be sufficient to fully offset the effect of lower milk prices in southern regions.
• In Queensland milk production is projected to fall in 2020–21, partly the result of the exit of farms from dairying. In addition, continued relatively dry seasonal conditions in southern Queensland have resulted in a smaller reduction in purchased feed costs 2020–21 than in southern Australian regions. In Western Australia, dry seasonal conditions have also resulted in reduced milk production and increased purchases of feed-grains and fodder.
• Farm cash income is projected to decline slightly in Victoria, South Australia and Tasmania while still remaining relatively high in historical terms. In New South Wales, Queensland and Western Australia farmgate milk prices have increased slightly and average farm cash incomes are projected to increase, primarily as a result of reduced expenditure on purchased fodder.
• In all states, turnoff of dairy and beef cattle is projected to be low in 2020–21 as herds are rebuilt resulting in dairy and beef cattle sales making a much smaller contribution to farm cash receipts than in either 2018–19 or 2019–20.

Hughes, N, Soh, W, Lawson, K, Boult, C, Donoghoe, M, Valle, H & Chancellor, W 2019, farmpredict: A microsimulation model of Australian farms, ABARES working paper, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, November.

Farm surveys data
Detailed ABARES farm survey data available through interactive tools and spreadsheets.

Farm surveys definitions and methods
Further information about our survey definitions and methods.

Previous reports

Farm performance: broadacre and dairy farms, 2017–18 to 2019–20
See our publications page for previous versions of the report Australian farms surveys results.

About my region
ABARES has produced a series of individual profiles of the agricultural, forestry and fisheries industries in your region. Each regional profile presents an overview of the agriculture, fisheries and forestry sectors in the region, and the recent financial performance of the broadacre and dairy industries.

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