Australian grains: financial performance of grain farms

2017–18 to 2019–20

Fred Litchfield

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Financial performance

Farm cash income

Average farm cash income of Australian grain farms decreased by 17% in 2018–19, to around $251,700 per farm (Table 1, Figure 1). Total cash receipts were reduced in 2018–19 by lower grain production, reflecting drought conditions in some regions. Cash costs in 2018–19 were somewhat lower as well, but not by enough to completely offset the decline in receipts.

In 2019–20, the effects of drought in some regions of Australia remains the dominant influence on the financial performance of grain farms, with average farm cash income projected to have fallen by 10% to around $226,000 per farm. For grain farms in drought-affected areas, average farm incomes are projected to have been much lower in 2019–20 due to lower crop areas and yields. In areas that have been less affected by drought and received timely in-season rainfall, high prices for most grain, oilseed, grain legume and fodder crops are helping to keep incomes for grain farms close to historically high levels.

Table 1 Farm financial performance, grain farms, Australia, 2017–18 to 2019–20
average per farm
Performance measure Unit 2017–18 2018–19p RSE 2019–20y
Total cash receipts $ 872,320 809,800 (3) 751,000
less total cash costs $ 569,290 558,200 (3) 525,000
Farm cash income $ 303,030 251,700 (5) 226,000
plus change in trading stocks $ –36,580 –44,100 (18) –68,000
less depreciation $ 74,520 75,500 (3) 78,000
less operator and family labour $ 75,090 80,700 (2) 86,000
Farm business profit $ 116,850 51,400 (23) –6,000
plus interest and lease payments $ 63,010 62,200 (5) 60,000
Profit at full equity $ 179,850 113,600 (10) 54,000
Rate of return a % 2.9 1.6 (10) 0.7

a Excluding capital appreciation. p Preliminary estimate. y Provisional estimate. RSE Relative standard error.
Note: Estimates may not sum due to rounding. Definitions and description of data source are provided in Box 1.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Note: Farm cash income varies over time because of short-term changes in factors such as commodity prices, seasonal conditions and management decisions, as well as longer-term changes in the farm sector, such as growth in average farm size, shifts in enterprise mix and technological progress. Appropriate consideration of the long-term factors is essential when interpreting changes in farm cash income over periods longer than 3 to 5 years.
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Despite favourable prices for most grains and livestock such as sheep and lambs, farm cash income in 2019–20 is projected to have been considerably lower than the peaks experienced in 2016–17 and 2017–18, because of lower grain production. Farm cash income in 2019–20 is projected to have been 3% below the 10 year average to 2018–19 in real terms.

Nearly 40% of grain farms are projected to have had cash incomes below $50,000 in 2019–20 (Figure 2), with the majority of these farms in the Northern region. The proportion of grain farms with incomes above $350,000 is projected to have been around 20% in 2019–20. Most of these farms are in the Western region.

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Box 1 About this report

The results below are for farms included in the Australian Agricultural and Grazing Industries Survey (AAGIS) that grew at least 40 hectares of grain, oilseed or pulse crops. For some variables, data are also reported for specialist grain farms – defined as grain farms that obtained more than 50 per cent of total cash receipts from crop receipts. Non-specialist farms are defined as grain farms that obtained less than 50 per cent of total cash receipts from crop receipts.

The AAGIS is funded by the Department of Agriculture, Water and the Environment, Meat & Livestock Australia and the Grains Research and Development Corporation (GRDC). GRDC commissioned and funded the analysis of grains industry farm performance. Data is provided at national and regional scales, with regions based on those used by GRDC—the Northern, Southern and Western regions.

Map 1 GRDC grain regions

A map showing the three Grains Research and Development Corporation regions—the Western region (south-west Western Australia); Southern region (Victoria, Tasmania and southern South Australia) and Northern region (Queensland and New South Wales).
Source: Grains Research and Development Corporation

Definitions of major financial performance indicators:

Total cash receipts: total revenues received by the business during the financial year

Total cash costs: payments made by the business for materials and services and for permanent and casual hired labour (excluding owner–manager, partner and family labour)

Farm cash income: total cash receipts – total cash costs

Farm business profit: farm cash income + change in trading stocks – depreciation – imputed labour costs

Profit at full equity: return produced by all the resources used in the business: farm business profit + rent + interest + finance lease payments – depreciation on leased items

Rate of return excluding capital appreciation: efficiency of businesses in generating returns from all resources used (profit at full equity/total opening capital) x 100

Farm household income

Farm cash income is a comprehensive measure of the income generated by the business for use by the farm household for consumption and investment. However, activities other than farming are also an important source of income for many farm households. This diversification is an important risk management strategy for many Australian farmers. On average over the 3 years to 2018–19, around 74% of grain farms received off-farm income, at an average value of $43,900 per farm, equivalent to 14% of farm household income (for farms with off-farm income) (Table 2).

The importance of off-farm income varies with farm size (Figure 3). For small grain farms (less than 600 hectares area planted) off-farm income accounted for 29% of farm household income. Around 76% of small grain farms received off-farm income, the highest proportion across the size groups. Off-farm income is less significant for larger grain farms: 69% of very large grain farms (more than 2,400 hectares area planted) earned some off-farm income, with an average value of $40,600 (around 4% of household income).

Table 2 Off-farm income, grain farms, by area planted, Australia, 3 year average to 2018–19
Measure Unit Small
Less than 600 hectares
Medium
600 to 1,200 hectares
Large
1,200 to 2,400 hectares
Very large
More than 2,400 hectares
All grain farms
Proportion of farms with off-farm income a % 76 72 74 69 74
Average off-farm income b $ 47,400 38,900 32,900 40,600 43,900
Off-farm income as a proportion of farm household income b % 29 12 7 4 14
Average off-farm income a $ 36,000 28,000 24,400 28,200 32,600

a All responding farms. b Farms with off-farm income greater than zero.
Note: Financial data in 2019–20 dollars.
Source: ABARES Australian Agricultural and Grazing Industries Survey

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Farm business profit

Farm business profit is a comprehensive measure of the long-term economic performance of farm businesses. In addition to the receipts and costs included in farm cash income, farm business profit also accounts for non-cash costs incurred by farm businesses, namely capital depreciation, payments for family labour and changes in inventories of livestock, fodder and grain held on farms.

In 2019–20, drought conditions and high prices are projected to have led to many farms running down their stocks of grain and livestock. Reflecting this change, and the decline in farm cash income, farm business profit is projected to have declined substantially to average negative $6,000 per farm in 2019–20 (Table 1). This follows declines in farm business profit in 2017–18 and 2018–19 (Figure 4). In 2019–20, farm business profit was around $94,000 below the 10 year average in real terms.

Note: Farm business profit varies over time because of short-term changes in factors such as commodity prices, seasonal conditions and management decisions, as well as longer-term changes in the farm sector, such as growth in average farm size, shifts in enterprise mix and technological progress. Appropriate consideration of the long-term factors is essential when interpreting changes in farm business profit over periods longer than 3 to 5 years.
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At the national level, around 54% of grain farms recorded negative farm business profit in 2018–19 (Figure 5). In the 10 years to 2018–19, the proportion of farms recording negative farm business profit averaged 49% a year. In 2019–20, a projected 60% of grain farms are expected to have recorded negative farm business profit.

The proportion of grain farms projected to have recorded negative farm business profit in 2019–20 differs substantially by region, mainly due to differences in seasonal conditions. In the Northern region, an estimated 82% of grain farms are expected to have recorded negative farm business profit in 2019–20, compared to 40% in the Southern region. The Western region had the largest increase, with a projected 55% of grain farms expected to have recorded negative farm business profit in 2019–20, up from 18% in 2018–19.

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Negative farm business profit in a particular year typically means a farm has not covered the costs of family labour or set aside sufficient funds to replace depreciating farm assets (and has also possibly not covered all cash costs). Many farms occasionally record negative farm business profit when their income fluctuates. However, ongoing low or negative profit affects long-term viability because farms have reduced capacity to invest in newer and more efficient technologies.

In some cases, negative farm business profit reflects short-term factors such as fluctuations in seasonal conditions and prices, and one-off events such as injury or illness. On average, 18% of grain farms recording negative farm business profit in any given year from 2009–10 to 2018–19 recorded a positive profit in the following year. In other cases, farm business profit is consistently low or negative over time, reflecting the fact that many farm households are supported by off-farm income and derive other benefits from owning farms such as amenity and long-term growth in asset values.

Rate of return

The most complete measure of farm business performance is the rate of return. This variable is calculated by dividing profit generated in a particular year by the value of assets used in that year. By capturing the value of the assets used by the business, rate of return effectively measures the efficiency with which the funds invested in a farm (for example in land, machinery and livestock) have been used to generate profit. With appropriate consideration of risk, farm rates of return can be compared to those generated by other potential uses of capital, such as debt and equity investments.

ABARES calculates rate of return to capital by expressing profit at full equity – that is, farm business profit plus rent, interest and finance lease payments – as a percentage of total opening capital. Rate of return represents the ability of businesses to generate a return to all capital used by the business, including that which is borrowed or leased. Finance costs are added back in to farm business profit so that rates of return can be compared across farms regardless of their debt arrangements.

The average rate of return (excluding capital appreciation) for grain farms declined from 2.9% in 2017–18 to 1.6% in 2018–19 (Figure 6). In 2019–20, the average rate of return is projected to have decreased further to around 0.7%, well below the average of 2.8% recorded from 2009–10 to 2018–19.

For specialist grain farms, the average rate of return in 2018–19 remained relatively steady at 3.5% but is projected to have decreased to 1.9% in 2019–20. For non-specialist grain farms, the average rate of return declined to negative 0.2% in 2018–19 and is projected to have fallen further to negative 0.5% in 2019–20. In comparison, the average rate of return for all broadacre farms in 2019–20 is estimated to have been 0.3%.

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Similar to other measures of performance, rates of return vary widely across grain farms (Figure 7). From 2009–10 to 2018–19, 70% of grain farms recorded a positive rate of return (excluding capital appreciation) and an estimated 27% of farms earned rates of return greater than 5%. In 2019–20, an estimated 55% of farms recorded a positive rate of return (excluding capital appreciation) and around 19% of farms earned rates of return greater than 5%. On average, larger grain farms have higher rates of return than smaller grain farms.

Ongoing increases in farm land prices in Australia over recent decades mean that farm rates of return are typically higher when changes in the value of capital items are included as a source of returns. However, these ‘real estate’ returns are ideally kept separate when seeking to understand the performance of farm enterprises such as livestock and crop production. When changes in the value of capital items are included, the average rate of return for grain farms over the 10 years to 2018–19 increases from 2.8% to 5.1% and 73% of farms earned a positive rate of return.

Variation in returns across farms reflects differences in seasonal conditions, prices and other factors between farms in any particular year. This variation is quite distinct from measures of farm business ‘risk’ – which is defined as the variation in returns or profits over time for individual farm businesses. This latter type of variation reflects changes over time in seasonal conditions, commodity prices and the cost of farm inputs, as well as farm-specific factors such as enterprise mix and the skills and experience of the farm manager. The focus of this report is presenting industry-level estimates, rather than farm-level.

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Performance by region

The financial performance of grain farms in 2019–20 varies across regions reflecting differences in seasonal conditions, markets and underlying industry structure. Grain farms in the Northern region recorded a second consecutive year of severe drought, with 86% of grain farms reporting drought conditions in 2019–20 (Figure 8).

In the Southern region, around 53% of grain farms reported above average or average seasonal conditions in 2019–20. In contrast, seasonal conditions worsened in the Western region, with around 73% of grain farms reporting below average or drought conditions in 2019–20.

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Drought in much of eastern Australia is directly influencing farm incomes in the Northern region due to low crop production, while recent poor seasonal conditions have led to lower average farm cash income in the Western region (Figure 9 and Table 3). In contrast, incomes are are projected to have increased on average in the Southern region in 2019–20 because of improved seasonal conditions and timely rainfall in most areas.

Note: Farm cash income and farm business profit varies over time because of short-term changes in factors such as commodity prices, seasonal conditions and management decisions, as well as longer-term changes in the farm sector, such as growth in average farm size, shifts in enterprise mix and technological progress. Appropriate consideration of the long-term factors is essential when interpreting changes in farm cash income and business profit over periods longer than 3 to 5 years.
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Table 3 Farm financial performance, grain farms, by region, 2017–18 to 2019–20
average per farm
Northern region Unit 2017–18 2018–19p RSE 2019–20y
Total cash receipts $ 796,180 601,600 (5) 464,000
less total cash costs $ 548,420 488,200 (5) 430,000
Farm cash income $ 247,760 113,500 (15) 34,000
plus change in trading stocks $ –74,850 –91,200 (15) –81,000
less depreciation $ 65,570 65,000 (4) 68,000
less operator and family labour $ 74,020 81,400 (4) 87,000
Farm business profit $ 33,320 –124,200 (13) –202,000
plus interest and lease payments $ 60,000 54,300 (7) 55,000
Profit at full equity $ 93,310 –69,800 (23) –147,000
Rate of return a % 1.4 –0.9 (23) –1.9
Southern region
Total cash receipts $ 711,480 688,500 (4) 796,000
less total cash costs $ 456,690 457,800 (5) 474,000
Farm cash income $ 254,790 230,700 (7) 322,000
plus change in trading stocks $ –3,360 –11,700 (55) –38,000
less depreciation $ 67,170 71,500 (4) 73,000
less operator and family labour $ 73,350 77,900 (2) 83,000
Farm business profit $ 110,910 69,600 (22) 129,000
plus interest and lease payments $ 57,070 61,200 (9) 60,000
Profit at full equity $ 167,980 130,800 (12) 189,000
Rate of return a % 3.0 2.1 (11) 2.8
Western region
Total cash receipts $ 1,429,620 1,510,600 (6) 1,278,000
less total cash costs $ 875,700 912,400 (7) 829,000
Farm cash income $ 553,910 598,200 (6) 449,000
plus change in trading stocks $ –12,230 –4,600 (100) –101,000
less depreciation $ 114,100 106,600 (7) 108,000
less operator and family labour $ 81,750 84,700 (4) 90,000
Farm business profit $ 345,830 402,300 (9) 150,000
plus interest and lease payments $ 84,090 81,600 (12) 70,000
Profit at full equity $ 429,920 483,900 (8) 220,000
Rate of return a % 6.4 7.0 (8) 3.2

p Preliminary estimate. y Provisional estimate. a Excluding capital appreciation. RSE Relative standard error.
Note: Estimates may not sum due to rounding.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Regional variation in average rate of return

The average annual rate of return varies significantly across regions. The Southern region has the greatest range in average rate of return and the Northern region has the smallest range (Figure 10).

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Performance of specialist and non-specialist grain farms

Specialist grain farms are defined as grain farms obtaining more than 50% of their total cash receipts from crop sales. These farms typically operate larger areas than non-specialists and focus primarily on crops, with relatively small sheep and beef cattle activities. Non-specialist grain farms are defined as grain farms obtaining less than 50% of their total cash receipts from crop sales. These farms are typically smaller than specialist grain farms and have a mix of sheep, beef cattle and cropping activities.

In 2019–20, farm cash incomes for specialist and non-specialist grain farms are projected to have declined (Figure 11 and Table 4). Both groups are projected to have lower crop and livestock receipts in 2019–20. Cash costs are also lower for both groups, but by less than the declines in receipts. Non-specialist grain farms reduced cash costs in 2019–20 to a greater extent than specialists, and hence recorded less of a decline in farm cash income.

Note: Farm cash income varies over time because of short-term changes in factors such as commodity prices, seasonal conditions and management decisions, as well as longer-term changes in the farm sector, such as growth in average farm size, shifts in enterprise mix and technological progress. Appropriate consideration of the long-term factors is essential when interpreting changes in farm cash income over periods longer than 3 to 5 years.
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Table 4 Farm financial performance, grain farms, by specialisation, 2017–18 to 2019–20
average per farm
Specialist grain farms Unit 2017–18 2018–19p RSE 2019–20y
Total cash receipts $ 1,122,450 1,153,200 (4) 1,093,000
less total cash costs $ 725,900 749,500 (4) 730,000
Farm cash income $ 396,550 403,700 (6) 363,000
plus change in trading stocks $ –49,300 –32,800 (47) –92,000
less depreciation $ 100,880 107,200 (4) 110,000
less operator and family labour $ 78,190 84,200 (3) 91,000
Farm business profit $ 168,190 179,600 (13) 70,000
plus interest and lease payments $ 86,340 89,700 (6) 89,000
Profit at full equity $ 254,530 269,300 (9) 159,000
Rate of return a % 3.6 3.5 (8) 1.9
Non-specialist grain farms
Total cash receipts $ 608,310 531,300 (5) 470,000
less total cash costs $ 403,990 403,000 (7) 357,000
Farm cash income $ 204,320 128,300 (14) 114,000
plus change in trading stocks $ –23,150 –53,300 (21) –49,000
less depreciation $ 46,700 49,800 (7) 51,000
less operator and family labour $ 71,820 77,800 (3) 82,000
Farm business profit $ 62,650 –52,600 (47) –69,000
plus interest and lease payments $ 38,380 39,900 (13) 36,000
Profit at full equity $ 101,030 –12,700 (100) –33,000
Rate of return a % –1.8 0.2 (100) 0.5

p Preliminary estimate. y Provisional estimate. a Excluding capital appreciation. RSE Relative standard error.
Note: Estimates may not sum due to rounding.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Debt and equity

Trends in average debt per farm

Debt is an important source of funds for farm investment and ongoing working capital for many grain farms. At the national level, average debt of grain farms declined by 8% to $957,900 per farm in 2018–19 (Figure 12). This was mainly due to a reduction in working capital debt. Average debt of grain farms is projected to have remained relatively steady in 2019–20.

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In ABARES farm surveys, debt is recorded by its main purpose. However, because some loans cover a range of purposes, estimates of debt by main purpose provide a guide only.

Over the 3 years to 2018–19, land purchase debt accounted for 41% of average total debt for grain farms and working capital around 37% (Figure 13). Additional detail is contained in the ‘farm capital and investment’ section of this report.

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Equity ratio

Increases in average total debt of grain farms over time have been largely matched by increases in total value of farm capital. As a consequence, over the 10 years to 2018–19 the average equity ratio of grain farms fluctuated around 84%.

Around 59% of grain farms had an equity ratio greater than 90% in 2018–19 (Table 5). On average, these farms were relatively small and diverse, with 49% of total receipts derived from selling crops. A further 32% of grain farms had an equity ratio of 70% to 90% in 2018–19. Only 9% of grain farms had an equity ratio less than 70%. On average, these were relatively large grain-producing farms that obtained around 69% of total cash receipts from crops.

Table 5 Farm performance by equity ratio, grain farms, Australia, 2018–19
average per farm
Measure Unit Equity ratio
More than 90% 70 to 90% Less than 70%
Proportion of farms % 59 32 9
Total area operated ha 1,718 2,738 3,944
Total area sown to crops ha 588 981 1,660
Crop receipts $ 269,100 518,600 917,400
Total cash receipts $ 550,100 930,200 1,323,600
Total cash costs $ 332,600 675,100 1,044,800
Farm cash income $ 217,500 255,100 278,800
Crop receipts as a proportion of total receipts % 49 56 69

Note: Average per responding farm. Based on preliminary estimates.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Debt servicing capacity

The long-term viability of a farm is affected by its capacity to service debt, among many other factors. The servicing of debt consists of making interest payments and paying down the principal. The proportion of farm receipts spent on interest payments is a useful indicator of short-term capacity to service debt.

From 2009–10 to 2016–17, the proportion of farm receipts needed to fund interest payments declined as a result of higher cash receipts and reduced interest rates. In 2017–18 and 2018–19, this proportion increased slightly, mainly reflecting a decline in average receipts as seasonal conditions worsened in some regions. In 2018–19, the proportion of farm receipts needed to fund interest payments was around 6% and is projected to have remained at 6% in 2019–20 (Figure 14).

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At the national level in 2018–19, around 42% of grain farms reduced their total debt over the financial year, while an estimated 34% increased their total debt (Figure 15). Grain farms in the Western region had the highest proportion of farms reducing their average total debt in 2018–19 (48%) and the lowest proportion increasing debt (26%). The Northern region had the highest proportion of farms increasing debt (37%) and the lowest proportion of farms with no debt at 1 July 2018 and 30 June 2019 (16%).

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Nationally, there was no significant difference in the size of farms reducing debt compared with those that increased debt (Table 6). However, cash incomes were around 56% higher for those reducing debt.

Table 6 Farm performance, by change in debt, grain farms, Australia, 2018–19
average per farm
Australia Unit Reducing debt Increasing debt
Proportion of farms % 42 34
Total area operated ha 2,360 2,646
Total area sown to crops ha 871 974
Crop receipts $ 481,900 461,200
Crop receipts as a proportion of total receipts % 57 56
Total cash receipts $ 850,400 828,900
Total cash costs $ 548,000 635,500
Farm cash income $ 302,400 193,400
Equity ratio % 87 81

Note: Average per responding farm. Based on preliminary estimates.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Table 7 shows the distribution of grain farms by debt and equity ratio at 30 June 2019. An estimated 26% of grain farms in Australia had no debt at 30 June and a further 10% held less than $100,000 in debt. An estimated 27% of farms had debt in excess of $1 million at 30 June 2019.

Table 7 Distribution of farms, by farm business debt and equity ratio, grain farms, Australia, 30 June 2019
percentage of farms
Equity ratio No debt Less than $100,000 $100,000 to less than $250,000 $250,000 to less than $500,000 $500,000 to less than $1m $1m to less than $2m More than $2m Total
Greater than or equal to 90% 26 10 10 7 5 2 0 59
80 to less than 90% 0 0 1 3 5 5 3 18
70 to less than 80% 0 0 1 1 3 4 6 14
60 to less than 70% 0 0 0 0 1 1 3 5
Less than 60% 0 0 0 0 0 1 2 4
Total 26 10 12 11 15 13 14 100

Note: Percentage of responding farms. Based on preliminary estimates. Row and column totals may not sum to 100 due to rounding.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Farm debt, by region

Farm business debt of grain farms varies significantly by region, reflecting differences in the scale of farms, the nature of production systems and prevailing seasonal conditions.

Average debt of grain farms in the Northern region trended upwards from 2012–13 to 2019–20, but fluctuated with changes in seasonal conditions and farms exiting the industry (Figure 16). In 2018–19, average debt declined by 15% to around $1 million per farm, but is projected to have risen by 6% in 2019–20.

In the Southern region, average debt per farm has increased since 2015–16 and is projected to have been $0.8 million per farm in 2019–20.

In the Western region, average debt per farm is generally higher than in the other regions, reflecting larger average farm sizes and higher working capital debt. Since 2011–12, average debt in the Western region has declined. This change mainly reflects higher average farm incomes over the period.

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Debt and equity, by specialist and non-specialist farms

Over the 10 years to 2018–19, the average debt of specialist grain farms followed a similar trend to that of non-specialists. A greater proportion of total farm debt is used for working capital, vehicles and machinery for specialist grain farms compared to non-specialist grain farms.

Average equity ratios are lower for specialist grain farms than non-specialists, averaging 84% in 2018–19 (Table 8). This is mainly because specialist grain growers tend to use working capital debt to purchase inputs, such as fertiliser and seed. These and other inputs are used more intensively in cropping than livestock enterprises. Equity ratios trended upwards for specialist grain farms over the 10 years to 2018–19 as increases in average total farm capital outweighed increases in total farm debt. The average equity ratio of non-specialist grain farms was steady from 2009–10 to 2018–19, and averaged 89% in 2018–19.

Table 8 Equity ratio and total farm debt, grain farms, by specialisation, 2017–18 to 2018–19
average per farm
Group Equity ratio (%) Farm debt at 30 June ($)
2017–18 2018–19p 2017–18 2018–19p
Specialist grain farms 82 84 1,293,020 1,325,800
Non-specialist grain farms 88 89 698,560 643,900

p Preliminary estimate.
Note: Average per responding farm. Specialist grain farms are grain farms that obtained more than 50% of total cash receipts from crop receipts. Non-specialist grain farms are grain farms that obtained less than 50% of total cash receipts from crop receipts.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Capital and investment

Total farm capital

Investment in farm capital is important for the ongoing development of the Australian grain industry. Investments in land, fixed improvements, and plant and equipment are key drivers of grain farmers’ capacity to generate farm outputs.

The total value of capital of Australian grain farms was 86% higher in 2018–19 than in 2000–01 in real terms (Figure 17). This growth in capital values mainly reflects increases in farm land prices over time. The accumulation of additional productive assets has been less significant, as it has been largely offset by depreciation. On a per farm basis, total capital more than doubled over the period to be around $7.3 million per farm in 2018–19, largely because of increased average farm sizes and higher land values.

The Northern region has more farms and higher total capital than the Southern or Western regions. The region accounted for around 45% of the total capital value of grain farms in 2018–19. The Southern and Western regions accounted for 36% and 19% of total grain farm capital respectively.

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The distribution of farms by asset value has changed substantially over time. From 2000–01 to 2018–19, the proportion of grain farms with a capital value of less than $3 million in real terms fell substantially, and the proportion of larger farms increased almost three-fold (Figure 18).

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Land accounted for an average of 85% of total capital per farm in 2018–19 (Figure 19). Plant and equipment accounted for 9%, livestock accounted for 5% and trading stocks accounted for 1% of total grain farm capital.

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Return on land

ABARES uses two rates of return to farm capital—rate of return excluding capital appreciation and rate of return including capital appreciation. Rate of return is defined as farm profit at full equity expressed as a percentage of total capital. Because land is the largest component of total farm capital it plays a key role in determining total farm returns.

Figure 20 shows the average value of land and fixed improvements per hectare. Strong demand for farm land led to increases in land values from 2000–01 to 2008–09, with an annual average return from land appreciation of 9.3% per year. Land values declined from 2008–09 to 2013–14 before continuing to increase because of strong demand, low interest rates and reduced supply as fewer properties have come on the market (Rural Bank 2020). This has been particularly the case in the Southern region (Victoria, South Australia and Tasmania). Growth in land values in the Northern and Western regions region has been at a more modest rate.

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New farm investment

Most farmers make new investments each year to add to the existing capital stock or to replace capital items that have reached the end of their useful life. Farm investments are usually made with longer-term outcomes in mind and based on expected returns over the life of the investment.

On average, 65% of grain farms each year made additions to their total capital over the 10 years to 2018–19 (Figure 21). The amount invested each year by those making capital additions fluctuated broadly in line with movements in farm cash incomes. In 2018–19, an estimated 59% of grain farms made capital additions.

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Figure 22 shows the proportion of grain farms that made capital additions in 2018–19 and the average capital addition in three categories—land purchases, plant and equipment, and buildings and structures. Land is the biggest component of capital additions, although only 8% of grain farms bought land in 2018–19. Average expenditure on land for those making purchases was around $1.3 million per farm.

Around 55% of all grain farms made additions to plant and equipment in 2018–19, at an average of around $138,600 per farm. Around 12% of grain farms made additions to buildings and structures, at an average of $72,500 per farm.

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Farm characteristics

Grains industry

The grains industry makes an important contribution to the Australian economy. In 2018–19, production of grain, oilseed and pulse crops accounted for around 21% ($12.9 billion) of the total gross value of farm production (GVP) (ABS 2020b) and around 17% of the total value of farm export income.

Australian grain production is predominantly characterised by winter cereals. From 2000–01 to 2018–19, wheat accounted for 55% of the area planted to grains, oilseeds and pulses, on average, followed by barley (19%). In 2018–19, the share of area planted to wheat was 51% and the area planted to barley was 23%.

Wheat is the most important individual crop by tonnage and value. In 2018–19, the GVP for wheat was $6.3 billion, around 49% of total GVP for the grains industry (ABS 2020b). Total production of wheat in 2018–19 was around 17.3 million tonnes or 52% of total grains industry tonnage.

Number of farms

In 2018–19, an estimated 22,300 Australian farms had at least 40 hectares sown to grains, oilseeds or pulses. Around 43% of these farms were in the Northern region, 38% in the Southern region and 19% in the Western region.

From 2000–01 to 2018–19, the total number of Australian grain farms fell by around 35%, with similar declines in each region (Figure 23). Around 25% of Australian farms produced grains, oilseeds and pulses in 2018–19 (ABS 2020a).

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Farm characteristics by region

Northern region

The Northern region includes grain farms in New South Wales and Queensland. These farms typically produce a mix of grain crops and livestock, varying in their degree of crop specialisation. In 2018–19, around 27% of Northern region grain farms were specialist grain growers. Over the 3 years to 2018–19, around 73% of Northern region grain farms planted less than 600 hectares and 5% planted more than 2,400 hectares (Figure 24).

Wheat is the main crop grown by Northern region grain farms. From 2009–10 to 2018–19, wheat accounted for around 56% of total grain production each year on Northern region grain farms, with barley accounting for 13% and grain sorghum 9%.

Southern region

The Southern region includes grain farms in Victoria, South Australia and Tasmania. These farms typically produce a mix of grain crops and livestock with a high proportion of farms specialising in grain production. In 2018–19, around 55% of Southern region grain farms were specialist grain growers. Over the 3 years to 2018–19, around 59% of Southern region grain farms planted less than 600 hectares and 8% planted more than 2,400 hectares (Figure 24).

From 2009–10 to 2018–19, wheat accounted for around 56% of total grain production each year on Southern region grain farms and barley accounted for 29%.

Western region

The Western region includes grain farms in Western Australia. This region has fewer grain farms than the other regions, but a higher proportion of Western region grain farms plant large areas of crops and are specialist grain growers. In 2018–19, around 64% of Western region grain farms were specialist grain growers. Over the 3 years to 2018–19, around 27% of Western region grain farms planted more than 2,400 hectares and 32% planted less than 600 hectares (Figure 24).

From 2009–10 to 2018–19, wheat accounted for 59% of total grain production on Western region grain farms on average each year and barley accounted for 23%.

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Crop yields

The distributions of average crop yield reflect the underlying characteristics of farms in each region and the variation in seasonal conditions over time. In the Northern region (Queensland and New South Wales) crop yields are generally high but with greater variability than other regions. In this region, crop yields depend to a significant degree on conservation of soil moisture. The region has generally relatively high inherent soil fertility and water-holding capacity. Crop yields in the Southern region (Victoria, Tasmania, and South Australia) are highly dependent on rainfall in autumn and spring. Soils in this region are generally of low fertility and with many subsoil constraints, leading to less dependence on stored soil moisture to drive yield. Crop yield is generally lower in the Western region (Western Australia) where soil fertility and water holding capacity is generally low to very low. Spring rainfall is highly variable with yield underpinned by relatively reliable winter rainfall (Figure 25).

In 2018–19, the average wheat yield was 1.2 tonnes per hectare in the Northern region, down from 1.9 tonnes per hectare in 2017–18 and below the median since 2000–01. In the Southern region, the average wheat yield in 2018–19 was 1.7 tonnes per hectare, down from 2.3 tonnes per hectare in 2017–18 and below the median since 2000–01. In the Western region, the average wheat yield in 2018–19 was 2.2 tonnes per hectare, the highest recorded over the period from 2000–01.

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Grain stocks

The stocks of grain held on farms varies with grain prices, requirements for seed and livestock feeding, marketing arrangements, and timing of harvest. Since 2016–17, the average stock of grains, oilseeds and pulses on hand at 30 June declined as a result of decreased grain production and increased feed use (Figure 26). The average stock of grain on hand per farm at 30 June 2019 was around 142 tonnes, down 35% from the previous June. Wheat accounted for around half the average total grain stock held on farm in 2018–19 (Table 9).

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Table 9 Grain stocks at 30 June, grain farms, Australia, 2017–18 to 2018–19
average per farm
Crop Unit 2017–18 2018–19p
Pulses t 28 13
Oilseeds t 23 10
Wheat t 106 70
Oats t 15 8
Barley t 34 32
Grain sorghum t 4 7
Other grain crops t 9 2
All grains t 219 142

p Preliminary estimate.
Source: ABARES Australian Agricultural and Grazing Industries Survey

Productivity

Agricultural productivity estimates are available for the cropping industry.

References

ABS 2020a, Agricultural commodities, Australia, 2018–19, cat. no. 7121.0 Australian Bureau of Statistics, Canberra, accessed 29 May 2020.

ABS 2020b, Value of agricultural commodities produced, Australia, 2018–19, cat. no. 7503.0 Australian Bureau of Statistics, Canberra, accessed 29 May 2020.

Rural Bank 2020, Australian Farmland Values 2020 report, Rural Bank, Adelaide, accessed 23 July 2020.

Data and other resources

Broadacre and dairy industries data

AgSurf provides a large selection of ABARES farm survey data on the broadacre and dairy industries

Previous reports

See our previous research page for previous versions of the report Australian grains: financial performance of grain farms.

Farm surveys definitions and methods

Further information about our survey definitions and methods.

Farm performance: broadacre and dairy farms

This web report provides a detailed profile of the financial performance of farm businesses in the grains, livestock and dairy industries in the years 2017–18 to 2019–20.

Download the full report

 
Last reviewed: 28 October 2020
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