The structure of farms and farming in Australia
As part of its research program, ABARES is currently undertaking a review of the structure of farms and farming in Australia. By examining changes in the structure of agriculture we can better understand how and why this process takes place. Examples include: long term declines in the number of farm businesses; changes in farm business ownership arrangements; vertical coordination in the form of production contracts and/or vertical integration of businesses in some industries; and greater use of non-family labour.
This research will contribute to greater understanding amongst government and industry decision makers by clearly articulating trends and issues in the structure of farms and farm households. This project provides context for other work being conducted in ABARES, including farm survey industry reporting, productivity analysis, farm labour, and evaluation of impacts of the Murray–Darling Basin Plan. Knowledge of how the structure of farms has evolved helps us understand future responses.
Agriculture is continuously evolving through a process of ongoing change and adjustment. Resulting changes in distributions of ownership and control of resources influence the incentives faced by farm decision makers. From a policy perspective it is important to be able to examine the scope of impacts from any given change. Some changes have widespread social impacts at either regional or national scales, while others are of narrower significance.
There are many ways to describe the structure of agriculture. These are simultaneously concerned with farms and farm businesses, farm households, and agricultural resource use.
- Farm businesses combine the services of land, labour, capital and management in production of agricultural products.
- Farm households are concerned with the welfare of household members. They make separate, but related, decisions to farm businesses. The presence of more than one person involved in ownership or management complicates the link between farm businesses and farm households. Household dynamics also influence the behaviour of farmers and the operations of farms. An example is when long term investment decisions may be influenced by whether or not the farm operator has a successor.
- Agricultural resources are fundamental to the organisation of farm businesses and it is the quality, quantity and relative mix of land, labour, capital and management through which structural change occurs.
Changes in the number of farm businesses in Australia
The historical data series on the number of farm businesses is complicated by changes over time in how farm businesses have been defined. These have included changes in minimum size classifications for inclusion, defined by Estimated Value of Operations (EVAO). Prior to 1986–87 the ABS included farm businesses with an EVAO of $2,500 or more. From 1986–87 the EVAO threshold was raised to $20,000 and from 1991–92 was raised further to $22,500. In 2016–17 the ABS increased the threshold to $40,000.
Apart from these structural breaks in the data there is a clear long term decline in the total number of farm businesses in Australia that gained pace in each decade up to the 2000s (Figure 1, Figure 2). To provide consistent representation the data were re-estimated to the equivalent basis of an EVAO of $22,500 or more.
Occasional increases in the number of farms are often the result of rural holdings operating on a part-time basis producing sufficient value of agricultural commodities to be classified as farms. This usually occurs because of increases in commodity prices rather than any substantial increase in the volume of output on these farms.