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AustralianbeefFinancial performance of beef farms, 2013–14 to 2015–16 DaleAshton,MarkOliverandHaydnValle

Research by the Australian Bureau of Agricultural

and Resource Economics and Sciences

Researchreport16.10September 2016

©CommonwealthofAustralia2016

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Cataloguingdata

Ashton,D,Oliver,M&Valle,H2016,Australianbeef:financialperformanceofbeeffarms,2013‒14to2015‒16,ABARESresearchreport16.10,Canberra,September.CCBY3.0.

ISSN1447–8358ISBN978‐1‐74323‐306‐1ABARESproject43010

Internet

Australianbeef:financialperformanceofbeeffarms,2013‒14to2015‒16isavailableatagriculture.gov.au/abares/publications.

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TheAustralianGovernmentactingthroughtheDepartmentofAgricultureandWaterResources,representedbytheAustralianBureauofAgriculturalandResourceEconomicsandSciences,hasexercisedduecareandskillinpreparingandcompilingtheinformationanddatainthispublication.Notwithstanding,theDepartmentofAgricultureandWaterResources,itsemployeesanditsadvisersdisclaimallliability,includingfornegligenceandforanyloss,damage,injury,expenseorcostincurredbyanypersonasaresultofaccessing,usingorrelyingoninformationordatainthispublication,tothemaximumextentpermittedbylaw.

Acknowledgements

ABARESreliesonthevoluntarycooperationoffarmersparticipatingintheannualAustralianAgriculturalandGrazingIndustriesSurveytoprovidedatausedinthepreparationofthisreport.Withouttheirhelp,thesurveywouldnotbepossible.ABARESfarmsurveystaffcollectedmostoftheinformationpresentedinthisreportthroughon‐farminterviewswithfarmers.TheAustralianAgriculturalandGrazingIndustriesSurveyisfundedbytheDepartmentofAgricultureandWaterResources,Meat&LivestockAustraliaandtheGrainsResearchandDevelopmentCorporation.TomJackson(ABARES)wrotethesectiononvariabilityinratesofreturn.ThanksarealsoduetoBenThomas(MLA)andJackMullumby(ABARES)forcommentsonanearlierdraft.

Australianbeef:financialperformanceofbeeffarms,2013–14to2015–16 ABARES

iii

Contents

Keypoints 1

1 Introduction 2

2 Industryoverview 3

3 Seasons,productionandprices 6

4 Receipts,costsandprofit 9

5 Capitalinvestmentanddebt 17

6 Productivity 19

Surveymethodology 21

Glossary 26

References 31

Furtherinformation 33

Tables

Table1Proportionsoffarmsandcattlebyherdsize,Australia,2014–15 5

Table2Beefproduction,Australia,2013–14to2015–16 7

Table3Farmcashreceipts,beeffarms,2013–14to2015–16 9

Table4Farmcashcosts,beeffarms,2013–14to2015–16 11

Table5Farmcashincome,beeffarms,2013–14to2015–16 12

Table6Rateofreturn,beeffarms,2013–14to2015–16 15

Table7AverageannualbeefindustryTFPgrowth,byregion,1977–78to2013–14 20

Figures

Figure1Cattlenumbers,Australia,2000–01to2015–16 3

Figure2Sharesoftotalbeefcattle,bystate,2014–15 3

Figure3Grossvalueoflivestockslaughteringsbycommodity,Australia,2014–15 4

Figure4Slaughternumbersandmeatproduction,Australia,2014–15 4

Figure5Proportionsofbeeffarms,byregion,2014–15 5

Figure6Priceindexesforselectedcommodities,Australia,2000–01to2015–16 8

Figure7Contributionofreceiptsbyenterprise,byregion,2000–01to2014–15 10

Figure8Cashreceiptsbysource,byregion,2000–01to2014–15 10


iv

Figure9Sharesoftotalcashcostsbycostitem,byregion,2000–01to2014–15 11

Figure10Farmcashincome,Australia,2000–01to2014–15 12

Figure11Farmcashincomebyherdsize,Australia,2000–01to2015–16 13

Figure12Changesinreceipts,costsandincomebyregion,2013–14to2014–15 13

Figure13Changesinreceipts,costsandincomebyregion,2014–15to2015–16 14

Figure14Farmcashincomebyregion,2000–01to2015–16 14

Figure15Rateofreturn,beeffarms,Australia,2000–01to2015–16 15

Figure16Rateofreturnvariabilitybyregion,2000–01to2015–16 16

Figure17Farmsmakingcapitaladditions,Australia,2000–01to2014–15 17

Figure18Totalfarmdebtandequity,Australia,2000–01to2014–15 18

Figure19Interesttototalcashreceiptsratio,Australia,2000–01to2015–16 18

Figure20Input,outputandTFP,beefindustry,Australia,1977–78to2013–14 19

Maps

Map1MLAbeefregions 2

Map2Rainfalldeciles,beefproducingregions,2014–15 6

Map3Rainfalldeciles,beefproducingregions,2015–16 6

Map4ABARESAustralianbroadacrezonesandregions 25


1

Key points ThisreportpresentsdetailedfinancialperformanceestimatesforAustralianbeefcattleproducingfarmsfor2013‒14to2015‒16.Beefcattlefarmsaredefinedasbroadacrefarmsthathadatleast100headofbeefcattleonhandattheendofJune2015.In2014–15Australiahadaround26600beefcattlefarms.

FarmfinancialperformanceAveragetotalcashreceiptsforAustralianbeeffarmsincreasedbyaround14percentin2014‒15to$391000andbyasimilarpercentageinthefollowingyeartoaround$442000.Theincreasesintotalcashreceiptslargelyreflectedhigherreceiptsfromcattlesales,whichwerelargelyaresultofhighercattleprices.

Becauseofhigheraveragetotalcashreceiptsandlittlechangeinaveragetotalcashcosts,theaveragefarmcashincomeforbeeffarmsincreasedbymorethan50percentin2014–15toaround$122000perfarm.In2015–16averagefarmcashincomeisestimatedtohaveincreasedbyone‐third,toaround$162000.Highertotalcashreceiptsareestimatedtohavemorethanoffsetanexpectedriseintotalcashcosts.

Inrealterms,estimatedaveragefarmcashincomesfor2014–15and2015–16areamongthehighestrecordedsince2000–01.

NorthernregionbeeffarmsrecordedhigheraveragefarmincomesthanfarmsintheSouthernregioninboth2014–15and2015–16.ReceiptsfrombeefcattlesalesintheNorthernregionaccountforamuchhigherproportionoftotalenterprisereceiptsthanintheSouthernregion.

Reflectinghigherincomes,theaveragerateofreturn(excludingcapitalappreciation)forbeeffarmsincreasedfrom–0.1percentin2013‒14to0.6percentin2014‒15.Averagerateofreturnisestimatedtohaveincreasedfurtherin2015‒16toaround1.9percent.

Investment,capitalanddebtFrom2000–01to2015–16,around50percentofbeefcattlefarmseachyearmadeanannualnetinvestmentofjustover$40000inrealterms.Netcapitalinvestmentisthedifferencebetweentotalcapitalpurchasesandtotalcapitalsales.

Averagebeeffarmdebtmostlyincreased,inrealterms,between2000–01and2014–15.In2014–15averagetotaldebtwasaround$460000perfarm.Theincreaseindebtovertimehaslargelybeensupportedbyanaccompanyingincreaseinthetotalcapitalvalueofbeeffarms.Consequently,averagefarmbusinessequityratiosremainedrelativelysteadyovertheperiod2000–01to2015–16.

ProductivityProductivitygrowth,measuredusingtotalfactorproductivity,isimportantformaintaininginternationalcompetitivenessandprofitability.Onaverage,totalfactorproductivityintheAustralianbeefcattleindustryincreasedby1.3percentayearbetween1977–78and2013–14.TheNorthernregionrecordedhigherannualgrowthintotalfactorproductivity(1.5percent)overthisperiodthantheSouthernregion(0.6percent).


2

1 Introduction ThebeefcattleindustrymakesanimportantcontributiontotheAustralianeconomy.In2014–15itaccountedforaround21percent($11.5billion)ofthetotalgrossvalueoffarmproductionandaround23percentofthetotalvalueoffarmexportsincome(ABARES2016).

Thisreportpresentsdetailedfinancialperformanceestimatesforbeefproducingfarmsfor2013‒14to2015‒16,withanemphasison2014‒15results.BeefproducingfarmsaredefinedasthoseAustralianbroadacrefarmbusinessesthathadatleast100headofbeefcattleonhandat30June2015.Basedonthisdefinition,approximately26600—around50percentofallbroadacrefarms—wereclassifiedasbeefcattleproducingfarmsin2014‒15.

Farmperformancedataareprovidedvariouslyatanationalandregionalscale.Thetworegions,NorthernandSouthern,arebasedonthoseusedbyMeat&LivestockAustralia.TheNorthernregionisdefinedasallofQueenslandandtheNorthernTerritoryaswellasnorthernWesternAustralia.TheremainderofAustralia,includingsouthernWesternAustralia,SouthAustralia,NewSouthWales,VictoriaandTasmania,makeuptheSouthernregion(Map1).

ThereportdrawsondatafromtheABARESannualAustralianAgriculturalandGrazingIndustriesSurvey(AAGIS).ThissurveyhasbeenconductedbyABARESanditspredecessorssince1977–78andprovidesgovernmentandindustrystakeholderswithimportantdataforanalysingandmonitoringchangesinAustralia’sbroadacreindustries.

TheAAGISsurveyisfundedbytheDepartmentofAgricultureandWaterResources,Meat&LivestockAustraliaandtheGrainsResearchandDevelopmentCorporation.Meat&LivestockAustraliacommissionedandfundedthisreport.

TheinformationpresentedinthisreportcomplementsfarmsurveyresultspublishedinMartin(2016).DetailedresultsforpreviousyearsareavailablefromtheABARESwebsiteandtheMeat&LivestockAustraliawebsite.

Map 1 MLA beef regions

Note: Regions based on aggregations of ABS statistical local areas. Source: ABARES


3

2 Industry overview Since2000–01totalcattlenumbersinAustraliatrendedupwardstoaround29.3millionheadby2012–13.Althoughdairycattlebreedscontributetobeefandvealproduction,mostproductioncomesfrombeefcattlebreedsthataccountforaround90percentofthetotalherd(Figure1).

From2012–13to2015–16thebeefcattleherddeclinedbyaround10percenttoanestimated23.3millionhead.Thisdeclineresultedfromhighcattleturn‐offbecauseofprolongedpoorseasonalconditionsand,morelatterly,strongexportdemand(Mullumby,Whitnall&Perndt2016).Dairyherdnumberschangedlittleoverthisperiod.

Figure 1 Cattle numbers, Australia, 2000–01 to 2015–16

Sources: ABARES (2011, 2015, 2016)

QueenslandaccountsforthelargestproportionofAustralia’stotalbeefherd,with45percent.NewSouthWalesaccountedforjustover20percentandVictoria,WesternAustraliaandtheNorthernTerritoryeachhadalmost10percentofthetotalherd(Figure2).

Figure 2 Shares of total beef cattle, by state, 2014–15

Source: ABS 2016

million head

5

10

15

20

25

30

2000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

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2013–14

2014–15

2015–16

Beef cattle

Dairy cattle

% 10 20 30 40 50

Qld

NSW

Vic.

WA

NT

SA

Tas.


4

Thegrossvalueofcattleandcalvesslaughteredin2014–15wasaround$10.2billion(Figure3).Thiswasmorethanthecombinedvaluesforsheep,lambs,poultryandpigs,androughlyequivalenttothegrossvalueofallgraincrops.

Figure 3 Gross value of livestock slaughterings by commodity, Australia, 2014–15

Note: Dairy cattle are included in cattle slaughterings. Source: ABARES 2016

Australiancattleandcalfslaughterwasjustover10millionheadin2014–15,yieldingaround2.7milliontonnesofbeefandveal(Figure4).Bothslaughteringsandmeatproductionwerearound7to8percenthigherthantheprecedingyear.

Figure 4 Slaughter numbers and meat production, Australia, 2014–15

Notes: Dairy cattle are included in cattle slaughterings. Slaughter data not available for chickens. Source: ABARES 2016

Inthisreport,thepopulationofbeefcattlefarmshasbeendividedintofourgroupsaccordingtonumberofcattleonhandat30June2015:

farmswith100to400head



farmswithmorethan5400head.

$m 2 000 4 000 6 000 8 000 10 000 12 000

Cattle, calves

Sheep, lambs

Poultry

Pigs

2015–16 $`000

12 000

24 000

36 000

Cattle, calves Sheep, lambs Pigs

Slaughterings

kt

1 000

2 000

3 000

Cattle, calves Sheep, lambs Pigs Chickens

Meat production


5

Ofthosefarmswithmorethan100headofbeefcattle,aroundtwo‐thirdsranherdsofbetween100and400head—accountingfor18percentoftotalbeefcattleonbeefproducingfarms—andafurther28percentofbeeffarmshadaherdofbetween400and1600head—accountingfor26percentofbeefcattle(Table1).Lessthan10percentoffarmshadherdslargerthan1600headbuttheyaccountedfor56percentofbeefcattle.

Table 1 Proportions of farms and cattle by herd size, Australia, 2014–15

Beefherdsizea Averagenumberoffarms

Shareoffarms Shareofbeefcattle

no. % %

100to400head 16 800 63 18

400to1600head 7 420 28 26

1600to5400head 1 940 7 26

Morethan5400head 510 2 30

Totalhead 26 670 100 100

a Farms with herds less than 100 head are not reported on. Source: ABS, ABARES Australian Agricultural and Grazing Industries Survey

Aswellasreportingresultsatanationalscale,thisreportalsoprovidesresultsfortheMLAdefinedNorthernandSouthernregions.Thetworegionshavemarkeddifferencesinclimate,pastures,industryinfrastructureandproximitytomarkets.Thishasaffectedthedevelopmentandnatureofthebeefindustryandassociatedfarmbusinessesineachregionoverthepast20years.Martin(2015)providesdescriptionsofeachregion.

TheaverageherdsizeforSouthernregionbeeffarmsin2014–15was431head.Almostthree‐quartersofbeefcattlefarmsintheSouthernregionhadaherdofbetween100and400head(Figure5).Afurther23percenthadbetween400and1600headofbeefcattleandjust4percenthadherdsgreaterthan1600head.

FarmsintheNorthernregionhadmuchlargerherdsizes.In2014–15theaverageherdsizewas1580.Over20percentoffarmshadanaverageherdofgreaterthan1600head,including5percentwithgreaterthan5400head.Around38percentoffarmswereinthe400to1600headcategoryandasimilarproportionranbetween100and400head,mostlyinsouthernQueensland.

Figure 5 Proportions of beef farms, by region, 2014–15

Source: ABARES Australian Agricultural and Grazing Industries Survey

Northern

Southern

100‒400 head

400‒1 600 head

1 600‒5 400 head

> 5 400 head

% 25 50 25 50 25 50 25 50


6

3 Seasons, production and prices

SeasonalconditionsIn2014–15rainfallwasaverageinmuchofnorthernNewSouthWalesandsouthernQueenslandfollowingwidespreadbelowaveragerainfallinthoseregionsin2013–14.However,itwasconsiderablydrierin2014–15inthebeefproducingregionsofnorthernQueensland,southernNewSouthWales,Victoria,SouthAustraliaandsouth‐westWesternAustralia.

Map 2 Rainfall deciles, beef producing regions, 2014–15

Source: Bureau of Meteorology

In2015–16mostofthebeefproducingregionsofNewSouthWalesandSouthAustraliareceivedaveragetobelowaveragerainfall,andrainfallwasgenerallybelowtowellbelowaverageinQueensland,northernWesternAustralia,theNorthernTerritory,VictoriaandTasmania.Muchofsouth‐westWesternAustraliarecordedaboveaveragerainfallin2015–16.

Map 3 Rainfall deciles, beef producing regions, 2015–16

Source: Bureau of Meteorology


7

BeefproductionTotalbeefproductionincreasedby8percentfrom2013–14to2014–15,reflectinganincreaseinthenumberofcattleslaughteredin2014–15(Table2).Thisincreaseinthenumberofcattleslaughteredwasmainlybecauseofdryconditionsinmanybeefproducingareasandhighcattleprices(Deards&Mullumby2015).Beefmeatandlivecattleexportsalsoincreasedin2014–15.Livecattleexportsincreasedbyalmost30percent,drivenbystrongdemandfromIndonesiaandVietnam.

In2015–16beefproductionisestimatedtofalltoaround2.4milliontonnesasaresultofanestimated12percentfallintotalslaughterings(Mullumby2016b).Livecattleexportsarealsoestimatedtofall,toaround1.12millionhead,largelyreflectinglowerIndonesianpermitallocationsinthefirstquarteroftheyear(Mullumby2016b).

Table 2 Beef production, Australia, 2013–14 to 2015–16

Year Cattleslaughtereda

Beefmeatproduction

Livecattleexportsb

Beefmeatexports

(’000) (kt) (’000) (kt)

2013–14 9 473 2 464 1 006 1 184

2014–15 10 103 2 662 1 295 1 349

2015–16 8 863 2 358 1 119 1 166

a Includes dairy cattle. b Includes live feeder and slaughter cattle. Note: Data for 2015–16 are estimates. Source: Mullumby (2016a, b)

Atthefarmlevel,theaveragenumberofbeefcattlesoldincreasedby4percentin2014–15.TheincreaseincattlesaleswasdrivenbytheSouthernregion,whichhadan11percentincreaseintheaveragenumberofcattlesoldin2014–15.IntheNorthernregion,theaveragenumberofbeefcattlesoldfellbyaround2percentin2014–15,largelyasaresultofimprovedseasonalconditionsinsomeareas.Dataonthenumberofcattlesoldatthefarmlevelarenotavailablefor2015–16.

PricesAfteramostlydownwardtrendfrom2000–01to2013–14,beefpricesareestimatedtohaveincreasedsignificantlyin2014–15and2015–16.Strongexportdemandforbothpackagedbeefandlivecattle,alowerAustraliandollaranddomesticre‐stockerdemandarethemaindriversofthispriceincrease(Mullumby2016a,b).Pricesforprimelambsarealsoexpectedtoincrease;wheatandwoolpriceshaveexhibitedcomparativelylessvariability(Figure6).


8

Figure 6 Price indexes for selected commodities, Australia, 2000–01 to 2015–16

Note: Data for 2015–16 are estimates. Source: ABARES estimates

Beef Wool Lamb Wheat

Index 2000–01=100

50

100

150

200

250

2000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

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2010–11

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2012–13

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2014–15

2015–16


9

4 Receipts, costs and profit FarmcashreceiptsIn2014–15atthenationallevelaveragetotalcashreceiptsincreasedby14percenttoaround$391000afarm(Table3).Thisincreaseintotalreceiptswaslargelybecauseofhigherbeefcattlereceipts.Whenaveragedoverthethreeyears2013–14to2015–16,receiptsfrombeefcattleaccountedforaround60percentoftotalcashreceipts.Theincreaseinbeefcattlereceiptsfrom2013–14to2014–15wastheresultofbothamodestriseinthenumberofcattlesoldandasignificantriseinaverageunitcattlepricereceived.

Table 3 Farm cash receipts, beef farms, 2013–14 to 2015–16

average per farm

Totalfarmcashreceipts Unit 2013–14 2014–15 2015–16

Australia $ 343 800 391 000 441 600

Northernregion $ 409 300 464 100 532 200

Southernregion $ 314 900 358 500 399 300

Note: 2015–16 data are preliminary estimates. Source: ABARES Australian Agricultural and Grazing Industries Survey

Averagetotalcashreceiptsatthenationallevelareestimatedtoincreasefurtherin2015–16toaround$442000,againlargelydrivenbyhighercattlereceipts.Cattlereceiptsareexpectedtoincreasebecauseofrisingcattlepricesmorethanoffsettingadeclineinthenumberofcattlesold.

Australianbeefcattleturn‐offisestimatedtofallin2015–16asaresultofherdrebuildinginresponsetoimprovedseasonalconditions(Martin2016;Mullumby2016a).Whencombinedwithexpectedstrongexportdemand,theaveragesaleyardpriceofbeefcattleisestimatedtoincreasebyaround40percentin2015–16(Mullumby2016a).

IntheNorthernregion,totalcashreceiptsincreasedbymorethan13percenttoaround$464000in2014–15(Table3).IntheSouthernregion,totalcashreceiptsincreasedbyasimilarpercentagetoabout$358000.In2015–16totalcashreceiptsareestimatedtoincreasefurtherinbothregions—tomorethan$532000and$399300intheNorthernandSouthernregions,respectively.

IntheNorthernregion,beefcattlereceiptsaresignificantlymoreimportantthanintheSouthernregion.From2000–01to2014–15,beefreceiptsaccountedforalmost90percentoftotalenterprise(crop,sheepandbeef)receiptsintheNorthernregion(Figure7).Cropandsheepenterprisereceiptswererelativelyinsignificantat9percentand4percent,respectively.

IntheSouthernregion,althoughbeefcattlesaleswerealsothemostimportantsourceofenterprisereceipts(47percent),theycontributedlesstototalenterprisereceiptsthanintheNorthernregion.Conversely,theproportionsoftotalreceiptsfromcropsandsheepenterprisesweremuchhigherthanintheNorthernregionat28percentand25percent,respectively.


10

Figure 7 Contribution of receipts by enterprise, by region, 2000–01 to 2014–15


From2000–01to2014–15,averagereceiptsfrombeefcattlesalesintheNorthernregionexceeded$382000eachyear,rangingbetweenaround$290000and$528000(Figure8).Theaverageyearlyreceiptsfromcropandsheepenterpriseswerearound$38000and$16000,respectively.

IntheSouthernregion,beefcattlereceiptsaveragedaround$164000overtheperiod2000–01to2014–15,receiptsfromcropswerearound$97000andreceiptsfromsheepwerearound$88000.

Figure 8 Cash receipts by source, by region, 2000–01 to 2014–15

average per farm

Note: Data for 2014–15 are preliminary estimates. Figures are rounded upwards. Source: ABARES Australian Agricultural and Grazing Industries Survey

Beef

Sheep

Crops

Northern Southern

% 20 40 60 80 % 20 40 60 80

Beef cattle CropsSheep

2015–16 $

200 000

400 000

600 000

2000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

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2015–16

2000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

Northern Southern


11

FarmcashcostsAveragetotalcashcostsonAustralianbeeffarmsincreasedbylessthan2percenttoaround$269000in2014–15(Table4).IntheSouthernregion,totalcashcostsincreasedby4percenttomorethan$244000,mostlybecauseofhighercattlepurchasecosts.IntheNorthernregion,costsfellby2percenttoaround$326000.

In2015–16averagetotalcashcostsatthenationallevelareestimatedtohaveincreasedby$10000(3.7percent)toaround$279000.TotalcashcostsintheNorthernandSouthernregionsareestimatedtohaveincreasedbyaround5.5percentandjustover2percent,respectively.

Table 4 Farm cash costs, beef farms, 2013–14 to 2015–16

average per farm

Totalfarmcashcosts Unit 2013–14 2014–15 2015–16

Australia $ 264 700 269 400 279 400

Northernregion $ 333 000 325 700 343 800

Southernregion $ 234 600 244 300 249 400


From2000–01to2014–15,cattlepurchases,interestandrepairsandmaintenancewerethethreeitemsaccountingforthelargestsharesoftotalcashcostsinboththeSouthernandNorthernregions(Figure9).Otheritemsaccountingformorethan5percentoftotalcashcostsintheNorthernregionwerefodder,labourandfuelandoil.

IntheSouthernregion,whilelabourandfuelandoilalsoaccountedformorethan5percentoftotalcashcosts,fodderwasmuchlessimportantthanfertiliserwhichaccountedforalmost10percentoftotalcashcosts.

Figure 9 Shares of total cash costs by cost item, by region, 2000–01 to 2014–15

average per farm

%

5

10

15

Cattle purchases

Interest

Rep

airs and m

aintenan

ce

Fodder

Labour

Fuel/oil

Freight

Contracts

Administration

Rates

Crop/pasture chemicals

Livestock m

aterials

Insurance

Fertiliser

Northern

Southern


12


FarmcashincomeReflectinghighertotalcashreceiptsandlittlechangeintotalcashcosts,averagefarmcashincomeincreasedbymorethan50percentin2014–15toaround$121700(Table5).AveragefarmcashincomeforAustralianbeeffarmsisestimatedtohaveincreasedfurtherin2015–16to$162200ashighercashreceiptsmorethanoffsetanestimatedincreaseintotalcashcosts.Inrealterms,theestimatedaveragefarmincomesfor2014–15and2015–16willbeamongthehighestrecordedsince2000–01(Figure10).

Table 5 Farm cash income, beef farms, 2013–14 to 2015–16

average per farm

Farmcashincome Unit 2013–14 2014–15 2015–16

Australia $ 79 100 121 700 162 200

Northernregion $ 76 300 138 400 188 500

Southernregion $ 80 300 114 200 150 000


Figure 10 Farm cash income, Australia, 2000–01 to 2014–15

average per farm

Note: Data for 2015–16 are estimates. Source: ABARES Australian Agricultural and Grazing Industries Survey

Theaveragefarmcashincomeforbeeffarmswith100to400headwasabout$51000from2000–01to2015–16(Figure11).Forfarmswith400to1600headitwas$114000andforfarmswith1600to5400headitwas$246000.Thosefarmswithmorethan5400headhadanaveragefarmcashincomeofroughly$770000,butwithlargevariationsfromyeartoyear.

2015–16 $

50 000

100 000

150 000

200 000

2000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16


13

Figure 11 Farm cash income by herd size, Australia, 2000–01 to 2015–16

average per farm

Note: Data for 2015–16 are estimates. Source: ABARES Australian Agricultural and Grazing Industries Survey

RegionalperformanceNorthernregionbeeffarmsrecordedhigheraveragefarmcashincomesthanfarmsintheSouthernregioninboth2014–15and2015–16(Table5).However,bothregionsrecordedyear‐on‐yearincreasesfrom2013–14to2014–15andfrom2014–15to2015–16.

Regionalchangesintotalcashreceipts,totalcashcostsandfarmcashincomefrom2013–14to2014–15areshowninFigure12.AveragefarmcashincomeintheNorthernregionincreasedbymorethan$60000becausetotalreceiptsincreasedby$55000andtotalcostsfellby$7000.IntheSouthernregion,averagefarmcashincomeincreasedby$34000asa$10000increaseintotalcostswasmorethanoffsetbya$44000increaseintotalcashreceipts.

Figure 12 Changes in receipts, costs and income by region, 2013–14 to 2014–15

average per farm

Note: Data for 2015–16 are projections. Figures are rounded upwards. Source: ABARES Australian Agricultural and Grazing Industries Survey

From2014–15to2015–16,averagefarmcashincomesinbothregionsareestimatedtohaveincreasedfurther(Figure13).IntheNorthernregion,farmcashincomeisestimatedtohave

100–400 head 400–1 600 head 1 600–5 400 head > 5 400 head

2015–16 $

500 000

1 000 000

1 500 000

2 000 0002000–01

2001–02

2002–03

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

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2013–14

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$`000


14

increasedby$50000asalargeincreaseintotalcashreceiptswasonlypartiallyoffsetbyanincreaseintotalcashcostsofaround$18000.IntheSouthernregion,totalcashreceiptsareestimatedtohaveincreasedbyjustover$40000,muchgreaterthanthe$5000increaseintotalcostsandresultinginfarmcashincomeincreasingby$36000.

Figure 13 Changes in receipts, costs and income by region, 2014–15 to 2015–16

average per farm

Note: Data for 2015–16 are projections. Figures are rounded upwards. Source: ABARES Australian Agricultural and Grazing Industries Survey

IntheSouthernregion,averagefarmcashincomefortheperiod2000–01to2015–16was$87000(Figure14).Thelowestrecordedaveragefarmcashincomewasaround$40000in2006–07andthehighestistheestimatefor2015–16of$150000.

AveragefarmcashincomefortheNorthernregionoverthisperiodwas$118000.Thelowestaverageincomewas$46000in2009–10andthehighestwas$223000intheearly2000s.

Figure 14 Farm cash income by region, 2000–01 to 2015–16

average per farm


68

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15

RateofreturnRateofreturnisameasureoftheannualprofitgeneratedbyabusiness,expressedasapercentageofthevalueofthecapitalusedtogeneratethatprofit.Becauseitisexpressedasaratio,therateofreturnforbeeffarmscanbecomparedwiththerateofreturnforotherfarmtypesorotherpotentialinvestments.Forexample,theaveragerateofreturnforallbroadacrefarmsinboth2013–14and2014–15was1.4percent(Martin2016).

Reflectinghigherincomes,therateofreturn(excludingcapitalappreciation)forAustralianbeefcattlefarmsincreasedfrom–0.1percentin2013–14to0.6percentin2014–15.Averagereturnisestimatedtohaveincreasedfurtherin2015–16toaround1.9percent.

Table 6 Rate of return, beef farms, 2013–14 to 2015–16

average per farm

Farmcashincome Unit 2013–14 2014–15 2015–16

Australia % –0.1 0.6 1.9

Northernregion % –0.5 0.1 1.6

Southernregion % 0.2 0.9 2.2

Notes: 2015–16 data are preliminary estimates. Rate of return excludes capital appreciation. Source: ABARES Australian Agricultural and Grazing Industries Survey

Fortheperiod2000–01to2014–15,theaveragerateofreturn(excludingcapitalappreciation)was1percent(Figure15).Boththehighestaveragereturn(3.2percent)andthelowestaveragereturn(–0.7percent)wererecordedintheearly2000s.

Figure 15 Rate of return, beef farms, Australia, 2000–01 to 2015–16

average per farm


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16

VariationinratesofreturnThelongtermperformanceoffarmbusinessesisdeterminedbyboththelevelandvariabilityofprofits.Figure16summarisesvariationintherateofreturnoncapital(excludingcapitalappreciation)fortheperiod2000–01to2015–16.Foreachyear,thereturnsgeneratedbyindividualfarmsineachregionhavebeenaveraged.Asaresult,thevariationinreturnsreflectschangesovertimeinaverageseasonalconditionsandcommoditypricesexperiencedbyfarmsineachregion.Individualfarmsarelikelytohaveexperiencedsomewhatdifferentvariationinreturnsoverthisperiod,dependingonthespecificseasonalconditionsandcommoditypricesthatwererealisedandotherfarm‐specificfactorssuchasenterprisemixandtheskillofthemanager.

Figure16contains‘boxes’thataredefinedbytheratesofreturngeneratedinthemostmoderate50percentofyearsbetween2000–01and2015–16.Theseratesofreturnare0.7percentto1.6percentintheNorthernregionand0.4percentto1.6percentintheSouthernregion.Onaverage,farmprofitwillbeintheserangesfiveyearsineveryten.

Thebestandworst25percentofyearsfallaboveandbelowtheboxes,respectively,withtheverticallinesrepresentingthehighestandlowestratesofreturnearnedinaparticularyearduringtheperiod.Theseare–0.7percentand3.9percentforNorthernregionfarmsand–0.7percentand2.7percentforSouthernregionfarms.Thehorizontallinewithineachboxrepresentstheaveragerateofreturngeneratedovertheperiod—1.3percentforNorthernregionfarmsand0.9percentforSouthernregionfarms.

Figure16showssomedifferenceinvariationbetweenregions,withNorthernregionfarmsgeneratingarelativelywiderangeofreturnsoverthepast16years.However,Figure16alsorevealsthat,whilebeeffarmsintheNorthernregionexperiencedthegreatestoverallvariationinreturnsoverthisperiod,verylowandnegativeratesofreturnoccurrednomoreoftenthanintheSouthernregion.

Figure 16 Rate of return variability by region, 2000–01 to 2015–16


–1

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17

5 Capital investment and debt

Farminvestment Producers’capacitytogeneratefarmincomeisinfluencedbytheirpastinvestmentsinland,farminfrastructure,andplantandmachinery.Althoughonlyarelativelysmallproportionoffarmersbuylandinanygivenyear,mostmakesomeannualinvestmentinplant,vehicles,machineryandinfrastructure.

From2000–01to2014–15,anaverageof50percentofbeefcattlefarmsmadeanannualnetcapitalinvestment.Theannualaverageinvestmentforthesefarmsovertheperiodwasaround$40000.Netcapitalinvestmentisthedifferencebetweentotalvalueofplant,vehicles,machineryandfarminfrastructurepurchasedandtotalvalueofthoseitemssold.

In2013–14theproportionoffarmsmakingcapitalinvestmentsandthevalueofthoseinvestmentswerelowerthanthelong‐termaverages,at43percentandaround$27000respectively(Figure17).In2014–15theproportionofbeeffarmsmakinginvestmentsincreasedtoaboutthelong‐termaverageat49percentandtheaveragenetinvestmentalsoincreased,toalmost$37000.

Figure 17 Farms making capital additions, Australia, 2000–01 to 2014–15

average per farm and proportion of farms


DebtandequityDebtisanimportantsourceoffundsforfarminvestmentandongoingworkingcapitalformanybeefproducingfarms.

Averagebeeffarmdebtmostlytrendedupwards,inrealterms,between2000–01and2014–15(Figure18).In2014–15theaveragefarmdebtforbeeffarmswasjustover$460000.Increasesinaveragedebtoverthepast15yearshavebeenlargelytheconsequenceofarapidincreaseinaveragefarmsize.Anincreaseinaveragedebtperfarmwouldprobablyhaveoccurredasaresultoftheexitofsmallfarmsevenwithoutanyadditionalborrowing.Manysmallfarmshadlittleornodebtandtheirexitraisedtheaveragedebtfortheremainingfarms.

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18

Theincreasesindebtovertimehavelargelybeensupportedbyincreasesinthetotalcapitalvalueofbeefproductionfarms.Asaconsequence,averagefarmbusinessequityratiostrendedslightlydownwardsovertheperiod2000–01to2015–16.Changeinfarmequityratiosovertimeshouldbeconsideredagainstthebackgroundoftheincreaseinaveragefarmsize.Equityratiosaretypicallylowerforlargerfarmsbecausetheyaregenerallyabletoservicelargerdebts.

Figure 18 Total farm debt and equity, Australia, 2000–01 to 2014–15

average per farm (two‐year moving average)


Overall,changesinaveragedebtovertimehavebeenmodestrelativetobeefproducers’capacitytoservicedebtbygeneratingincome.Thecapacitytoservicedebt—makinginterestandprincipalrepayments—isanimportantpartoffarmviability.Onaverage,around9percentofbeeffarmcashreceiptswereusedtomakeinterestpaymentsoverthe10yearsto2015–16.Thisproportionhasfalleninyearsofhigherfarmreceiptsandreducedinterestrates(Figure19).

Figure 19 Interest to total cash receipts ratio, Australia, 2000–01 to 2015–16

average per farm


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19

6 Productivity ProductivityisanimportantmeasureofperformanceforAustralianagriculturebecauseitreflectsimprovementsintheefficiencywithwhichinputssuchasland,labourandcapitalareusedtoproduceoutputssuchasmeat,crops,woolandmilk.Productivitygrowthisimportantformaintaininginternationalcompetitivenessandprofitabilitygivenlong‐termdeclinesinAustralianfarmers’termsoftrade.

Productivitygrowthisdefinedasanincreaseinoutputbeyondanyassociatedincreaseininput(oradecreaseinthequantityofinputsneededtoproduceaunitofoutput).ABARESmeasuresproductivityusingtotalfactorproductivity(TFP),whichtakesintoaccountthefullrangeofinputsandoutputsthataregeneratedonfarm.

Productivitygrowthisgenerallymeasuredoverthelongtermbecauseitistreatedasanindicatoroftechnologicalprogress,whichcaninvolvesignificanttimelagsinbothon‐farmimplementationandrealisedbenefits.Further,short‐termvariabilityinproductivitycanreflectseasonalconditionsratherthanshiftsinunderlyingtechnologyorefficiency.

AnumberoffundamentaldriversofproductivityacrosstheAustralianfarmsectorhavebeenidentified,includingclimateconditions,structuraladjustment,researchanddevelopment,increasingfarmsizeandmanagementability.Mostimportantforthebeefindustrytoachieveongoingproductivitygrowthwillbeitsabilitytocontinueadoptingnewtechnologiesandmanagementpracticesthatgenerateimprovementsinefficiency.

TrendsinbeefindustryproductivityProductivityintheAustralianbeefindustryincreasedby1.3percentayearonaveragefrom1977–78to2013–14(Figure20).Outputincreasedby1.1percentayearwhileinputsdeclinedby0.2percentayear(Table7).

Figure 20 Input, output and TFP, beef industry, Australia, 1977–78 to 2013–14


Productivitygrowthinthebeefindustryhasbeensupportedbyimprovementsinpastures,herdgeneticsanddiseasemanagement.Thishasledtoincreasedbrandingrates(calvesmarkedasapercentageofcowsmated)andlowermortalities.

Index (1977–78=100)

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Output

Input


20

Table 7 Average annual beef industry TFP growth, by region, 1977–78 to 2013–14

Beeffarms Inputgrowth Outputgrowth TFPgrowth

% % %

Allbeeffarms –0.2 1.1 1.3

Southernregion 0.5 1.2 0.6

Northernregion –0.4 1.1 1.5


Mostoftheproductivitygainsinthebeefindustrybetween1977–78and2013–14weremadeintheNorthernregion(Table7).Productivitygrowthinthisregionaveraged1.5percentayear,drivenbyoutputgrowthof1.1percentayearandreducedinputuseof0.4percentayear.

Thisimprovementinproductivitycanbepartlyattributedtoimprovedreproductiveperformanceandreduceddeathratesresultingfromthebrucellosisandtuberculosiseradicationcampaignofthe1980s.Managersculledpoorperformingstockandinvestedsignificantlyinfences,on‐farminfrastructureandcattlemanagementsystems.Expansionofthefeedlotsectorandtheliveexporttradeduringthe1990salsodroveshiftsinherdstructureandgreateruseofclimateappropriateBosindicusbreeds.

ProductivityintheSouthernbeefregionincreasedby0.6percentayearfrom1977–78to2013–14.Southernregionoutputgrowthof1.2percentayearwasgreaterthanthatoftheNorthernregion,butsubstantiallyhighergrowthininputuse(0.5percentayear)meantthatproductivityincreasedataslowerrate.

FarmsintheSouthernregionfacedifferentconstraintsfromtheirnortherncounterparts.TheclimateismorevariedandbeeffarmsintheSouthernregionaremoresensitivetodroughtconditions,whichleadtoincreasedfeedpurchasesanddestockingandrestockingcyclesthathamperoutputgrowth.BeefcattlefarmsinsouthernAustraliaaremoreintensiveanddiversifiedthanthoseintheNorthernregion.Theyarealsosmallerandlessprofitable,whichislikelytohavecontributedtoloweraverageproductivitygrowth(Jackson&Valle2015).


21

Survey methodology ABAREShasconductedsurveysofselectedAustralianagriculturalindustriessincethe1940s.Thesesurveysprovideabroadrangeofinformationontheeconomicperformanceoffarmbusinessunitsintheruralsector.Thiscomprehensivedatasetisusedforresearchandanalysisthatformsthebasisofmanypublications,briefingmaterialandindustryreports.Since1977–78ABAREShasconductedtheannualAustralianAgriculturalandGrazingIndustriesSurvey(AAGIS)toprovideasetofdatathatarecollectednationallyusingaconsistentmethodology.

DefinitionsofindustriesIndustrydefinitionsarebasedonthe2006AustralianandNewZealandStandardIndustrialClassification(ANZSIC06).ThisclassificationisinlinewithaninternationalstandardappliedcomprehensivelyacrossAustralianindustry,permittingcomparisonsbetweenindustries,bothwithinAustraliaandinternationally.FarmsassignedtoaparticularANZSIChaveahighproportionoftheirtotaloutputcharacterisedbythatclass.FurtherinformationonANZSICandonfarmingactivitiesincludedineachoftheseindustriesisprovidedinAustralianandNewZealandStandardIndustrialClassification(ABS2006).

ThefivebroadacreindustriescoveredbyAAGISare:

wheatandothercropsindustry(class0146and0149)

‐ farmsengagedmainlyingrowingrice,othercerealgrains,coarsegrains,oilseeds,pulses

mixedlivestock–cropsindustry(class0145)

‐ farmsengagedmainlyinrunningsheep,beefcattleandgrowingcerealgrains,coarsegrains,oilseeds,pulses

sheepindustry(class0141)

‐ farmsengagedmainlyinrunningsheep

beefindustry(class0142)

‐ farmsengagedmainlyinrunningbeefcattle

sheep–beefindustry(class0144)

‐ farmsengagedmainlyinrunningbothsheepandbeefcattle.

TargetpopulationsAAGISisdesignedfromapopulationlistdrawnfromtheAustralianBusinessRegister(ABR)andmaintainedbytheAustralianBureauofStatistics.TheABRcomprisesbusinessesregisteredwiththeAustralianTaxationOffice.TheABR‐basedpopulationlistprovidedtoABARESconsistsofagriculturalestablishmentswiththeircorrespondinggeographycode(currentlyAustralianStatisticalGeographyStandard),ANZSIC,andasizeofoperationvariable.

ABARESsurveystargetfarmingestablishmentsthatmakeasignificantcontributiontothetotalvalueofagriculturaloutput(commercialfarms).FarmsexcludedfromABARESsurveyswillbethesmallestunitsandinaggregatewillcontributelessthan2percenttothetotalvalueofagriculturalproductionfortheindustriescoveredbythesurveys.

ThesizeofoperationvariableusedinABARESsurveydesignsisusuallyestimatedvalueofagriculturaloperations(EVAO).EVAOisastandardiseddollarmeasureofthelevelof


22

agriculturaloutput.However,insomesurveysinrecentyearsothermeasuresofagriculturalproductionhavealsobeenused.

Since2004–05theABARESsurveyhasincludedestablishmentsclassifiedashavinganEVAOof$40000ormore.Between1991–92and2003–04thesurveyincludedestablishmentswithanEVAOof$22500ormore.Between1987–88and1990–91thesurveyincludedestablishmentswithanEVAOof$20000ormore.Before1987–88thesurveyincludedestablishmentswithanEVAOof$10000ormore.

SurveydesignThetargetpopulationisgroupedintostratadefinedbyABARESregion,ANZSICandsizeofoperation.Thesampleallocationisacompromisebetweenallocatingahigherproportionofthesampletostratawithhighvariabilityinthesizevariableandanallocationproportionaltothepopulationofthestratum.

Alargeproportionofsamplefarmsareretainedfromthepreviousyear’ssurvey.Thesamplechoseneachyearmaintainsahighproportionofthesamplebetweenyearstoaccuratelymeasurechangewhilemeetingtherequirementtointroducenewsamplefarms.Newfarmsareintroducedtoaccountforchangesinthetargetpopulation,aswellastoreducetheburdenonsurveyrespondents.

ThesamplesizeforAAGISisusuallyaround1600farms.

Themainmethodofcollectingdataisface‐to‐faceinterviewswiththeowner–managerofthefarmbusiness.Detailedphysicalandfinancialinformationiscollectedontheoperationsofthefarmbusinessduringtheprecedingfinancialyear.RespondentstoAAGISarealsocontactedbytelephoneinthelatterpartofeachyeartoobtainestimatesofprojectedproductionandexpectedreceiptsandcostsforthecurrentfinancialyear.ABARESsurveysalsoallowsupplementaryquestionnairestobeattachedtothemainortothetelephonesurveys.Theseadditionalquestionshelpaddressspecificindustryissues—suchasgraincostofproduction,livestockmanagementpracticesandadoptionofnewtechnologiesondairyfarms.

SampleweightingABARESsurveyestimatesarecalculatedbyappropriatelyweightingthedatacollectedfromeachsamplefarmandthenusingtheweighteddatatocalculatepopulationestimates.Sampleweightsarecalculatedsothatpopulationestimatesfromthesamplefornumbersoffarms,areasofcropsandnumbersoflivestockcorrespondascloselyaspossibletothemostrecentlyavailableAustralianBureauofStatisticsestimatesfromitsAgriculturalCensusandsurveys.

TheweightingmethodologyforAAGISusesamodel‐basedapproach,withalinearregressionmodellinkingthesurveyvariablesandtheestimationbenchmarkvariables.ThedetailsofthismethodaredescribedinBardsleyandChambers(1984).

ForAAGIS,thebenchmarkvariablesprovidedbytheABSinclude:

totalnumberoffarmsinscope

areaplantedtowheat,rice,othercereals,grainlegumes(pulses)andoilseeds

closingnumbersofbeefandsheep.


23

Generally,largerfarmshavesmallerweightsandsmallerfarmshavelargerweights.Thisreflectsboththestrategyofsamplingahigherfractionofthelargerfarmsthansmallerfarmsandtherelativelylowernumbersoflargefarms.Largefarmshaveawiderrangeofvariabilityofkeycharacteristicsandaccountforamuchlargerproportionoftotaloutput.

ReliabilityofestimatesThereliabilityoftheestimatesofpopulationcharacteristicspublishedbyABARESdependsonthedesignofthesampleandtheaccuracyofthemeasurementofcharacteristicsfortheindividualsamplefarms.

PreliminaryestimatesandprojectionsEstimatesfor2013–14andallearlieryearsarefinal.Alldatafromfarmers,includingaccountinginformation,havebeenreconciled;finalproductionandpopulationinformationfromtheABShasbeenincludedandnofurtherchangeisexpectedintheseestimates.

The2014–15estimatesarepreliminary,basedonfullproductionandaccountinginformationfromfarmers.However,editingandadditionofsamplefarmsmaybeundertakenandABSproductionandpopulationbenchmarksmayalsochange.

The2015–16estimatesareprojectionsdevelopedfromthedatacollectedthroughon‐farmandtelephoneinterviewsbetweenSeptember2015andDecember2015.Theestimatesincludecropandlivestockproduction,receiptsandexpenditureuptothedateofinterview,togetherwithexpectedproduction,receiptsandexpenditurefortheremainderofthefinancialyear.Modificationshavebeenmadetoexpectedreceiptsandexpenditurefortheremainderof2015–16wherepriceshavechangedsignificantlysincetheinterview.Projectionestimatesarenecessarilysubjecttogreateruncertaintythanpreliminaryandfinalestimates.

Preliminaryandprojectionestimatesoffarmfinancialperformanceareproducedwithinafewweeksofthecompletionofsurveycollections.However,thesemaybeupdatedseveraltimesatlaterdates.Thesesubsequentversionswillbemoreaccurate,astheywillbebasedonupgradedinformationandslightlymoreaccurateinputdatasets.

SamplingerrorsOnlyasubsetoffarmsoutofthetotalnumberoffarmsinaparticularindustryissurveyed.Thedatacollectedfromeachsamplefarmareweightedtocalculatepopulationestimates.Estimatesderivedfromthesefarmsarelikelytobedifferentfromthosethatwouldhavebeenobtainedifinformationhadbeencollectedfromacensusofallfarms.Anysuchdifferencesarecalled‘samplingerrors’.

Thesizeofthesamplingerrorisinfluencedbythesurveydesignandtheestimationprocedures,aswellasthesamplesizeandthevariabilityoffarmsinthepopulation.Thelargerthesamplesize,thelowerthesamplingerrorislikelytobe.Hence,nationalestimatesarelikelytohavelowersamplingerrorsthanindustryandstateestimates.

Togiveaguidetothereliabilityofthesurveyestimates,standarderrorsarecalculatedforallestimatespublishedbyABARES.Theseestimatederrorsareexpressedaspercentagesofthesurveyestimatesandtermedrelativestandarderrors.


24

CalculatingconfidenceintervalsusingrelativestandarderrorsRelativestandarderrorscanbeusedtocalculate‘confidenceintervals’thatgiveanindicationofhowclosetheactualpopulationvalueislikelytobetothesurveyestimate.

Toobtainthestandarderror,multiplytherelativestandarderrorbythesurveyestimateanddivideby100.Forexample,ifaveragetotalcashreceiptsareestimatedtobe$100000witharelativestandarderrorof6percent,thestandarderrorforthisestimateis$6000.Twostandarderrorsequal$12000.

Thereisroughlyatwo‐in‐threechancethatthe‘censusvalue’(thevaluethatwouldhavebeenobtainedifallfarmsinthetargetpopulationhadbeensurveyed)iswithinonestandarderrorofthesurveyestimate.Thisrangeofonestandarderrorisdescribedasthe66percentconfidenceinterval.Inthisexample,thereisanapproximatelytwo‐in‐threechancethatthecensusvalueisbetween$94000and$106000($100000plusorminus$6000).

Thereisroughlya19‐in‐20chancethatthecensusvalueiswithintwostandarderrorsofthesurveyestimate(the95percentconfidenceinterval).Inthisexample,thereisanapproximately19‐in‐20chancethatthecensusvalueliesbetween$88000and$112000($100000plusorminus$12000).

ComparingestimatesWhencomparingestimatesbetweentwogroups,itisimportanttorecognisethatthedifferencesarealsosubjecttosamplingerror.Asaruleofthumb,aconservativeestimateofthestandarderrorofthedifferencecanbeconstructedbyaddingthesquaresoftheestimatedstandarderrorsofthecomponentestimatesandtakingthesquarerootoftheresult.

Forexample,supposetheestimatesoftotalcashreceiptswere$100000inthebeefindustryand$125000inthesheepindustry—adifferenceof$25000—andtherelativestandarderrorisgivenas6percentforeachestimate.Thestandarderrorofthedifferenceis$9605,estimatedasthesquarerootof:

((6x$100000/100)2+(6x$125000/100)2)

A95percentconfidenceintervalforthedifferenceistherefore:

$25000±1.96x$9605=($6174;$43826)

Hence,ifalargenumber(towardsinfinity)ofdifferentsamplesaretaken,inapproximately95percentofthem,thedifferencebetweenthesetwoestimateswillliebetween$6174and$43826.Also,sincezeroisnotinthisconfidenceinterval,itispossibletosaythatthedifferencebetweentheestimatesisstatisticallysignificantlydifferentfromzeroatthe95percentconfidencelevel.


25

RegionsBroadacrestatisticsarealsoavailablebyregion(Map4).Theseregionsrepresentthefinestlevelofgeographicalaggregationforwhichthesurveyisdesignedtoproducereliableestimates.

Map 4 ABARES Australian broadacre zones and regions

Note: Each region is identified by a unique code of three digits. The first digit identifies the state or territory, the second digit identifies the zone and the third digit identifies the region. Source: ABARES


26

Glossary Term Definition

owner–manager Theprimarydecision‐makerforthefarmbusiness.Thispersonisusuallyresponsibleforday‐to‐dayoperationofthefarmandmayownorhaveashareinthefarmbusiness.

beefcattle Cattlekeptprimarilyfortheproductionofmeat,irrespectiveofbreed.

dairycattle Cattlekeptorintendedmainlyfortheproductionofmilkorcream.

hiredlabour Excludesthefarmbusinessmanager,partnersandfamilylabourandworkbycontractors.Expenditureoncontractservicesappearsasacashcost.

labour Measuredinworkweeks,asestimatedbytheowner–managerormanager.Itincludesallworkonthefarmbytheowner–manager,partners,family,hiredpermanentandcasualworkersandsharefarmersbutexcludesworkbycontractors.

totalareaoperated Includesalllandoperatedbythefarmbusiness,whetherownedorrentedbythebusiness,butexcludeslandsharefarmedonanotherfarm.

largestockunit 400kilogramdrycoworsteer.

capital Thevalueoffarmcapitalisthevalueofalltheassetsusedonafarm,includingthevalueofleaseditemsbutexcludingmachineryandequipmenteitherhiredorusedbycontractors.Thevalueof‘owned’capitalisthevalueoffarmcapitalexcludingthevalueofleasedmachineryandequipment.

ABARESusestheowner–manager’svaluationofthefarmproperty.Thevaluationincludesthevalueoflandandfixedimprovementsusedbyeachfarmbusinessinthesurvey,excludinglandsharefarmedoffthesamplefarm.Residencesonthefarmareincludedinthevaluations.Livestockarevaluedatestimatedmarketpricesforthelandusezoneswithineachstate.Thesevaluesarebasedonrecordedsalesandpurchasesbysamplefarms.

Before2001–02ABARESmaintainedaninventoryofplantandmachineryforeachsamplefarm.Individualitemswerevaluedatreplacementcost,depreciatedfor


27

Term Definition

age.Eachyearthereplacementcostwasindexedtoallowforchangesinthatcost.

Since2001–02totalvalueofplantandmachineryhasbeenbasedonmarketvaluationsprovidedbytheowner–managerforbroadcategoriesofcapital,suchastractors,vehiclesandirrigationplant.

Thetotalvalueofitemspurchasedorsoldduringthesurveyyearwasaddedtoorsubtractedfromfarmcapitalat31Decemberoftherelevantfinancialyear,irrespectiveoftheactualdateofpurchaseorsale.

changeindebt Estimatedasthedifferencebetweendebtat1Julyandthefollowing30Junewithinthesurveyyear,ratherthanbetweendebtat30Juneinconsecutiveyears.Itisanestimateofthechangeinindebtednessofagivenpopulationoffarmsduringthefinancialyearandisthusunaffectedbychangesinsampleorpopulationbetweenyears.

farmbusinessdebt Estimatedasalldebtsattributabletothefarmbusinessbutexcludingpersonaldebt,leasefinanceddebtandunderwrittenloans,includingharvestloans.Informationiscollectedattheinterview,supplementedbyinformationcontainedinthefarmaccounts.

farmliquidassets Assetsownedbythefarmbusinessthatcanbereadilyconvertedtocash.Theyincludesavingsbankdeposits,interestbearingdeposits,debenturesandshares.Excludedareitemssuchasrealestate,lifeassurancepoliciesandotherfarmsorbusinesses.

receiptsandcosts Receiptsforlivestockandlivestockproductssoldaredeterminedatthepointofsale.Sellingchargesandchargesfortransporttothepointofsaleareincludedinthecostsofsamplefarms.

Receiptsforcropssoldduringthesurveyyeararegrossofdeductionsmadebymarketingauthoritiesforfreightandsellingcharges.Thesedeductionsareincludedinfarmcosts.Receiptsforotherfarmproductsaredeterminedonafarmgatebasis.Allcashreceiptitemsaretherevenuereceivedinthefinancialyear.

Farmreceiptsandcostsrelatetothewholeareaoperated,includingareasoperatedbyon‐farmsharefarmers.Thus,cashreceiptsincludereceiptsfromthesaleofproductsproducedbysharefarmers.Ifpossible,on‐farmsharefarmers’costsareamalgamated


28

Term Definition

withthoseofthesamplefarm.Otherwise,thetotalsumpaidtosharefarmersistreatedasacashcost.

Somesamplefarmbusinessesengageinoff‐farmcontractingorsharefarming,employinglabourandcapitalequipmentalsousedinnormalon‐farmactivities.Sinceitisnotpossibletoaccuratelyallocatecostsbetweenoff‐farmandon‐farmoperations,theincomeandexpenditureattributabletosuchoff‐farmoperationsareincludedinthereceiptsandcostsofthesamplefarmbusiness.

totalcashcosts Paymentsmadebythefarmbusinessformaterialsandservicesandforpermanentandcasualhiredlabour(excludingowner–manager,partnerandotherfamilylabour).Itincludesthevalueoflivestocktransfersontothepropertyaswellasanyleasepaymentsoncapital,producepurchasedforresale,rent,interest,livestockpurchasesandpaymentstosharefarmers.Capitalandhouseholdexpendituresareexcludedfromtotalcashcosts.

Handlingandmarketingexpensesincludecommission,yardduesandleviesforfarmproducesold.Administrationcostsincludeaccountancyfees,bankingandlegalexpenses,postage,stationery,subscriptionsandtelephone.Contractspaidreferstoexpenditureoncontractssuchasharvesting.Capitalandlanddevelopmentcontractsarenotincluded.

Othercashcostsincludestoresandrations,seedpurchased,electricity,artificialinseminationandherdtestingfees,advisoryservices,motorvehicleexpenses,travellingexpensesandinsurance.Whileothercashcostsmaycomprisearelativelylargeproportionoftotalcashcosts,individuallythecomponentsarerelativelysmalloveralland,assuch,havenotbeenlisted.

totalcashreceipts Totalofrevenuesreceivedbythefarmbusinessduringthefinancialyear,includingrevenuesfromthesaleoflivestock,livestockproductsandcrops,plusthevalueoflivestocktransfersoffaproperty.Itincludesrevenuereceivedfromagistment,royalties,rebates,refunds,planthire,contracts,sharefarming,insuranceclaimsandcompensation,andgovernmentassistancepaymentstothefarmbusiness.


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Term Definition

build‐upintradingstocks Theclosingvalueofallchangesintheinventoriesoftradingstocksduringthefinancialyear.Itincludesthevalueofanychangeinherdorflocksizeorinstocksofwool,fruitandgrainsheldonthefarm.Itisnegativeifinventoriesarerundown.

depreciationoffarmimprovements,plantandequipment

Estimatedbythediminishingvaluemethod,basedonthereplacementcostandageofeachitem.TheratesappliedarethestandardratesallowedbytheCommissionerofTaxation.Foritemspurchasedorsoldduringthefinancialyear,depreciationisassessedasifthetransactionhadtakenplaceatthemidpointoftheyear.Calculationoffarmbusinessprofitdoesnotaccountfordepreciationonitemssubjecttoafinanceleasebecausecashcostsalreadyincludefinanceleasepayments.

farmbusinessequity Thevalueofownedcapital,lessfarmbusinessdebt,at30June.Theestimateisbasedonthosesamplefarmsforwhichcompletedataonfarmdebtareavailable.

farmbusinessprofit Farmcashincomeplusbuild‐upintradingstocks,lessdepreciationandtheimputedvalueoftheowner–manager,partner(s)andfamilylabour.

farmcashincome Thedifferencebetweentotalcashreceiptsandtotalcashcosts.

farmequityratio Calculatedasfarmbusinessequityasapercentageofownedcapitalat30June.

imputedlabourcost Paymentsforowner–managerandfamilylabourmaybearlittlerelationshiptotheactualworkinput.Anestimateofthelabourinputoftheowner–manager,partnersandtheirfamiliesiscalculatedinworkweeksandavalueisimputedattherelevantFederalPastoralIndustryAwardrates.

off‐farmincome Collectedfortheowner–managerandspouseonly,includingincomefromwages,otherbusinesses,investment,governmentassistancetothefarmhouseholdandsocialwelfarepayments.

profitatfullequity Farmbusinessprofit,plusrent,interestandfinanceleasepayments,lessdepreciationonleaseditems.Itisthereturnproducedbyalltheresourcesusedinthefarmbusiness.


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Term Definition

ratesofreturn Calculatedbyexpressingprofitatfullequityasapercentageoftotalopeningcapital.Rateofreturnrepresentstheabilityofthebusinesstogenerateareturntoallcapitalusedbythebusiness,includingthatwhichisborrowedorleased.Rateofreturnexcludingcapitalappreciationandrateofreturnincludingcapitalappreciationareestimated.


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References Unlessotherwiseindicated,ABARESpublicationslistedhereareavailableatagriculture.gov.au/abares/publications.

ABARES2011,Agriculturalcommoditystatistics2011,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

——2015,Agriculturalcommoditystatistics2015,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

ABARES2016,Agriculturalcommodities:Junequarter2016,vol.6,no.2,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

ABS2006,AustralianandNewZealandStandardIndustrialClassification(ANZSIC),cat.no.1292.0,AustralianBureauofStatistics,Canberra,availableatabs.gov.au/1292.0.

ABS2016,Agriculturalcommodities,Australia,2014‐15,cat.no.7121.0,AustralianBureauofStatistics,Canberra,March,availableatabs.gov.au/7121.0.

Bardsley,P&Chambers,R1984,‘Multipurposeestimationfromunbalancedsamples’,JournaloftheRoyalStatisticalSociety,SeriesC(AppliedStatistics),vol.33,pp.290–299.

Deards,B&Mullumby,J2015,‘Beefandveal’,Agriculturalcommodities:Junequarter2015,vol.5,no.2,pp.84–97,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Jackson,T&Valle,H2015,‘ProfitabilityandproductivityinAustralia’sbeefindustry’,Agriculturalcommodities:Marchquarter2015,vol.5,no.1,pp.226–235,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Martin,P2015,Australianbeef:financialperformanceofbeefcattleproducingfarms,2012–13to2014–15,ABARESresearchreportpreparedforMeat&LivestockAustralia,Canberra,July.

Martin,P2016,‘Farmperformance:broadacreanddairyfarms,2013–14to2015–16’,Agriculturalcommodities:Marchquarter2016,vol.6,no.1,pp.168–214,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Mifsud,C2014,‘Beefandveal’,Agriculturalcommodities:Junequarter2014,vol.4,no.2,pp.92–102,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Mullumby,J2016a,‘Beefandveal:outlookto2020–21’,Agriculturalcommodities:Marchquarter2016,vol.6,no.1,pp.103–111,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Mullumby,J2016b,‘Beefandveal’,Agriculturalcommodities:Junequarter2016,vol.6,no.2,pp.82–90,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.

Mullumby,J,Whitnall,T&Perndt,N2016,‘RecentdynamicsintheAustralianbeefcattleherd’,Agriculturalcommodities:Junequarter2016,vol.6,no.2,pp.91–95,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.


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Valle,H2016,‘ProductivityinAustralianbroadacreanddairyindustries’,Agriculturalcommodities:Marchquarter2016,vol.6,no.1,pp.215–225,AustralianBureauofAgriculturalandResourceEconomicsandSciences,Canberra.


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Further information ABARESfarmsurveydataforthelivestockandotherbroadacreindustriesagriculture.gov.au/agsurf

Meat&LivestockAustraliaLevel1,40MountStreet,NorthSydneyNSW2060

Postaladdress:POBox1961,NorthSydneyNSW2059

Phone:0294639333

Fax:0294639393

Email:[email protected]

Web:mla.com.au

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