australian beef: financial performance of beef cattle ... · the average financial performance of...

Australian beef Financial performance of beef cattle producing farms, 2011‒12 to 2013‒14 Therese Thompson and Peter Martin

Research by the Australian Bureau of Agricultural

and Resource Economics and Sciences

Research report 14.7 August 2014

© Commonwealth of Australia 2014

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Cataloguing data

Thompson, T & Martin, P 2014, Australian beef: financial performance of beef cattle producing farms, 2011‒12 to 2013‒14, ABARES research report prepared for Meat & Livestock Australia, Canberra, August. CC BY 3.0.

ISSN 1447‒8358 ISBN 978-1-74323‒196-8 ABARES project 43009

Internet

Australian beef: financial performance of beef cattle producing farms, 2011‒12 to 2013‒14 is available at agriculture.gov.au/abares.

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)

Postal address GPO Box 1563 Canberra ACT 2601 Switchboard +61 2 6272 3933 Facsimile +61 2 6272 2001 Email [email protected] Web agriculture.gov.au/abares

Inquiries about the licence and any use of this document should be sent to [email protected].

The Australian Government acting through the Department of Agriculture, represented by the Australian Bureau of Agricultural and Resource Economics and Sciences, has exercised due care and skill in preparing and compiling the information and data in this publication. Notwithstanding, the Department of Agriculture, ABARES, its employees and advisers disclaim all liability, including for negligence and for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon information or data in this publication to the maximum extent permitted by law.

Acknowledgements

ABARES relies on the voluntary cooperation of farmers participating in the annual Australian Agricultural and Grazing Industries Survey to provide data used in the preparation of this report. Without their help, the survey would not be possible. ABARES farm survey staff collected most of the information presented in this report through on-farm interviews with farmers. The authors also thank Emily Gray, writer of the productivity chapter, and Haydn Valle and Milly Lubulwa for their input and support during the project and in preparing this report.

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Australian beef: financial performance of beef cattle producing farms, 2011–12 to 2013–14 ABARES

iii

Contents

Summary vii

1 Introduction 1

2 Cattle production 7

Seasonal conditions in 2012‒13 and 2013‒14 7

Beef cattle turn-off 8

Slaughter and cattle numbers 9

Beef cattle selling methods 10

Grain finishing 11

3 Financial performance 13

Financial performance of northern Australian beef cattle producers 13

Financial performance of live cattle export region 22

Financial performance of southern Australian beef cattle producers 25

On-farm cash costs of beef cattle production 33

4 Farm investment 38

5 Farm debt 42

6 Productivity 49

Survey methods and definitions 52

Glossary 58

References 62

Further information on beef cattle producers 63

Tables

Table 1 Distribution of broadacre beef cattle farms, by number of cattle, at 30 June 2

Table 2 Selected physical characteristics, beef cattle producing farms, by region 4

Table 3 Beef cattle herd group, by number of head 6

Table 4 Financial performance, beef cattle producing farms, northern Australia 15

Table 5 Financial performance, beef cattle producing farms, northern Australia, by

herd size 18

Table 6 Financial performance, beef cattle producing farms, northern Australia, by

zone 21

Table 7 Financial performance, beef cattle producing farms, northern live cattle

export region 25

Table 8 Financial performance, beef cattle producing farms, southern Australia 26


iv

Table 9 Financial performance, beef cattle producing farms, southern Australia, by

herd size 29

Table 10 Financial performance, beef cattle producing farms, southern Australia,

by zone 31

Table 11 Cash costs of beef production, by region, 2012‒13p 34

Table 12 Cash costs of beef production, by herd size, 2012‒13p 35

Table 13 Distribution of northern beef cattle producing farms, by farm business

debt and equity ratio, at 30 June 2013ap 45

Table 14 Distribution of southern beef cattle producing farms, by farm business

debt and equity ratio, at 30 June 2013ap 46

Table 15 Average annual broadacre productivity growth by industry, 1977‒78

to 2011‒12 50

Table 16 Average annual beef total factor productivity growth, 1977‒78 to

2011‒12 50

Figures

Figure 1 Beef cattle branding rate, 1994‒95 to 2012‒13p 5

Figure 2 Beef cattle turn-off rate, 1994‒95 to 2013‒14y 5

Figure 3 Beef cattle turn-off, Australia, 1994‒95 to 2013‒14f 8

Figure 4 Beef cattle stocking rates, 1994‒95 to 2012‒13p 9

Figure 5 Beef cattle numbers, slaughter numbers and saleyard prices,

Australia, 1994‒95 to 2013‒14f 9

Figure 6 Method of selling beef cattle, southern Australia, 1994‒95 to 2012‒13p 10

Figure 7 Method of selling beef cattle, northern Australia, 1994‒95 to 2012‒13p 11

Figure 8 Farm receipts, northern beef cattle producing farms, 1994‒95 to

2013‒14y 13

Figure 9 Cash costs beef cattle producers, northern Australia, 1994‒95

to 2013‒14y 14

Figure 10 Composition of farm costs, beef cattle producing farms, 2010‒11

to 2012‒13 14

Figure 11 Financial performance, beef producing farms, northern

Australia, 1994‒95 to 2013‒14y 16

Figure 12 Financial performance, beef producing farms, northern live cattle export

region, 1994‒95 to 2013‒14y 24

Figure 13 Farm cash income, beef cattle producing farms, 1994‒95 to 2013‒14y 24

Figure 14 Farm cash receipts, southern beef cattle producing farms, 1994‒95

to 2013‒14y 27


v

Figure 15 Composition of cash costs, beef cattle producers, southern

Australia, 1994‒95 to 2013‒14y 27

Figure 16 Financial performance, beef producing farms, southern

Australia, 1994‒95 to 2013‒14y 28

Figure 17 Farm cash income, beef producers, southern Australia, 1994‒95 to

2013‒14y 33

Figure 18 Unit cost of beef production (live weight basis), northern Australia, by

herd size, 2012‒13p 36

Figure 19 Unit cost of beef production (live weight basis), southern Australia, by

herd size, 2012‒13p 36

Figure 20 Proportion of beef producing farms acquiring land, Australia, 1994‒95

to 2012‒13p 38

Figure 21 Land prices, beef cattle producing farms, 1994‒95 to 2012‒13p 39

Figure 22 Net investment in vehicles, machinery and farm improvements, northern

Australian beef producing farms, 1994‒95 to 2012‒13p 40

Figure 23 Net investment in vehicles, machinery and farm improvements, southern

Australian beef producing farms, 1994‒95 to 2012‒13p 41

Figure 24 Composition of farm business debt, northern Australian beef producing

farms, 1993‒94 to 2012‒13p 42

Figure 25 Composition of farm business debt, southern Australian beef producing

farms, 1993‒94 to 2012‒13p 42

Figure 26 Proportion of beef cattle producing farms increasing farm business debt,

1994‒95 to 2012‒13p 43

Figure 27 Ratio of interest payments to total cash receipts, beef cattle producing

farms, 1994‒95 to 2013‒14y 47

Figure 28 Debt servicing and borrowing capacity, northern Australian beef cattle

producing farms, 1993‒94 to 2013‒14y 48

Figure 29 Debt servicing and borrowing capacity, southern Australian beef cattle

producing farms, 1993‒94 to 2013‒14y 48

Figure 30 Beef industry total factor productivity growth, 1977‒78 to 2011‒12 51

Maps

Map 1 Australian beef cattle industry 3

Map 2 Australian rainfall percentiles, 1 July 2012 to 30 June 2013 7

Map 3 Australian rainfall percentiles, 1 July 2013 to 30 June 2014 7

Map 4 Australian broadacre zones 20

Map 5 Northern Australian live cattle export region 22

Map 6 Proportion of total farm cash receipts from sale of beef cattle for live export 23


vi

Map 7 ABARES Australian broadacre zones and regions 56

Map 8 Australian Dairy Industry Survey regions, New South Wales and Victoria 57

Boxes

Box 1 Major financial performance indicators 13

Box 2 ABARES productivity estimates 49


vii

Summary Around 27 000 Australian broadacre farms each run more than 100 beef cattle. This report

classifies these farms as beef cattle producing farms. Around two-thirds of these farms derive

most of their farm receipts from sales of beef cattle. Around one-third are mixed enterprises,

deriving a large proportion of their receipts from cropping, sheep, lambs and wool as well as

from the sale of beef cattle.

The average financial performance of Australian beef cattle producing farms is estimated to have

declined in 2013‒14. This is a result of lower beef cattle prices, as beef cattle turn-off increased

in response to continued dry seasonal conditions and historically high beef cattle numbers in

northern Australia. In addition, lower grain production in Queensland and northern New South

Wales further reduced farm receipts in 2013‒14 for mixed enterprise producers.

In northern Australia, average farm cash income of beef cattle producing farms is estimated to

have declined from an average of $86 600 a farm in 2012‒13 to $49 000 a farm in 2013‒14,

around 48 per cent below the average for the 10 years ending 2012‒13, in real terms. Increased

beef cattle turn-off is estimated to have reduced beef cattle numbers and the value of cattle

inventories. As a consequence, farm business profit is estimated to have declined sharply from

an average of -$6100 a farm in 2012‒13 to -$63 000 a farm in 2013‒14.

In southern Australia, average farm cash income of beef cattle producing farms is estimated to

have increased from an average of $78 200 a farm in 2012‒13 to $85 000 a farm in 2013‒14,

around 12 per cent above the average for the 10 years ending 2012‒13. However, reduction in

beef cattle numbers as turn-off increased lowered the value of cattle inventories and farm

business profit. Farm business profit is estimated to have declined from an average of

-$900 a farm in 2012‒13 to -$9000 a farm in 2013‒14.

Around 17 700 beef cattle producing farms in Australia earn most of their total farm receipts

from sales of beef cattle. Most of these producers, termed specialist beef cattle producers in this

report, are in southern Australia. Farm cash income of specialist beef cattle producers in

southern Australia is estimated to have increased from an average of $28 800 a farm in 2012‒13

to $35 000 a farm in 2013‒14—around 21 per cent below the average for the previous 10 years.

Farm business debt decreased in 2012‒13; however, a small increase in farm debt is expected

in 2013‒14. In northern Australia, increases in farm debt (from borrowing for farm investment

over the past 15 years), accumulated business losses and declines in farm receipts in recent

years have increased the proportion of farm receipts needed to meet interest payments.

In 2013‒14 the ratio of interest payments to farm receipts is estimated to have been 13 per cent

in northern Australia. The ratio in southern Australia is estimated to have been much lower at

around 6 per cent.

In 2013‒14 more than 90 per cent of Australian beef cattle producing farms had relatively high

farm equity. At 30 June 2013 farm business equity ratios averaged 89 per cent in northern

Australia and 91 per cent in southern Australia. However, lower farm cash income and reduced

land values have resulted in increased financial pressure on many farm businesses, particularly

those affected by drought in northern Australia and northern New South Wales. The proportion

of beef cattle producing farms with relatively little capacity for further borrowing and high debt

servicing commitments is expected to increase to around 12 per cent in 2013‒14, a level last

recorded in the late 1990s, when beef cattle prices were historically low.


1

1 Introduction Around 55 per cent of all Australian farms carry beef cattle (ABS 2014), making this the most

common and most widely dispersed agricultural activity in Australia; beef cattle farms are an

important part of rural communities and economies in almost all regions. In addition, farms

running beef cattle manage more than 75 per cent of the total area of agricultural land in

Australia.

This report presents the detailed financial performance of beef cattle producing farms

from 2011‒12 to 2013‒14 and discusses recent farm financial performance and productivity in

a historical context.

The report draws on data from the ABARES annual Australian Agricultural and Grazing

Industries Survey (AAGIS) to provide an overview of production, financial performance and

productivity growth of the Australian beef cattle industry. Meat & Livestock Australia funded the

preparation of this report and contributed to funding of AAGIS.

ABARES uses the latest data to produce estimates for this report, ensuring that estimates are

revised as new information becomes available. The latest AAGIS data were collected between

July and December 2013.

Farm businesses with fewer than 100 head of beef cattle are excluded from the analysis in this

report. Farm businesses with fewer than 100 head of cattle represent just 2 per cent of the

national beef cattle herd and contribute around 3 per cent to the total value of beef cattle sales

(Table 1).

Specialist feedlots are mainly involved in feeding cattle in a confined area with feed mostly

purchased from other producers. Unlike the farm businesses included in this report, specialist

feedlots have minimal involvement in cattle grazing or cattle breeding. Farm businesses

finishing more than 5000 cattle on grain for more than 70 days have been excluded from this

report to remove specialist feedlots and ensure a consistent definition of beef producers over

the period for which AAGIS data are available. Since 2006 specialised feedlots have been listed in

a separate Australian and New Zealand Standard Industrial Classification (ANZSIC06) in

Australian Bureau of Statistics collections; they are no longer included in the broadacre group of

industries surveyed in AAGIS.


2

Table 1 Distribution of broadacre beef cattle farms, by number of cattle, at 30 June

average between 2010‒11 and 2012‒13

Herd size Average number of farms (no.)

Share of farms (%)

Share of beef cattle (%)

Share of value of cattle sales (%)

Northern Australia

<100 head 580 7 0 1

100–200 head 1 250 14 1 2

200–400 head 1 500 17 3 4

400–800 head 1 970 23 9 10

800–1 600 head 1 460 17 13 14

1 600–5 400 head 1 520 18 32 34

>5 400 head 350 4 41 35

Total 8 630 100 100 100

Southern Australia

<100 head 5 810 25 4 6

100–200 head 5 800 24 11 11

200–400 head 6 680 28 24 22

400–800 head 3 650 15 26 25

800–1 600 head 1 320 6 17 16

1 600–5 400 head 410 2 13 12

>5 400 head 40 0 5 7

Total 23 710 100 100 100

Australia

<100 head 6 390 20 2 3

100–200 head 7 050 22 5 6

200–400 head 8 180 25 11 13

400–800 head 5 620 17 15 17

800–1 600 head 2 780 9 15 15

1 600–5 400 head 1 930 6 25 23

>5 400 head 390 1 27 21

Total 32 340 100 100 100

Note: Excludes major feedlots. Source: Australian Agricultural and Grazing Industries Survey

Northern and southern Australia

This report presents the performance of beef cattle producing farms in northern Australia and

southern Australia separately. Northern Australia is defined as northern Western Australia, the

Northern Territory and Queensland. The remainder of Australia, including southern Western

Australia, South Australia, New South Wales, Victoria and Tasmania, is defined as southern

Australia (Map 1).

In the three years ending 2012‒13, northern Australia had more than 8600 beef cattle

producing farms. Around 97 per cent of these farm businesses were in Queensland, 2 per cent in

the Northern Territory and 1 per cent in Western Australia.

Farm businesses with the greatest reliance on the sale of live export cattle are in the far northern

and western extremes of northern Australia.


3

Map 1 Australian beef cattle industry

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

Northern Australia and southern Australia have marked differences in climate, pastures,

industry infrastructure and proximity to markets. This has affected the development and nature

of the beef industry and associated farm businesses in each region over the past 20 years.

The beef cattle industry in Queensland focuses primarily on beef export markets, whereas farm

businesses in the upper Northern Territory and northern Western Australia focus on the live

cattle export trade. In contrast, production in the southern states is spread more evenly between

the beef export market and the domestic beef market (Gleeson et al. 2012).

Rainfall in northern Australia is dominated by monsoon systems that create a distinct wet

season (usually September to March) and dry season (usually April to October). This limits the

growing season for pastures and, unlike southern Australia, makes it difficult to finish cattle for

markets in one production year. Rainfall is not uniform. The intensity of wet and dry seasons

varies depending on latitude, topography and distance from the coast.

More variable quantity and lower quality of pasture in most northern areas results in lower

stocking rates and more extensive production systems than in southern Australia, on average

(Table 2).

Improved pastures in many southern beef cattle producing areas and the production of fodder

crops allow for much higher stocking rates. Remote locations in the north make some

management practices (such as short-term supplementary feeding to deal with poor seasonal

conditions) less cost effective than in southern Australia.

An important part of normal management practice and response to differing seasonal conditions

across northern Australia is the transfer of beef cattle between the individual landholdings of

large family-owned and corporate farm businesses. Transferring cattle between holdings in

different regions often provides significant flexibility in managing variable seasonal and market

conditions. Data tables in this report include transfers into and out of farm businesses.

Au

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4

Table 2 Selected physical characteristics, beef cattle producing farms, by region

average per farm

Physical characteristics unit Northern Australia Southern Australia

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Area operated at 30 June ha 22 692 22 663 (11) 22 169 6 050 6 013 (11) 6 255

Beef cattle numbers at 30 June no. 1 596 1 478 (4) 1 436 424 404 (4) 410

Calves branded no. 471 426 (4) 423 173 159 (4) 170

Beef cattle purchases no. 65 53 (15) 46 39 26 (15) 27

Branding rate % 73 70 (2) na 89 89 (1) na

Beef cattle sold no. 415 392 (5) 428 177 163 (4) 184

Within-year change in cattle numbers % 3 1 (83) –1 6 3 (29) –1

Area planted to crops ha 96 105 (11) 65 258 225 (13) 188

Sheep numbers at 30 June no. 294 229 (33) 225 1 300 1 155 (10) 1 195

Stocking rate – hectares per large stock unit ha 13 14 (11) na 7 7 (12) na

Cattle turn-on rate % 6 5 (13) 5 10 7 (15) 7

Cattle turn-off rate % 30 30 (4) 32 43 41 (3) 45

p Preliminary estimate. y Provisional estimate. na not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey


5

Figure 1 Beef cattle branding rate, 1994‒95 to 2012‒13p

p Preliminary estimate. Note: Branding rate is defined as the number of calves marked as a proportion of cows mated. Source: Australian Agricultural and Grazing Industries Survey

Branding rates (calves branded as a percentage of cows mated) are typically lower and more

variable in the north than in southern Australia, reflecting less favourable pasture conditions.

According to AAGIS data, branding rates in northern Australia averaged 71 per cent for the

10 years ending 2012‒13, compared with 86 per cent in southern Australia (Figure 1).

Slower growth rates and lower branding percentages for cattle in northern Australia result in

lower average turn-off rates. According to AAGIS data, turn-off rates (cattle sold or transferred

off-farm as a percentage of the average herd size) averaged 32 per cent in northern Australia for

the 10 years ending 2013‒14, compared with 45 per cent in southern Australia (Figure 2).

Figure 2 Beef cattle turn-off rate, 1994‒95 to 2013‒14y

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

%

20

40

60

80

100

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

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20

03–

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06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

2012

–13

p

Southern Australia

Northern Australia

%

10

20

30

40

50

60

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

2012

–13

p

20

13–

14

y

Southern Australia

Northern Australia


6

To be economically viable northern properties tend to be much larger in terms of average herd

size and the area of land operated than properties in the south. For example, in northern

Australia 86 per cent of the beef cattle herd is on properties with more than 800 head of beef

cattle, while in southern Australia only 35 per cent of the beef cattle herd is on properties with

more than 800 head of beef cattle (Table 1).

The main breeds of cattle in northern Australia are Bos indicus. Over recent decades, the

proportion of Bos indicus in the region has increased as producers introduced and selected cattle

better suited for beef production in tropical conditions. In southern Australia, British and

European Bos taurus breeds, such as the Angus and Hereford, remain dominant.

To provide an insight into the performance of the beef cattle industry, ABARES divides farm businesses with different scales of operation into four groups—small, medium, large and very large—based on the size of their beef cattle herd in each year the farm business was surveyed. Beef cattle producers operate significantly larger properties in northern Australia than their counterparts in southern Australia. For this reason, different sized groups have been used in these regions to enable meaningful analysis of financial performance by scale (Table 3).

Table 3 Beef cattle herd group, by number of head

Herd size Northern Australia Southern Australia

Small 100–400 100–200

Medium 400–1 600 200–400

Large 1 600–5 400 400–800

Very large >5 400 >800

In this report farm businesses with more than 100 head of beef cattle are classified as specialist

beef cattle producing farms if they earned, on average, more than 50 per cent of total farm

receipts from the sale of beef cattle in the previous three years. Between 2010‒11 and 2012‒13

an average of 18 300 farms were classified as specialist beef cattle producers.

Between 2010‒11 and 2012‒13, 86 per cent of beef cattle producing farms in northern Australia

were classified as specialist beef cattle producers. In southern Australia, the number of specialist

beef cattle producers and mixed enterprise producers is more even; between 2010‒11

and 2012‒13 around 60 per cent of beef cattle producing farms were classified as specialist

producers. For this reason, some separate tabulation and analysis of financial performance is

provided for specialist beef cattle producers in southern Australia.


7

2 Cattle production

Seasonal conditions in 2012‒13 and 2013‒14

In 2012‒13 below average rainfall through winter, spring and summer reduced pasture and

crop growth in all states. In northern Australia, the wet season failed and by autumn dry

conditions extended across most of the continental interior. Rainfall along coastal margins of

New South Wales and Queensland was higher, providing adequate grazing conditions in these

regions (Map 2).

Map 2 Australian rainfall percentiles, 1 July 2012 to 30 June 2013

Note: Percentiles is a way of dividing sorted data (in this case rainfall data) into 100 equal parts. The 10th percentile represents the lowest 10 per cent of the data and the 90th percentile represents the top 10 per cent of the data. Source: Bureau of Meteorology

In 2013‒14 a continuation of dry seasonal conditions through summer led to below average

seasonal conditions for most beef cattle producing farms. Drought conditions worsened in

Queensland, northern New South Wales and northern pastoral South Australia (Map 3). In the

second half of 2013‒14, seasonal conditions improved slightly in the Northern Territory,

northern Western Australia, Cape York, southern New South Wales, Victoria, Tasmania and

South Australia.

Map 3 Australian rainfall percentiles, 1 July 2013 to 30 June 2014

Note: Percentiles is a way of dividing sorted data (in this case rainfall data) into 100 equal parts. The 10th percentile represents the lowest 10 per cent of the data and the 90th percentile represents the top 10 per cent of the data. Source: Bureau of Meteorology


8

Beef cattle turn-off

Widespread, above average grazing conditions after 2010‒11 resulted in an increase in saleyard

prices of beef cattle. This was the result of strong restocker demand as available cattle were

redistributed between farms and regions with abundant grazing.

Turn-off of cattle for slaughter slowed sharply in 2010‒11 as rebuilding of cattle herds

commenced in southern Australia (Figure 2 and Figure 3) and branding rates rose (Figure 1).

With the continuation of above average grazing conditions in 2011‒12, transactions of cattle

between farms slowed, calf brandings rose, turn-off rates declined further and cattle numbers on

farms increased further.

Figure 3 Beef cattle turn-off, Australia, 1994‒95 to 2013‒14f

f ABARES forecast. Source: Australian Bureau of Statistics

According to AAGIS data, between 2009‒10 and 2011‒12 stocking rates on beef cattle

producing farms in northern Australia were the highest in the 20 years to 2009‒10 and were

also relatively high in southern Australia (Figure 4).

Turn-off of beef cattle increased significantly in 2012‒13 (Figure 3), when failure of the

northern wet season reduced pasture availability across a large area of northern Australia and

particularly western Queensland. Saleyard throughput and cattle slaughter surged across the

eastern states during the last quarter of 2012‒13, leading to a fall in prices for slaughter age

cattle. Adding further pressure on markets, relatively few producers were in a position to

increase stocking, with widespread dry conditions resulting in lower demand from producers

for younger cattle for restocking (Map 3).

Continued dry seasonal conditions resulted in a further increase in beef cattle turn-off in

2013‒14 (Figure 3). Saleyard prices for all classes of cattle continued to fall during 2013‒14 and

the weighted average saleyard prices for 2013‒14 declined to the lowest recorded since

1997‒98, and 16 per cent below the 10-year average to 2012‒13, in real terms (Figure 5).

Factors contributing to downward pressure on the average saleyard price include higher

numbers of cattle being offered for sale, an increased share of (lower value) cows in total sales

and poorer condition of animals offered for sale. As in the previous financial year, few producers

in 2013‒14 were in a position to restock, resulting in lower demand for younger store cattle.

%

5

10

15

20

25

30

35

40

45

m

2

4

6

8

10

12

19

94–

95

19

95–

96

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96–

97

19

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13

2013

–14

f

Live cattle exported

Cattle and calves slaughtered

Turn-off rate (right axis)


9

Figure 4 Beef cattle stocking rates, 1994‒95 to 2012‒13p

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

Figure 5 Beef cattle numbers, slaughter numbers and saleyard prices, Australia, 1994‒95 to 2013‒14f

f ABARES forecast. Source: ABARES; Australian Bureau of Statistics

Slaughter and cattle numbers

Australian cattle and calf slaughter is forecast to increase by 13 per cent in 2013‒14, the highest

since 1978‒79 (Figure 5). This reflects a 21 per cent increase in female cattle slaughter, a

5 per cent increase in male cattle slaughter and an 11 per cent increase in calf slaughter. Dry

seasonal conditions prompted destocking in eastern Australia, with the number of cattle

slaughtered in 2013‒14 as a proportion of average herd numbers forecast to be 37 per cent, the

highest since 1998‒99.

stock units/ha

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p

Southern Australia

Northern Australia

2013–14 Ac/kg

50

100

150

200

250

300

350

400

450

m

5

10

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30

19

94–

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13

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13–

14

fBeef cattle numbers

Cattle and calves slaughtered

Saleyard price (right axis)


10

Similarly, the total number of cattle slaughtered or sold for live export in 2013‒14 as a

proportion of average herd numbers is forecast to be 42 per cent, the highest in more than two

decades.

The beef cattle herd is estimated to have fallen by 4 per cent in 2013‒14 to 25.4 million head,

reflecting increased cattle slaughter, increased live exports and lower calving. Since early 2013

poorer seasonal conditions in eastern Australia have resulted in many producers not having

sufficient pasture to support large herds built up during previous years when seasonal

conditions were more favourable. As a result, many older cattle have been sent to slaughter and

fewer younger cattle have been purchased as replacements.

Beef cattle selling methods

Australian beef cattle producers sell cattle primarily through auction, in the paddock and over

the hooks. AAGIS data indicate significant differences between the preferred method of sale for

northern and southern Australian producers.

In southern Australia, the auction system remained the main method of sale in 2012‒13,

representing 66 per cent of total beef cattle sales (Figure 6). Auction sales are most favoured by

producers who have smaller herds and who sell in small lot sizes, particularly in southern

Australia. These producers are generally located closer to settled areas so distances to saleyards

and freight costs are relatively small. These areas also produce and trade a range of cattle types,

including store, finished and stud, which can be sold at auction.

Figure 6 Method of selling beef cattle, southern Australia, 1994‒95 to 2012‒13p

p Preliminary estimate. Note: Live export cattle sales are mostly paddock sales over the scales. Because of changes in data collected, consistent results cannot be provided for 2002‒03 to 2004‒05. Source: Australian Agricultural and Grazing Industries Survey

Producers with larger herd sizes are more likely to sell over the hooks or in the paddock because

they can generate larger sale numbers. Direct methods of sale, such as over the hooks, can also

reduce carcass damage and loss of meat quality caused by the additional handling involved in

saleyard and auction sales.

In northern Australia, in 2012‒13 the proportion of cattle sold at auction increased to

41 per cent and the proportion sold over the hooks decreased to 31 per cent. The proportion

0%

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2012

–13p

Other

Over hooks

Paddock

Auction


11

sold in the paddock decreased slightly to 27 per cent (Figure 7). In northern Australia, the

proportion of cattle sold over the hooks has typically exceeded the proportion sold through

auction over the long term. However, since 2010‒11 the proportion of cattle sold at auction has

exceeded the proportion sold over the hooks. This change has mainly resulted from an increase

in the proportion of cattle turn-off sold at auction by farms in the Queensland wheat–sheep zone

(Map 4). Farms in the Queensland wheat–sheep zone account for 40 per cent of total cattle turn-

off in northern Australia. Increase in the share of auction sales is also likely to reflect a larger

number of cattle sold to major feedlots for finishing since 2011‒12.

Figure 7 Method of selling beef cattle, northern Australia, 1994‒95 to 2012‒13p

p Preliminary estimate. Note: Live export cattle sales are mostly paddock sales over the scales. Because of changes in data collected, consistent results cannot be provided for 2002‒03 to 2004‒05. Source: Australian Agricultural and Grazing Industries Survey

Grain finishing

In the three years to 2012‒13, around 4 per cent of southern Australian and 3 per cent of

northern Australian beef cattle producers used grain to finish beef cattle for sale. In both

regions, grain-finishing farms, on average, operated a smaller area than non-grain finishing

farms. Despite operating on a smaller area, grain-finishing farms sold significantly more cattle

than non-grain finishing farms.

AAGIS results indicate most beef cattle producers in northern Australia who used grain to finish

cattle for sale were in south-eastern and central Queensland. In northern Australia, the

proportion of beef cattle producers using grain to finish beef cattle decreased significantly from

around 7 per cent in 2007‒08 to just 2 per cent in 2011‒12 but increased to 3 per cent in

2012‒13. Several factors may have contributed to the decrease, including improved pasture

availability and a reduction in turn-off rates between 2009‒10 and 2011‒12. Drier seasonal

conditions in 2012‒13, increased turn-off, lower saleyard prices and a higher proportion of

younger store cattle available resulted in an increase in the proportion of farms grain finishing

cattle. In addition, farms that did grain finish sold a higher proportion of grain-finished cattle

than in previous years.

In the north, the margin increased slightly between the average price received for cattle sold

directly for slaughter by grain-finishing farms and non-grain finishing farms. In 2011‒12 cattle

0%

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40%

60%

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2012

–13p

Other

Over hooks

Paddock

Auction


12

sold for slaughter by grain finishing farms received an average of around $91 a head more than

cattle sold for slaughter by non-grain finishing farms. During 2012‒13 grain finishing farms

received $123 a head more for cattle sold for slaughter.

Similarly, the proportion of farms using grain to finish beef cattle for sale in southern Australia

fell from around 6 per cent in 2010‒11 to 2 per cent in 2011‒12 and increased slightly to

3 per cent in 2012‒13. In contrast to northern Australia, the average proportion of cattle

finished on grain decreased significantly in 2012‒13. The margin between the average price

received for cattle sold directly to slaughter by grain-finishing and non-grain finishing farms

narrowed, from an average premium of around $236 a head for grain-finished farms in 2011‒12

to $139 a head in 2012‒13. In part, the narrowing of the price premium is likely to be because of

a reduction in the average time that cattle were fed on grain.


13

3 Financial performance

Financial performance of northern Australian beef cattle producers

Farm cash income

In 2012‒13 average farm cash receipts (Box 1) for northern Australian beef cattle producers

declined by 10 per cent, mainly as a result of reduced receipts for cattle sold for slaughter and

live export (Figure 8). The decline was the result of a 12 per cent reduction in average sale prices

for beef cattle caused by an increased supply of cattle and the sale of lower value cattle. The

reduction in farm receipts was partially offset by a reduction in the number of beef cattle

purchased in 2012‒13, resulting in a 29 per cent fall in expenditure on beef cattle purchases

(Figure 9) and a 38 per cent reduction in the value of beef cattle transferred in. Despite this

reduction and a 15 per cent reduction in interest payments as a result of lower interest rates,

in 2012‒13 average farm cash income of northern Australian beef cattle producing farms

declined by 14 per cent to an average of $86 600 a farm (Table 4).

Figure 8 Farm receipts, northern beef cattle producing farms, 1994‒95 to 2013‒14y


Box 1 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 to total capital used: efficiency of businesses in generating returns from all resources used (profit at full equity/total opening capital) x 100

Rate of return to owners equity: efficiency of businesses in generating profit from capital invested by owners (farm business profit/farm business equity) x 100

2013–14 $’000

100

200

300

400

500

600

700

800

19

94–

95

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95–

96

19

96–

97

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97–

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12

20

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13

p2

01

3–1

4y

Other cash receipts

Total crop receipts

Sheep, lambs and wool sales

Beef cattle sales for live export

Beef cattle sales


14

Figure 9 Cash costs beef cattle producers, northern Australia, 1994‒95 to 2013‒14y


On average, beef cattle purchases are the largest cash cost of beef cattle producing farms. As a

consequence of increases in farm debt over the decade to 2009‒10, interest payments are now

the second largest cash cost of beef cattle producing farms in northern and southern Australia

(Figure 10). Average total cash costs decreased in 2011‒12 and 2012‒13 to resemble those

recorded in the late 1990s, in real terms (Figure 9).

Figure 10 Composition of farm costs, beef cattle producing farms, 2010‒11 to 2012‒13

average per farm

Source: Australian Agricultural and Grazing Industries Survey

2013–14 $’000

100

200

300

400

500

600

700

800

19

94–

95

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96

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97

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11

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2012

–13

p2

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4y

Overhead costs

Interest paid

Variable costs

Beef cattle purchases

Total cash receipts

% 5 10 15 20

DepreciationValue of owner–manager and family labour cost

Other cash costsOther materials

Other servicesShearing and crutching

FertiliserLand rent

Crop and pasture chemicalsLivestock materials and chemicals

RatesAdministrative costs

ContractsFodder

Wages for hired labourFuel, oil and lubricants

Freight, handling and marketingRepairs and maintenance

Interest paidLivestock purchases and transfers

Northern Australia Southern Australia


15

In 2013‒14 continued dry seasonal conditions in northern Australia led to a further increase in

beef cattle turn-off. However, lower average sale prices for beef cattle are estimated to have

more than offset the increase in turn-off, resulting in average beef cattle receipts declining by

around 2 per cent for northern beef producing farms. Grain receipts for mixed enterprise farms

in Queensland are also estimated to have decreased, leading to lower average farm cash receipts

in 2013‒14 (Table 4).

Despite further reductions in expenditure on beef cattle, average farm cash costs increased

mainly because of higher expenditure on fodder. The reduction in beef cattle receipts and

increased expenditure are estimated to have resulted in average farm cash income of beef cattle

producing farms in northern Australia declining further to average $49 000 a farm in 2013‒14.

This is around 48 per cent below the average for the previous 10 years, in real terms (Figure 11).

Table 4 Financial performance, beef cattle producing farms, northern Australia

average per farm

Farm cash receipts unit 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 322 470 270 200 (5) 265 000

Beef cattle sales – live export $ 17 450 11 100 (25) 10 000

Value of cattle transferred out $ 29 170 24 300 (14) 24 000

Sheep, lambs and wool sales $ 12 600 8 700 (31) 8 000

Total crop receipts $ 29 960 49 100 (16) 22 000

Total cash receipts $ 421 010 380 000 (5) 347 000

Farm cash costs

Beef cattle purchases $ 46 160 32 700 (11) 25 000

Beef cattle transferred in $ 16 430 10 200 (23) 14 000

Wages for hired labour $ 18 530 16 300 (9) 15 000

Fodder $ 14 380 19 700 (9) 34 000

Fuel, oil and lubricants $ 22 660 22 600 (4) 24 000

Repairs and maintenance $ 32 800 31 700 (5) 31 000

Contracts $ 15 520 15 700 (8) 14 000

Freight, handling and marketing $ 24 360 25 400 (7) na

Interest paid $ 46 400 39 300 (9) 39 000

Total cash costs $ 319 810 293 400 (5) 298 000

Farm capital and debt

Total capital at 30 June $ 5 892 400 5 500 800 (3) na

Farm business debt at 30 June $ 644 010 577 400 (9) 588 000

Equity ratio at 30 June % 88 89 (2) na

Farm financial performance

Farm cash income $ 101 200 86 600 (12) 49 000

Farm business profit $ 37 990 –6 100 (150) –63 000

Profit at full equity $ 87 520 36 700 (26) –21 000

Rate of return

Return on capital – excluding capital appreciation % 1.5 0.7 (26) –0.5

Return on capital – including capital appreciation % –0.5 –2.0 (29) na



16

Farm business profit and rates of return

Farm cash income is a measure of cash funds generated by the farm business for farm

investment and consumption after paying all costs incurred in production, including interest

payments but excluding capital payments and payments to family workers. It is a measure of

short-term farm performance because it does not take into account depreciation or changes in

farm inventories. A measure of longer term profitability is farm business profit, as it takes into

account capital depreciation and changes in inventories of livestock, fodder, grain and wool.

Reductions in herd sizes on many farms in northern Australia as a result of increased cattle turn-

off will result in a reduction in the value of cattle inventories. As a consequence, farm business

profit of beef cattle producing farms in northern Australia is estimated to have declined from an

average of -$6100 a farm in 2012‒13 to -$63 000 a farm in 2013‒14 (Figure 11).

Figure 11 Financial performance, beef producing farms, northern Australia, 1994‒95 to 2013‒14y


Profit at full equity, also referred to as earnings before interest and taxes (EBIT), adjusts farm

business profit by adding back interest and leasing expenditure so that the performance of all

farms can be compared regardless of the financing arrangements in place. For northern beef

cattle producing farms, profit at full equity averaged $87 520 in 2011‒12, declined to

$36 700 in 2012‒13 and is estimated to have declined further to -$21 000 in 2013‒14. Rate of

return on total capital used (profit at full equity expressed as a percentage of total capital)

averaged 1.5 per cent in 2011‒12, 0.7 per cent in 2012‒13 and is estimated to have declined to

-0.5 per cent in 2013‒14. Reductions in land values resulted in small negative average rates of

return on total capital used when capital appreciation is included in both 2011‒12 and 2012‒13.

Financial performance by herd size

Farm financial performance varies between producers with different herd sizes. Generally, farm

cash incomes, farm business profits and rates of return are higher for producers with larger

herd sizes (Table 5). In 2013‒14 small herd size farms are estimated to have the lowest rate of

return (excluding capital appreciation) at –5.0 per cent, medium herd size producers

-1.0 per cent, large herd size producers 0.3 per cent, while very large herd size producers are

estimated to have a rate of return of 3.1 per cent.

- 100

- 50

2013–14 $’000

50

100

150

200

250

19

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95

19

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96

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97

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99

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Farm cash income

Farm business profit


17

Very large herd size producers are estimated to have a rate of return on total capital of

3.1 per cent in 2013‒14. Despite a small reduction in average profit at full equity for this group,

this profit is still expected to be more than $500 000, remaining well above the average for other

herd size groups. In 2013‒14, rate of return increases for this group are a result of slightly lower

profit being expressed as a percentage of a much lower total capital value for this group

during 2012‒13. This was the result of a reduction in land values in northern Australia and

lower cattle inventory values.

Reduced farm cash income and farm business profit are estimated for all herd size groups

in 2013‒14. Farm business profit is estimated to have declined as a result of lower values of

cattle inventories on farms because of increased turn-off, slower growth in cattle numbers on

some farms in northern Australia and reductions in cattle numbers on others. However, high

average beef receipts are estimated for small and medium herd size producers because high

turn-off more than offset low cattle prices.

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18

Table 5 Financial performance, beef cattle producing farms, northern Australia, by herd size

average per farm

Farm cash receipts unit Small Medium

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 66 630 52 200 (14) 55 000 212 220 169 100 (9) 187 000

Beef cattle sales – live export $ 420 100 – 1 000 450 100 (55) 1 000

Value of cattle transferred out $ 0 0 – 0 2 900 0 – 300

Sheep, lambs and wool sales $ 10 830 9 300 (74) 10 000 15 470 9 100 (30) 8 000

Total crop receipts $ 17 870 53 400 (50) 6 000 21 540 39 200 (18) 31 000

Total cash receipts $ 103 840 126 200 (28) 81 000 282 320 246 400 (7) 254 000

Farm cash costs

Beef cattle purchases $ 11 530 11 200 (30) 8 000 29 290 24 700 (19) 24 000

Beef cattle transferred in $ 0 0 – 0 710 1 000 (88) 2 000

Wages for hired labour $ 550 1 700 (71) 1 000 5 490 4 800 (27) 5 000

Interest paid $ 11 260 11 200 (30) 10 000 30 300 28 700 (14) 27 000

Total cash costs $ 86 760 104 300 (18) 91 000 203 330 197 000 (7) 225 000


Total capital at 30 June $ 2 100 630 2 013 800 (12) 1 776 000 4 584 900 4 205 100 (6) 4 144 000

Farm business debt at 30 June $ 144 860 171 500 (30) 162 000 399 560 417 300 (14) 406 000

Equity ratio at 30 June % 93 91 (2) na 91 90 (2) na


Farm cash income $ 17 080 21 800 (82) –10 000 78 990 49 400 (23) 29 000

Farm business profit $ –43 970 –36 200 (45) –81 000 2 780 –17 100 (58) –78 000

Profit at full equity $ –32 390 –24 600 (73) –70 000 36 510 15 300 (59) –47 000

Rate of return

Return on capital – excluding capital appreciation % –2.0 –1.0 (83) –5.0 0.8 0.4 (59) –1.0

Return on capital – including capital appreciation % –2.0 –2.0 (47) na –0.3 –1.0 (55) na

Other

Off-farm income a $ 42 920 40 400 (26) na 32 760 32 800 (24) na

continued ...

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19

Table 5 Financial performance, beef cattle producing farms, northern Australia, by herd size

average per farm continued

Farm cash receipts unit

Large Very large

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 623 350 544 600 (10) 506 000 2 322 660 1 959 700 (11) 1 750 000

Beef cattle sales – live export $ 5 550 9 200 (47) 18 000 385 760 251 600 (27) 207 000

Value of cattle transferred out $ 8 120 5 800 (103) 8 000 634 920 630 700 (15) 647 000

Sheep, lambs and wool sales $ 12 510 4 900 (81) 6 000 – 17 300 (5) 12 000


Total cash receipts $ 758 410 656 900 (9) 588 000 3 076 230 2 767 300 (9) 2 524 000

Farm cash costs


Beef cattle transferred in $ 6 360 500 (129) 600 359 000 261 900 (25) 367 000

Wages for hired labour $ 31 050 27 100 (20) 24 000 249 130 226 800 (13) 211 000

Interest paid $ 106 740 73 500 (15) 71 000 247 550 233 800 (16) 255 000

Total cash costs $ 567 810 478 900 (10) 465 000 2 414 650 2 140 700 (9) 2 124 000



Farm business debt at 30 June $ 1 453 860 1 023 700 (15) 1 058 000 5 442 960 5 397 600 (16) 5 298 000



Farm cash income $ 190 600 178 000 (20) 123 000 661 580 626 600 (23) 401 000

Farm business profit $ 122 830 9 400 (371) –56 000 728 100 308 200 (36) 251 000

Profit at full equity $ 237 670 90 100 (39) 23 000 978 440 548 200 (19) 512 000

Rate of return

Return on capital – excluding capital appreciation % 2.3 0.9 (39) 0.3 3.0 1.9 (20) 3.1

Return on capital – including capital appreciation % 1.1 –1.0 (69) na –2.0 –2.0 (58) na

Other


a Average per responding farm. p Preliminary estimate. y Provisional estimate. na not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey


20

Financial performance by zone

Farm business income of beef cattle producers in each zone (Map 4) is strongly related to herd

size. The northern pastoral zone, which has the largest average herd size, had the highest

average farm business incomes in the three years ending 2013‒14 (Table 6). This zone also

recorded rates of return that were the same or above the average for northern Australia.

Map 4 Australian broadacre zones


Of the three zones in the northern region, the northern high rainfall zone had the lowest

estimated average farm cash income for the three years ending 2013‒14. Small herd size is the

primary cause of low performance across a range of financial performance measures. In the

three years ending 2013‒14, the average herd size in this region was 710 head, the lowest of all

zones in northern Australia. This is fairly typical of higher rainfall regions with a high proportion

of smaller farm businesses. While the average financial performance of these businesses is low,

most generate positive farm cash income because of the substantial input of unpaid family

labour. Including the value of this unpaid labour in the calculation of farm business profit results

in most farm businesses generating negative profits and returns to capital. Small herd size

specialist beef producers typically rely on off-farm income to support the farm’s operators.

Reduced farm cash income and farm business profit are estimated for the northern pastoral and

wheat–sheep zones in 2013‒14. Increased cattle turn-off was more than offset by a reduction in

cattle prices received and cattle inventory values reduced.

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Table 6 Financial performance, beef cattle producing farms, northern Australia, by zone

average per farm

Farm cash receipts unit Pastoral Wheat–sheep High rainfall

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 525 930 543 300 (9) 449 000 298 700 227 200 (6) 229 000 178 660 117 200 (9) 170 000

Beef cattle sales – live export $ 64 670 45 000 (25) 43 000 0 0 – 1 000 1 140 10 (131) 1 000

Value of cattle transferred out

$ 98 640 98 500 (14) 95 000 5 610 0 – 0 2 190 0 – 0

Sheep, lambs and wool sales $ 38 840 25 400 (40) 25 000 5 340 5 400 (39) 4 000 60 100 (100) 100

Total crop receipts $ 430 3 100 (83) 1 000 59 990 96 700 (18) 42 000 12 810 19 900 (23) 11 000

Total cash receipts $ 710 970 722 100 (8) 623 000 390 050 354 900 (7) 298 000 211 890 148 900 (7) 196 000

Farm cash costs

Beef cattle purchases $ 64 240 54 200 (19) 36 000 53 650 34 700 (16) 29 000 19 640 13 500 (23) 11 000

Total cash costs $ 555 470 547 800 (8) 554 000 294 730 266 100 (7) 260 000 149 720 133 300 (9) 148 000


Total capital at 30 June $ 8 486 850 8 222 200 (6) 7 793 000 5 400 240 5 284 900 (5) 5 155 000 4 329 180 3 685 800 (7) 3 703 000

Farm business debt at 30 June

$ 1 042 180 943 800 (16) 981 000 643 020 555 200 (13) 533 000 316 930 338 300 (20) 366 000

Equity ratio at 30 June % 84 86 (4) na 88 90 (2) na 93 91 (3) na


Farm cash income $ 155 500 174 400 (17) 68 000 95 320 88 800 (18) 38 000 62 170 15 600 (45) 48 000

Farm business profit $ 157 470 –9 500 (263) –80 000 9 880 13 900 (105) –68 000 –26 220 –30 700 (24) –43 000

Profit at full equity $ 227 050 57 300 (49) –14 000 63 650 56 700 (25) –29 000 –270 –6 600 (109) –16 000

Rate of return

Return on capital – excluding capital appreciation

% 2.6 0.7 (48) –0.3 1.2 1.1 (25) –0.7 0.0 –0.2 (113) –0.5

Return on capital – including capital appreciation

% –1.0 –3 (31) na 0.4 –0.4 (179) na –0.2 –2.0 (36) na

Return on owners equity % 3.0 –0.2 (263) na 0.2 0.3 (104) na –0.7 –0.9 (27) na



22

In contrast, farm cash income is estimated to have increased on northern high rainfall zone

farms from a low of $15 600 in 2012‒13 to $48 000 in 2013‒14. While farms in the northern

pastoral and wheat–sheep zones were required to increase or maintain relatively high turn-off

in 2012‒13, producers in the northern high rainfall zone had milder seasonal conditions and

were able to hold on to stock during this period. However, with the onset of drier seasonal

conditions in 2013‒14, farms in the high rainfall zone had larger increases in turn-off. Combined

with the sale of heavier cattle, this resulted in a lesser decline in prices received for cattle

compared with other zones. This is estimated to have resulted in increased beef cattle receipts

and an increase in farm cash income. However, the decrease in inventories of cattle has resulted

in projected farm business profit decreasing in 2013‒14 (Table 6).

Financial performance of live cattle export region

Most of the cattle exported live from northern Australia over the past decade have been sourced

from the northern live export region (Map 5). This region contains around 1250 farm businesses

with greater than 100 head of beef cattle. AAGIS data indicate that around 110 of these

businesses derived more than 50 per cent of their beef cattle receipts from live export sales in

the three years ending 2012‒13 (Table 7).

Map 5 Northern Australian live cattle export region

Note: Regions based on aggregations of Australian Bureau of Statistics statistical local areas. Source: Australian Agricultural and Grazing Industries Survey

Generally, farm businesses with the greatest reliance on sales of live export cattle are located in

the far northern and western parts of the northern live cattle export region. On average, many

farm businesses in the upper west of the Northern Territory and in the Kimberley, Pilbara and

Murchison–Gascoyne regions of Western Australia derived more than 50 per cent of their total

beef cattle receipts from sale of cattle for live export in the three years ending 2012‒13 (Map 6).

Businesses in the south of the northern live export region and in Queensland are generally far

less reliant on live export sales.


23

Map 6 Proportion of total farm cash receipts from sale of beef cattle for live export

average for three years ending 2012‒13


Turn-off of cattle for live export declined between 2010‒11 and 2012‒13, with a reduction in

both the number of farms selling cattle for live export and the average number of cattle sold for

live export per farm. The effect on farm cash receipts of the reduction in turn-off for live export

was partially offset by the sale of other cattle. Initially, the average price received for other cattle

(cattle sold for slaughter in Australia) rose in 2011‒12 as excellent seasonal conditions resulted

in increased sale weights. Wet seasonal conditions in 2010‒11 and 2011‒12, abundant pasture

and the slowdown in live cattle exports resulted in increased beef cattle numbers across

northern Australia. The increase in cattle numbers halted abruptly in 2012‒13 as failure of the

northern wet season resulted in dry conditions, increased cattle turn-off and lower beef cattle

prices.

Average farm cash receipts per farm declined by 13 per cent between 2011‒12 and 2012‒13 as

a result of lower average sale prices for cattle in 2012‒13. Despite reductions in purchases of

beef cattle and transfer of beef cattle to properties in the region by corporate and large family

operators, average farm cash income declined from an average of $146 550 a farm in 2011‒12

to $115 800 in 2012‒13 (Table 7).

In 2013‒14 turn-off of cattle for live export is estimated to have increased, with both the

number of farm businesses selling beef cattle for live export and the average number of cattle

sold per farm for live export increasing. In addition, the rapid increase in numbers exported live

in the second half of 2013‒14 is estimated to have resulted in a significant number of cattle

being sourced from outside the live export region. The increase in live cattle exports is not

expected to result in an increase in average total cash receipts because continuing high beef

cattle turn-off is estimated to result in lower overall average sale prices. In addition, average

total cash costs are estimated to have increased as a result of higher expenditure on fodder

(including supplements) during 2013‒14 and increased transfer of beef cattle to properties in

the region following improved seasonal conditions from March 2014.


24

Farm cash income is estimated to have averaged $22 000 a farm in 2013‒14, well below the

average of $158 000 for the 10 years ending 2012‒13 (Table 7 and Figure 12). Farm business

profit is also estimated to have decreased to a loss of $58 000 per farm in 2013‒14, also well

below the average for the past 10 years of $100 000 a farm.

Figure 12 Financial performance, beef producing farms, northern live cattle export region, 1994‒95 to 2013‒14y


Farm businesses operating in the northern live cattle export region have an average herd size

almost 3.8 times larger than the average herd size for the balance of northern Australia

(remainder of the Northern Territory and Queensland) and around 9.7 times the average herd

size in southern Australia. As a result, average farm cash income of the northern live cattle

export region has historically been well above that for the balance of northern Australia and

southern Australia (Figure 13).

Figure 13 Farm cash income, beef cattle producing farms, 1994‒95 to 2013‒14y


- 100

2013–14 $’000

100

200

300

400

5001

99

4–9

51

99

5–9

61

99

6–9

71

99

7–9

81

99

8–9

91

99

9–0

02

00

0–0

12

00

1–0

22

00

2–0

32

00

3–0

42

00

4–0

52

00

5–0

62

00

6–0

72

00

7–0

82

00

8–0

92

00

9–1

02

01

0–1

12

01

1–1

22

01

2–1

3p

20

13–

14

y

Farm cash income


- 50

2013–14 $’000

50

100

150

200

250

300

350

400

450

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

20

12–

13

p2

01

3–1

4y

southern Australia

balance northern Australia

northern live cattle export region


25

Many of the largest large herd size farms in the northern live cattle export region are corporate

entities. These farms dominate turn-off and performance estimates and typically have financial

performance well above the average for other smaller herd size businesses in the region.

Transfer of cattle between corporate group properties in the northern live export region and

associated properties outside the region (in response to grazing conditions and marketing

opportunities) contributes to the high variability in average farm cash incomes for this region.

Despite this variability, average farm cash income and rates of return have been relatively high

on average over time.

Table 7 Financial performance, beef cattle producing farms, northern live cattle export region

average per farm

Farm cash receipts unit 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 587 170 503 400 (12) 435 000

Beef cattle sales – live export $ 112 210 65 800 (29) 63 000

Value of cattle transferred out $ 154 400 132 200 (18) 143 000

Total cash receipts $ 799 090 697 400 (10) 632 000

Farm cash costs

Beef cattle purchases $ 83 070 57 400 (20) 42 000

Beef cattle transferred in $ 76 750 60 500 (25) 80 000

Interest paid $ 72 140 63 600 (17) 62 000

Total cash costs $ 652 550 581 600 (9) 610 000


Total capital at 30 June $ 9 362 940 7 928 300 (7) na

Farm business debt at 30 June $ 1 132 810 987 700 (18) 1 020 000

Equity ratio at 30 June % 83 82 (8) na


Farm cash income $ 146 550 115 800 (31) 22 000

Farm business profit $ 132 760 21 300 (128) –58 000

Profit at full equity $ 208 490 91 000 (33) 10 000

Rate of return

Return on capital – excluding capital appreciation % 2.2 1.1 (32) 0.2

Return on capital – including capital appreciation % –2.0 –2.0 (43) na


Financial performance of southern Australian beef cattle producers

Farm cash income

In 2012‒13 average farm cash receipts for southern Australian beef cattle producers declined by

19 per cent mainly because of reduced beef cattle prices and lower receipts for crops, sheep,

lambs and wool (Figure 14). The reduction in farm receipts was partially offset by a reduction in

average total cash costs, mostly as a result of reduced expenditure on interest payments and

purchases of beef cattle (Figure 15). Average farm cash income of southern Australian beef cattle

producing farms declined by 25 per cent to an average of $78 200 a farm in 2012‒13 (Table 8).

Au

stralian b

eef: finan

cial perfo

rman

ce of b

eef cattle pro

du

cing farm

s, 20

11

–1

2 to

20

13

–1

4

AB

AR

ES

26

Table 8 Financial performance, beef cattle producing farms, southern Australia

average per farm

Farm cash receipts unit All beef cattle producing farms Specialist beef cattle producers

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Beef cattle sales $ 148 530 118 500 (4) 126 000 174 610 129 700 (12) 136 000




Farm cash costs



Fodder $ 4 640 7 000 (9) 10 000 4 180 5 700 (21) 9 000

Fuel, oil and lubricants $ 21 700 19 100 (9) 21 000 9 980 8 200 (11) 9 000

Repairs and maintenance $ 28 590 24 800 (6) 26 000 14 700 12 900 (11) 14 000

Contracts $ 15 610 14 700 (15) 14 000 4 840 5 100 (22) 5 000

Freight, handling and marketing $ 21 200 18 000 (11) na 9 750 8 600 (19) na

Interest paid $ 31 490 22 600 (12) 22 000 13 320 10 400 (42) 9 000

Total cash costs $ 301 710 251 500 (8) 259 000 157 950 126 700 (15) 131 000


Total capital at 30 June $ 4 439 690 3 829 800 (6) na 3 528 360 2 892 100 (7) na




Farm cash income $ 104 210 78 200 (14) 85 000 58 580 28 800 (26) 35 000

Farm business profit $ 35 020 –900 (1134) –9 000 3 020 –29 900 (24) –40 000

Profit at full equity $ 72 310 27 300 (42) 18 000 19 360 –17 300 (39) –29 000

Rate of return

Return on capital – excluding capital appreciation % 1.6 0.7 (38) 0.6 0.6 –0.6 (43) –1.0

Return on capital – including capital appreciation % 1.8 0.7 (75) na 0.8 –0.7 (73) na



27

Figure 14 Farm cash receipts, southern beef cattle producing farms, 1994‒95 to 2013‒14y


Figure 15 Composition of cash costs, beef cattle producers, southern Australia, 1994‒95 to 2013‒14y


In 2013‒14 continued dry seasonal conditions resulted in an increase in beef cattle turn-off and

a reduction in beef cattle numbers in many regions in southern Australia. Despite lower average

sale prices for beef cattle, the increase in turn-off is estimated to result in average beef cattle

receipts increasing by around 6 per cent for southern beef producing farms. In addition, receipts

from grain, sheep, lambs and wool are also estimated to have increased slightly, resulting in

average total cash receipts increasing by 4 per cent (Table 8).

Despite further reduced expenditure on purchases of beef cattle and a slight decrease in

expenditure on interest payments, average farm cash costs are estimated to have increased

slightly in 2013‒14 as a result of small increases in most other major cash costs, including

fodder. Average farm cash income of beef cattle producing farms in southern Australia is

2013–14 $’000

100

200

300

400

500

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

2012

–13

p

20

13–

14

y

Other cash receipts

Crop receipts

Sheep, lambs and wool sales

Beef cattle sales

2013–14 $’000

100

200

300

400

500

600

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p

20

13–

14

y

Overhead costs

Interest paid

Variable costs

Beef cattle purchases

Total cash receipts


28

estimated to have increased slightly to average $85 000 a farm in 2013‒14. This is around

13 per cent above the average for the previous 10 years, in real terms. However, farm cash

incomes of many southern Australian beef cattle producing farms were low through most of the

2000s because of drought.

Farm business profit and rates of return

Decreases in cattle numbers during 2013‒14 will result in a decrease in the average value of

cattle inventories on beef cattle producing farms. As a consequence, farm business profit is

estimated to have declined from an average of -$900 a farm in 2012‒13 to -$9000 a farm

in 2013‒14 (Figure 16). This remains better than 2006‒07 to 2009‒10, when farm business

profit of southern Australian beef cattle producers averaged -$39 400 a farm.

For southern beef cattle producing farms, profit at full equity averaged $72 310 in 2011‒12,

declined to $27 000 in 2012‒13 and is estimated to have declined further in 2013‒14 to

$18 000 a farm (Table 8).

Figure 16 Financial performance, beef producing farms, southern Australia, 1994‒95 to 2013‒14y


Financial performance by herd size

Farm financial performance for southern Australian beef cattle producing farms varies between

different herd size groups. Generally, farm cash incomes and farm business profits and rates of

return are higher for larger herd size producers (Table 9). Small herd size farms often rely on

off-farm income to support the farm operators, particularly small specialist beef cattle

producers.

Receipts from the sale of beef cattle increased on all but very large herd size farms as increased

turn-off more than offset the decrease in sale prices for beef cattle. Total cash costs increased for

small and large herd size producers and remained relatively unchanged for medium herd size

producers. Farm cash incomes decreased for large herd size groups in 2013‒14, remained

relatively unchanged for very large producers and increased for small and medium herd size

procurers. In 2013‒14 farm business profit is estimated to have decreased for all herd size

groups, except small herd size producers, as cattle inventories on farms in southern Australia

were reduced.

- 150

- 100

- 50

2013–14 $’000

50

100

150

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

20

12–

13

p2

01

3–1

4y

Farm cash income


Au

stralian b

eef: finan

cial perfo

rman

ce of b

eef cattle pro

du

cing farm

s 20

11

–1

2 to

20

13

–1

4

AB

AR

ES

29

Table 9 Financial performance, beef cattle producing farms, southern Australia, by herd size

average per farm

Farm cash receipts unit Small Medium

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y





Farm cash costs



Interest paid $ 22 690 12 700 (30) 13 000 15 820 15 400 (22) 16 000

Total cash costs $ 219 440 164 200 (20) 184 000 190 470 179 900 (9) 178 000






Farm cash income $ 74 450 46 200 (28) 69 000 65 380 60 800 (15) 66 000

Farm business profit $ 4 750 –28 200 (40) –9 000 1 860 –19 800 (50) –25 000

Profit at full equity $ 32 620 –11 500 (133) 8 000 22 840 500 (1609) –5 000

Rate of return

Return on capital – excluding capital appreciation % 1.0 –0.4 (137) 0.4 0.7 0.0 (1607) –0.2

Return on capital – including capital appreciation % 1.2 0.0 (4151) na 0.7 –0.3 (462) na

Other


continued ...

Au

stralian b

eef: finan

cial perfo

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ce of b

eef cattle pro

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cing farm

s, 20

11

–1

2 to

20

13

–1

4

AB

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30

Table 9 Financial performance, beef cattle producing farms, southern Australia, by herd size

average per farm continued

Farm cash receipts unit Large Very large

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y




Total cash receipts $ 499 050 368 500 (17) 364 000 1 136 920 1 103 000 (22) 1 067 000

Farm cash costs



Interest paid $ 48 450 26 600 (26) 23 000 82 140 83 800 (16) 77 000

Total cash costs $ 368 230 272 900 (19) 286 000 846 500 862 200 (24) 826 000



Farm business debt at 30 June $ 690 070 399 400 (26) 379 000 1 383 340 1 371 800 (17) 1 341 000



Farm cash income $ 130 820 95 600 (20) 78 000 290 420 240 800 (19) 241 000

Farm business profit $ 44 050 15 800 (101) –31 000 240 560 150 400 (28) 112 000

Profit at full equity $ 98 790 48 000 (43) 200 331 890 249 800 (19) 201 000

Rate of return

Return on capital – excluding capital appreciation % 1.9 1.1 (37) 0.0 3.2 2.4 (16) 2.5

Return on capital – including capital appreciation % 1.2 1.3 (37) na 4.4 1.8 (104) na

Other


a Average per responding farm. p Preliminary estimate. y Provisional estimate. na not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey

Au

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s, 20

11

–1

2 to

20

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4

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31

Table 10 Financial performance, beef cattle producing farms, southern Australia, by zone

average per farm

Farm cash receipts unit Pastoral Wheat–sheep High rainfall

2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y 2011‒12 2012‒13p 2013‒14y

Beef cattle sales – total $ 162 310 166 000 (15) 174 000 150 750 108 900 (8) 119 000 145 890 122 100 (5) 128 000

Sheep, lambs and wool sales $ 228 320 204 500 (19) 169 000 99 470 71 200 (17) 78 000 91 720 59 600 (16) 66 300

Total crop receipts $ 42 410 15 900 (72) 76 000 277 220 248 200 (15) 249 000 22 350 22 600 (121) 22 000

Total cash receipts $ 517 040 497 900 (18) 508 000 576 490 468 700 (9) 489 000 278 770 216 000 (16) 228 000

Farm cash costs

Beef cattle purchases $ 27 570 8 500 (35) 7 000 42 790 17 400 (26) 19 000 21 080 17 300 (15) 14 000

Total cash costs $ 359 470 308 300 (17) 343 000 448 400 352 400 (10) 374 000 195 370 173 800 (13) 171 000


Total capital at 30 June $ 3 792 750 3 501 600 (8) 3 433 000 4 941 660 4 110 700 (10) 4 236 000 4 142 780 3 648 800 (9) 3 558 000

Farm business debt at 30 June $ 422 540 360 500 (35) 366 000 772 790 496 700 (16) 506 000 247 830 214 400 (22) 231 000

Equity ratio at 30 June % 88 88 (12) na 84 88 (2) na 94 94 (5) na


Farm cash income $ 157 570 189 600 (25) 166 000 128 090 116 400 (12) 116 000 83 400 42 300 (39) 57 000

Farm business profit $ 121 820 82 800 (69) 31 000 23 320 3 800 (340) 5 000 36 240 –10 400 (148) –21 000

Profit at full equity $ 151 940 104 500 (55) 52 000 83 370 45 000 (33) 46 000 58 320 8 800 (192) –4 000

Rate of return

Return on capital – excluding capital appreciation

% 4.1 3.0 (57) 2.3 1.7 1.1 (32) 1.3 1.4 0.2 (185) –0.1

Return on capital – including capital appreciation

% 4.3 2.4 (83) na 2.3 1.7 (39) na 1.2 –0.3 (291) na



32

Financial performance by zone

Similar to northern Australia, farm business profit of beef cattle producers in each zone of

southern Australia (Map 4) is strongly related to herd size. The southern pastoral zone, which

has the largest average herd size, had the highest average farm business profits in the three

years ending 2013‒14 and the highest rates of return (Table 10).

Farm cash receipts are estimated to have increased for beef cattle producers in all southern

zones in 2013‒14 (Table 10). High beef cattle turn-off in all zones more than offset lower prices

received for cattle, resulting in an estimated increase in farm cash receipts. Farms in the high

rainfall zone are estimated to have a small decrease in farm cash costs. Despite a decrease in

expenditure on interest payments and beef cattle purchases in all zones except for the pastoral

zone, farm cash costs increased in the pastoral and wheat–sheep zones as a result of higher

expenditure on fodder, fuel and fertiliser.

Farm cash income is estimated to have decreased for beef cattle producers in the pastoral zone

because of higher costs, remained relatively unchanged in the wheat–sheep zone and increased

for farms in the high rainfall zone 2013‒14 (Table 10). Farm business profits are estimated to

have decreased for beef cattle producers in the pastoral and high rainfall zones but to have

remained relatively unchanged in the wheat–sheep zone.

Financial performance of southern specialist beef cattle producers

Around 60 per cent of beef cattle producing farms in southern Australia are classified as

specialist producers, deriving more than 50 per cent of average farm cash receipts from the sale

of beef cattle. Specialist beef cattle producing farms account for the majority of farms in the

southern high rainfall zone.

On average, specialist beef cattle producers in southern Australia derived 82 per cent of their

average total cash receipts from the sale of beef cattle in the three years ending 2013‒14

(Table 8). Over most of the past two decades, average farm cash income of specialist beef cattle

producers in southern Australia has been substantially below the average for all beef cattle

producing farms in southern Australia (Figure 17).

In 2012‒13 average farm cash receipts for specialist southern Australian beef cattle producers

decreased. This was a result of reduced beef cattle receipts and lower receipts from sheep, lambs

and wool. A reduction in average total cash costs, as a result of a decrease in the number of beef

cattle purchased and lower interest payments, only partially offset the decrease in farm cash

receipts. As a result, average farm cash income of specialist southern Australian beef cattle

producing farms decreased to $28 800 a farm in 2012‒13 (Table 8).

In 2013‒14 increased cattle turn-off is estimated to have more than offset lower average sale

prices for beef cattle, resulting in average beef cattle receipts for southern specialist beef

producing farms increasing by 5 per cent and average total cash receipts increasing by

7 per cent.

Despite further small reductions in expenditure on the purchase of beef cattle and interest

payments, total farm cash costs increased because of small increases in several other costs,

including fodder. Higher farm cash receipts, as a result of increased cattle turn-off, are estimated

to have more than offset the small increase in farm cash costs. This will result in average farm

cash income for specialist beef cattle producing farms in southern Australia increasing slightly to

average $35 000 a farm in 2013‒14, around 20 per cent below the average for the previous

10 years, in real terms.


33

Figure 17 Farm cash income, beef producers, southern Australia, 1994‒95 to 2013‒14y


Slowing in growth in cattle numbers will result in smaller values for the build-up in trading

stocks on specialist beef cattle producing farms. As a consequence, farm business profit for the

beef industry is estimated to have declined, from an average of -$29 900 a farm in 2012‒13 to

-$40 000 a farm in 2013‒14, compared with the average of -$28 300 a farm for the previous

10 years, in real terms.

On-farm cash costs of beef cattle production

A supplementary questionnaire about the cash costs incurred in producing beef cattle in

2012‒13 was included in ABARES annual Australian agricultural and grazing industries survey

(AAGIS). This supplementary survey was commissioned by Meat & Livestock Australia (MLA) to

improve its understanding of the costs faced by beef cattle producers. These data will also aid

MLA to assess the risks and challenges facing producers. As part of the supplementary survey,

farmers were asked to indicate the proportion of various cost items that could be attributed to

aggregated beef production. Unit cash costs of production were estimated for each farm by

dividing on-farm cash costs of beef cattle production by the live weight of cattle produced.

In 2012‒13 average unit cash costs of beef production (live weight basis) were similar in

northern and southern Australia (Map 1 and Table 11). Northern Australia had a lower average

unit cost of beef production, estimated to have been 69 cents a kilogram (excluding freight,

marketing and family labour). In southern Australia the average unit cost of beef production is

estimated to have been slightly higher at 75 cents a kilogram (excluding freight, marketing and

family labour).

In northern Australia, repairs and maintenance (20 per cent) and fodder (16 per cent)

contributed the most to average costs of beef production in 2012‒13. In southern Australia,

repairs and maintenance was the largest component of beef cash costs of production

(16 per cent), followed by fertiliser (11 per cent), with a lower proportion being spent on fodder,

fuel, oil and grease, hired labour and contracts than in northern Australia.

This analysis considers only the cash costs of production, in this case excluding freight,

marketing and interest costs. Over the medium and longer term, beef producers need to meet

2013–14 $’000

20

40

60

80

100

120

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p2

01

3–1

4y

Beef cattle producing farms

Specialist beef cattle procuders


34

more than just the cash costs of beef production. They also need to cover the cost of replacing

plant, machinery, vehicles and farm improvements that wear out over time; generate sufficient

profit to provide an acceptable return on the owner’s investment; and fund investment to

maintain longer-term profitability and the protection of the farm’s natural resources.

Table 11 Cash costs of beef production, by region, 2012‒13p

average per farm

Beef production unit Northern Australia Southern Australia

Total farm cash receipts from beef cattle sold $ 233 000 (6) 113 700 (16)

Total farm cash costs to beef production a $ 106 800 (7) 57 800 (5)

Total beef cattle sold no. 330 (7) 157 (13)

Farm cash costs b

Repairs and maintenance c/kg 14 (7) 12 (22)

Fodder c/kg 11 (10) 6 (24)

Fuel, oil and grease c/kg 8 (7) 7 (17)

Hired labour c/kg 6 (23) 6 (18)

Fertiliser c/kg 0 (29) 8 (21)

Livestock materials c/kg 4 (7) 5 (23)

Contracts paid c/kg 5 (15) 3 (27)

Crop and pasture chemicals c/kg 1 (20) 2 (17)

Cash costs (excluding family labour) c/kg 69 (6) 75 (20)

– imputed cost of family labour c/kg 32 (7) 37 (22)

Cash costs (including family labour) c/kg 101 (5) 111 (20)

Cash receipts c/kg 150 (2) 147 (6)

Net return

– excluding family labour c/kg 48 (11) 49 (21)

– including family labour c/kg 16 (37) 12 (148)

a Excludes handling, marketing, interest paid and freight costs. b Cents per kilogram live weight. p Preliminary estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey

Cost of production by herd size

To explore the relationship between beef producers’ average unit cost of production and scale of

beef production, farms were divided into herd size groups. Previous studies have identified a

positive relationship between farm size and productivity growth (Nossal et al. 2008).

These results broadly suggest that an inverse relationship exists between cost of production

per kilogram (live weight basis) and herd size (Figure 18, Figure 19 and Table 12). In particular,

farms with the smallest herd size had the highest average unit cost of production. The estimated

slight increase in average unit cost of production for very large herd size farms compared with

large herd size farms was based on a single year of data and therefore does not suggest

diseconomies for very large farms.

In northern Australia, large herd size farms had the lowest costs per kilogram, averaging

61 cents a kilogram in 2012‒13 compared with 84 cents a kilogram for the small herd size group

(Figure 18 and Table 12). Northern farms showed evidence of economies of scale, particularly in

repairs and maintenance and fodder, especially moving from small to medium and large

producers. Small northern producers also achieve much lower receipts per kilogram than

medium, large or very large producers.

Au

stralian b

eef: finan

cial perfo

rman

ce of b

eef cattle pro

du

cing farm

s, 20

11

–1

2 to

20

13

–1

4

AB

AR

ES

35

Table 12 Cash costs of beef production, by herd size, 2012‒13p

average per farm

Beef production unit Northern Australia Southern Australia

Small Medium Large Very large Small Medium Large Very large

Total farm cash receipts from beef cattle sold

$ 53 300 (14) 165 700 (10) 516 800 (11) 1 442 800 (13) 47 500 (9) 83 100 (6) 150 100 (9) 442 300 (8)

Total farm cash costs to beef production a

$ 33 100 (11) 82 800 (6) 210 500 (14) 642 500 (15) 30 700 (11) 46 400 (8) 65 300 (9) 206 100 (6)

Total beef cattle sold no. 86 (14) 240 (9) 698 (13) 2 105 (14) 71 (9) 115 (6) 213 (8) 578 (10)

Farm cash costs b

Repairs and maintenance c/kg 18 (26) 16 (12) 14 (11) 11 (14) 17 (23) 14 (22) 10 (26) 10 (13)

Fodder c/kg 14 (27) 14 (16) 9 (21) 9 (13) 9 (32) 7 (24) 5 (18) 5 (23)

Fuel, oil and grease c/kg 10 (20) 9 (11) 8 (15) 9 (8) 12 (21) 9 (14) 5 (14) 6 (16)

Hired labour c/kg 1 (114) 4 (33) 6 (43) 9 (22) 7 (33) 3 (28) 6 (26) 9 (15)

Fertiliser c/kg 2 (40) 1 (40) 0 (202) 0 (46) 12 (27) 7 (17) 6 (23) 8 (15)

Livestock materials c/kg 3 (26) 3 (14) 4 (14) 3 (13) 6 (17) 5 (18) 4 (14) 5 (15)

Contracts paid c/kg 2 (61) 5 (21) 5 (27) 6 (18) 5 (46) 3 (34) 2 (22) 3 (27)

Crop and pasture chemicals c/kg 1 (36) 1 (27) 0 (41) 1 (47) 2 (36) 2 (22) 1 (35) 2 (18)

Cash costs (excluding family labour)

c/kg 84 (17) 77 (7) 61 (12) 66 (10) 103 (15) 81 (10) 61 (11) 69 (11)

– imputed cost of family labour

c/kg 99 (20) 42 (11) 20 (15) 9 (16) 69 (14) 54 (11) 31 (9) 13 (13)

Cash costs (including family labour)

c/kg 183 (17) 119 (7) 82 (11) 75 (9) 172 (14) 135 (10) 93 (8) 81 (11)

Cash receipts c/kg 136 (7) 155 (5) 151 (4) 147 (3) 159 (8) 146 (7) 141 (7) 147 (5)

Net return

– excluding family labour c/kg 25 (55) 46 (18) 59 (17) 34 (38) 29 (50) 44 (21) 54 (16) 57 (11)

– including family labour c/kg –74 (40) 4 (266) 39 (26) 25 (52) –40 (47) –11 (98) 23 (39) 44 (15)

a Excludes handling, marketing, interest paid and freight costs. b Cents per kilogram live weight. p Preliminary estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Herd size groups are defined in Table 3. Source: Australian Agricultural and Grazing Industries Survey


36

Figure 18 Unit cost of beef production (live weight basis), northern Australia, by herd size, 2012‒13p

average per farm

p Preliminary estimate. Note: Cash costs (excluding freight, marketing and family labour). Source: Australian Agricultural and Grazing Industries Survey

In southern Australia, average costs per kilogram of live weight produced for small herd size

farms were around 27 per cent higher than the medium herd size, at around 103 cents (Figure

19 and Table 12). The large herd size farms in the southern region have an average herd size of

between 400 and 800 head of cattle and had the lowest estimated average costs of 61 cents a

kilogram of live weight produced.

Figure 19 Unit cost of beef production (live weight basis), southern Australia, by herd size, 2012‒13p

average per farm

p Preliminary estimate. Note: Cash costs (excluding freight, marketing and family labour). Source: Australian Agricultural and Grazing Industries Survey

c/kg

10

20

30

40

50

60

70

80

90

Small Medium Large Very large

c/kg

20

40

60

80

100

120



37

Almost all major cash costs on southern beef farms showed evidence of economies of scale,

especially on repairs and maintenance, fodder, fuel, oil and grease, fertiliser and livestock

materials. Unlike small northern farms, small southern farms achieved higher receipts per

kilogram than larger farms.

It is not surprising that the imputed cost of family labour is highest on small size farms. These

family labour costs made up more than half the total cost per kilogram on small northern farms

in 2012‒13 and 40 per cent of total cash costs on small southern farms.


38

4 Farm investment Producers’ capacity to generate farm income is influenced by their past investments, in

additional land to expand the scale of their farming activities and in new infrastructure, plant

and machinery to boost productivity in the longer term.

Over the past decade, beef cattle producers have undertaken considerable new investments in

land, plant and machinery.

The proportion of beef cattle producing farms acquiring land was high in northern and southern

Australia between 1999‒2000 and 2006‒07 (Figure 20). The proportion dropped sharply

in 2007‒08 and has remained relatively low since, particularly in northern Australia. While still

low relative to its peak, land acquisition has been on the rise since 2009‒10, particularly in

southern Australia.

Figure 20 Proportion of beef producing farms acquiring land, Australia, 1994‒95 to 2012‒13p


Land values reported for beef cattle producing farms have declined since 2007‒08, with land

values reported in 2012‒13 as much as 25 per cent below those reported in 2007‒08 in some

pastoral regions of northern Australia. Very large increases in reported land values occurred

over the previous decade (Figure 21). Much smaller reductions in reported land values occurred

in many regions in the high rainfall and wheat–sheep zones.

Average land prices for beef cattle producing farms increased sharply between 2001‒02

and 2007‒08, particularly compared with cash receipts generated per hectare, which increased

only modestly over this period.

The ratio of average land price per hectare to total cash receipts per hectare almost doubled

from around 5:1 before 2001‒02 to around 9:1 in 2009‒10 on beef cattle producing farms. This

ratio more than doubled across all agricultural zones. The ratio increased from 7:1 to 15:1 in the

high rainfall zone and from 4:1 to 8:1 in the wheat–sheep zone. The largest increase was

reported in the pastoral zone of northern Australia, where the ratio increased from 4:1 to 10:1.

%

2

4

6

8

10

12

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p

Southern Australia

Northern Australia


39

Figure 21 Land prices, beef cattle producing farms, 1994‒95 to 2012‒13p


Only a relatively small proportion of beef cattle producing farms buy land in any one year, but

most producers make some investment in plant, vehicles, machinery and/or infrastructure each

year. Because of the much larger average value of land transactions, the value of land purchases

dominates total investment.

Net investment in plant, vehicles, machinery and farm infrastructure for beef cattle producing

farms has been historically high since 2006‒07 (Figure 22 and Figure 23).

In 2008‒09 and 2009‒10 investment in plant, machinery and farm infrastructure (such as

buildings, irrigation systems, water supply structures and fencing) was stimulated by the

investment allowance offered to businesses as part of the Australian Government’s Nation

Building and Jobs Plan to support economic activity during the global financial crisis.

Net investment is the difference between the total value of plant, vehicles, machinery and farm

infrastructure purchased and the total value of those items sold or disposed of. In addition to

acquiring new capital items and replacing old items, farmers invest in ongoing maintenance and

repair of existing plant, vehicles, machinery and farm infrastructure. This expenditure is

recorded in ABARES surveys as the cash cost of repairs and maintenance. A significant

proportion of reported annual expenditure on repairs and maintenance is the capital cost of

replacing and upgrading items of farm capital, such as fencing, stockyards and watering

facilities. Annual expenditure on repairs and maintenance is strongly correlated with farm

income. Expenditure on repairs and maintenance rises in years of high farm cash income and

decreases in years of lower farm cash incomes.

In northern Australia, fencing, stockyards and watering facilities account for a high proportion of

total farm capital value. Expenditure on the repair and maintenance of this infrastructure,

together with plant machinery and vehicle repairs, typically exceeds net capital additions

(Figure 22). Since 2006‒07 expenditure on repairs and maintenance and net capital additions in

northern Australia has trended downward as total farm cash receipts have declined.

2013–14 $/ha

50

100

150

200

250

300

200

300

400

500

600

700

800

900

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p

Southern Australia

Northern Australia (right axis)

2013–14 $/ha


40

Figure 22 Net investment in vehicles, machinery and farm improvements, northern Australian beef producing farms, 1994‒95 to 2012‒13p


In the five years ending 2012‒13, motor vehicles accounted for around 41 per cent of average

total net capital additions for northern beef cattle producing farms. Tractors accounted for a

further 29 per cent, but most expenditure was by mixed enterprise beef cattle producing farms.

Investment in plant, vehicles, machinery and farm infrastructure by southern Australian beef

cattle producing farms has also been strong since 2006‒07 (Figure 23). In the five years

ending 2012‒13, motor vehicles accounted for 28 per cent of average total net capital additions

of southern beef cattle producing farms. Reflecting the reliance of many southern beef cattle

producers on crop production, tractors also accounted for 25 per cent of net capital additions,

crop harvesting equipment accounted for a further 18 per cent and cultivation and planting

equipment 12 per cent.

Over the past 20 years, most of the increase in real expenditure on net capital additions and

repairs and maintenance for both northern and southern beef cattle producing farms can be

attributed to increases in the average scale of operations of farms and production of crops and

increased intensification of beef cattle enterprises.

2013–14 $’000

10

20

30

40

50

19

94

–9

51

99

5–

96

19

96

–9

71

99

7–

98

19

98

–9

91

99

9–

00

20

00

–0

12

00

1–

02

20

02

–0

32

00

3–

04

20

04

–0

52

00

5–

06

20

06

–0

72

00

7–

08

20

08

–0

92

00

9–

10

20

10

–1

12

01

1–

12

20

12

–1

3p

Computer, office, workshop and other equipmentLivestock handling

Buildings, fences, yards and structuresGrain storage

Accommodation

Irrigation equipment

Harvesting and handling

Cultivation, sowing, fertiliser and sprayingTractors

Vehicles

Repairs and maintenance


41

Figure 23 Net investment in vehicles, machinery and farm improvements, southern Australian beef producing farms, 1994‒95 to 2012‒13p


2013–14 $’000

10

20

30

40

50

19

94

–9

51

99

5–

96

19

96

–9

71

99

7–

98

19

98

–9

91

99

9–

00

20

00

–0

12

00

1–

02

20

02

–0

32

00

3–

04

20

04

–0

52

00

5–

06

20

06

–0

72

00

7–

08

20

08

–0

92

00

9–

10

20

10

–1

12

01

1–

12

20

12

–1

3p

Computer, office, workshop and other equipmentLivestock handling

Buildings, fences, yards and structuresGrain storage

Accommodation

Irrigation equipment

Harvesting and handling

Cultivation, sowing, fertiliser and sprayingTractors

Vehicles

Repairs and maintenance


42

5 Farm debt More than 95 per cent of beef cattle producing farms are family-owned and operated. For family

farms, funding for farm expansion and improvement is limited to the funds available to the

family, the profits the farm business can generate and the funds it can borrow. Debt is therefore

an important source of funds for farm investment and ongoing working capital.

Average debt per farm business almost doubled in real terms for beef cattle producing farms

between 2000‒01 and 2008‒09, in northern Australia and southern Australia. In northern

Australia average debt per farm business increased from $342 000 a farm in 2000‒01 to

$651 000 a farm in 2008‒09 (Figure 24). Debt in southern Australia increased from an average

of $202 000 a farm in 2000‒01 to $481 000 a farm in 2008‒09 (Figure 25).

Figure 24 Composition of farm business debt, northern Australian beef producing farms, 1993‒94 to 2012‒13p


Figure 25 Composition of farm business debt, southern Australian beef producing farms, 1993‒94 to 2012‒13p


2013–14 $’000

100

200

300

400

500

600

700

800

1993

–94

1994

–95

1995

–96

19

96–

97

19

97–

98

19

98–

99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

20

06–

07

20

07–

08

20

08–

09

2009

–10

2010

–11

2011

–12

2012

–13p

Other debt

Buildings and structures

Land development

Machinery, plant and vehicles

Reconstructed debt

Land purchase

Working capital

2013–14 $’000

100

200

300

400

500

600

19

93–

94

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

20

12–

13

p

Other debt

Buildings and structures

Land development

Machinery, plant and vehicles

Reconstructed debt

Land purchase

Working capital


43

Several factors contributed to the growth in debt over this period, including:

lower interest rates

large increases in land values raising borrowing capacity

increases in farm size

changes in commodities produced

reduced farm cash incomes because of widespread and extended drought conditions.

Throughout much of the 2000s, interest rates were historically low, reducing the cost of

servicing debt and encouraging borrowing for farm investment. Interest rate subsidies provided

to many farms as part of drought assistance programmes also supported borrowing.

Structural adjustment resulted in beef cattle producers in the wheat–sheep zone changing the

mix of commodities produced. Farm size also increased in northern and southern Australia.

The largest contribution to increases in farm debt in the past two decades has been borrowing to

fund new investment, particularly purchase of land, machinery and vehicles, and to develop land

and farm improvements. Debt to fund land purchase accounts for the largest share of debt on

beef cattle producing farms, accounting for an estimated 54 per cent of average debt in northern

Australia and 46 per cent of average debt in southern Australia in 2012‒13.

Growth in average debt per farm business has slowed for beef cattle producing farms in recent

years because of a reduction in land values and more restricted access to credit from lending

institutions. The proportion of farms increasing debt declined significantly in 2010‒11 to be

closer to the historical lows recorded in 2000‒01 (Figure 26). According to AAGIS data, average

farm debt for beef cattle producing farms has declined slightly since 2008‒09 in both northern

Australia and southern Australia (Figure 24 and Figure 25). However, the proportion of

northern Australian farms borrowing additional funds in 2012‒13 increased significantly as

farm cash incomes declined (Figure 26).

Figure 26 Proportion of beef cattle producing farms increasing farm business debt, 1994‒95 to 2012‒13p


%

10

20

30

40

50

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

20

12–

13

p

Southern Australia

Northern Australia


44

Increased size of farm enterprises also resulted in higher borrowing for ongoing working capital.

Additionally, borrowing to meet working capital requirements increased for producers during

the 2000s as drought depressed farm cash incomes in many regions. Working capital debt was

second only to land purchase debt, accounting for 24 per cent of average farm debt in northern

Australia in 2012‒13 and 37 per cent of average debt in southern Australia.

Distribution of farms by debt and equity

The proportion of beef cattle producing farms with relatively high debt varies across regions and

herd sizes (Table 13 and Table 14). Around 10 per cent of farms in southern Australia,

15 per cent of farms in northern Australia and 18 per cent of farms in the northern live cattle

export region (Map 1 and Map 5) carried in excess of $1 million in debt at 30 June 2013. The

higher proportion of such farms in northern Australia and the northern live cattle export region

largely reflects the much higher proportion of large and very large herd size businesses in those

regions (Table 1).

In contrast, around 62 per cent of beef cattle producing farms in southern Australia and

53 per cent in northern Australia were recorded as having less than $100 000 in debt at 30 June

2013. A high proportion of these businesses are small and medium herd size farms, but more

than 15 per cent of very large herd size businesses were also recorded as having less than

$100 000 in debt at 30 June 2013.

The general increase in land values to 2008 boosted the equity most farmers have in their

businesses. For some farms, reductions in farm debt, increases in capital investment and

increased livestock numbers have resulted in further improvement in farm equity. However, in

several regions farm equity is estimated to have fallen significantly over the past three years as a

consequence of reductions in reported land values and lower cattle inventory values.

On average, farm business equity remains strong for most beef cattle producing farms. The

average equity ratio for beef cattle producing farms at 30 June 2013 was estimated to be

89 per cent for northern Australian farms and 91 per cent for southern Australian farms.

Nine per cent of beef cattle producing farms in northern Australia, 5 per cent in southern

Australia and around 18 per cent in the northern live cattle export region were estimated to

have equity ratios below 70 per cent in 2012‒13. In contrast, 70 per cent of beef cattle

producing farms in northern Australia and 76 per cent in southern Australia were estimated to

have equity ratios exceeding 90 per cent at 30 June 2013. Equity ratios are typically lower for

larger herd size farms because they are able to service larger debts.

Au

stralian b

eef: finan

cial perfo

rman

ce of b

eef cattle pro

du

cing farm

s, 20

11

–1

2 to

20

13

–1

4

AB

AR

ES

45

Table 13 Distribution of northern beef cattle producing farms, by farm business debt and equity ratio, at 30 June 2013ap

percentage of farms

Farm business debt unit Herd size Northern Australian live

cattle export region

Northern Australia


<$100 000 % 82 (7) 44 (16) 33 (24) 15 (39) 33 (27) 53 (8)

$100 000 and <$250 000 % 6 (55) 14 (35) 13 (48) 1 (31) 19 (50) 11 (26)

$250 000 and <$500 000 % 4 (48) 11 (35) 13 (34) 1 (30) 11 (52) 9 (23)

$500 000 and <$1m % 4 (97) 21 (23) 10 (34) 0 – 19 (38) 13 (20)

$1m and <$2m % 4 (80) 7 (37) 14 (28) 16 (45) 5 (51) 8 (23)

≥$2m % 1 (26) 3 (45) 17 (23) 68 (14) 13 (26) 7 (15)

Total % 100 – 100 – 100 – 100 – 100 – 100 –

Average farm debt at 30 June $ 171 000 (30) 417 000 (14) 1 024 000 (16) 5 398 000 (19) 988 000 (20) 577 000 (9)

Farm business equity ratio b

≥90 per cent % 85 (7) 63 (10) 68 (6) 27 (33) 55 (17) 70 (5)

80 and <90 per cent % 7 (69) 20 (25) 15 (26) 22 (21) 24 (34) 15 (19)

70 and <80 per cent % 2 (78) 8 (41) 7 (38) 21 (43) 3 (55) 6 (28)

60 and <70 per cent % 5 (63) 7 (31) 6 (46) 12 (55) 11 (62) 6 (24)

<60 per cent % 2 (46) 2 (69) 5 (45) 18 (25) 7 (38) 3 (28)

Total % 100 – 100 – 100 – 100 – 100 – 100 –

Average farm business equity ratio at 30 June % 91 (2) 90 (1) 90 (2) 76 (3) 82 (3) 89 (1)

Population of farms no. 2 644 – 3 864 – 1 613 – 310 – 1 246 – 8 431 –

a Excludes debt for large corporate farms. b Equity ratio defined as total owned capital at 30 June less debt as a percentage of total owned business capital p Preliminary estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey

Au

stralian b

eef: finan

cial perfo

rman

ce of b

eef cattle pro

du

cing farm

s, 20

11

–1

2 to

20

13

–1

4

AB

AR

ES

46

Table 14 Distribution of southern beef cattle producing farms, by farm business debt and equity ratio, at 30 June 2013ap

percentage of farms

Farm business debt unit Herd size Southern Australia

Small Medium Large Very Large

<$100 000 % 73 (6) 68 (7) 44 (17) 31 (21) 62 (5)

$100 000 and <$250 000 % 10 (32) 13 (33) 21 (32) 7 (55) 13 (18)

$250 000 and <$500 000 % 7 (31) 9 (35) 14 (30) 8 (45) 9 (18)

$500 000 and <$1m % 5 (50) 5 (37) 9 (35) 15 (31) 6 (21)

$1m and <$2m % 4 (56) 3 (30) 9 (25) 20 (28) 6 (17)

≥$2m % 1 (151) 2 (47) 4 (32) 20 (20) 4 (21)

Total % 100 – 100 – 100 – 100 – 100 –

Average farm debt at 30 June $ 182 000 (31) 238 000 (24) 399 000 (26) 1 372 000 (16) 335 000 (12)

Farm business equity ratio b

≥90 per cent % 80 (5) 82 (4) 68 (8) 57 (12) 76 (3)

80 and <90 per cent % 11 (24) 10 (30) 23 (23) 21 (24) 14 (13)

70 and <80 per cent % 5 (67) 5 (41) 3 (48) 9 (40) 5 (30)

60 and <70 per cent % 4 (50) 2 (71) 4 (33) 7 (64) 3 (27)

<60 per cent % 1 (24) 1 (83) 2 (53) 6 (36) 2 (29)

Total % 100 – 100 – 100 – 100 – 100 –

Average farm business equity ratio at 30 June % 93 (2) 92 (2) 91 (2) 87 (2) 91 (1)

Population of farms no. 6 626 – 6 899 – 3 990 – 1 616 – 19 130 –

a Excludes debt for large corporate farms. b Equity ratio defined as total owned capital at 30 June less debt as a percentage of total owned business capital p Preliminary estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate. Source: Australian Agricultural and Grazing Industries Survey


47

Debt servicing

The proportion of farm receipts needed to fund interest payments rose substantially in the

decade ending 2009‒10. This was because extended drought conditions led to large increases in

farm debt and reduced farm receipts. Interest rate subsidies paid to farm businesses (as drought

assistance) partially offset the increase in interest paid between 2001‒02 and 2007‒08.

Lower interest rates in 2011‒12 and 2012‒13 resulted in a decline in farm receipts needed to

fund interest payments. In southern Australia, in 2013‒14 the ratio of interest payments to farm

receipts is estimated to have reduced further, to around 6 per cent. This was a result of an

increase in farm cash receipts and a decrease in interest payments (Figure 27). However, in the

same period in northern Australia, the ratio increased to 13 per cent, mainly because of reduced

cash receipts. The proportion of farm receipts needed to meet interest payments in 2013‒14

was high compared with that recorded historically in northern Australia.

Figure 27 Ratio of interest payments to total cash receipts, beef cattle producing farms, 1994‒95 to 2013‒14y

p Preliminary estimate. y Provisional estimate. Note: For farms with debt. Source: Australian Agricultural and Grazing Industries Survey

In 2013‒14 the proportion of beef cattle producing farms recording negative farm cash incomes,

and therefore potentially needing to borrow additional working capital, is estimated to have

increased by around 5 per cent in southern Australia to 31 per cent and remained relatively

unchanged in northern Australia at 36 per cent.

The capacity farm businesses have to undertake further borrowing depends on the equity or

security farmers have in their businesses and the business’s capacity to service increased debt

from farm receipts. The proportion of beef cattle producing farm businesses in northern

Australia with relatively low additional borrowing capacity (equity ratio of less than

70 per cent) and relatively high debt servicing commitments (interest-to-receipts ratios

exceeding 15 per cent) has increased significantly since 2008‒09 to an estimated 8 per cent

in 2012‒13, rising further to an estimated 12 per cent in 2013‒14. The 2013‒14 estimate is

close to the high of 14 per cent recorded in 1996‒97, when beef cattle prices were historically

low (Figure 28).

%

5

10

15

20

1994

–95

1995

–96

1996

–97

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

20

12–

13

p

20

13–

14

y

Southern Australia

Northern Australia


48

In the northern live cattle export region, the proportion of beef cattle producing farm businesses

with relatively low additional borrowing capacity and relatively high debt servicing

commitments increased to around 17 per cent in 2012‒13 and is expected to have increased

further to around 20 per cent in 2013‒14.

Figure 28 Debt servicing and borrowing capacity, northern Australian beef cattle producing farms, 1993‒94 to 2013‒14y


The proportion of beef cattle producing farm businesses in southern Australia with relatively

low borrowing capacity and relatively high debt servicing commitments declined from

6 per cent in 2009‒10 to around 3 per cent in 2012‒13, but is expected to have increased to

4 per cent in 2013‒14, which is around half of the historical highs recorded in the late 1990s

(Figure 29).

Figure 29 Debt servicing and borrowing capacity, southern Australian beef cattle producing farms, 1993‒94 to 2013‒14y


% of farm businesses

5

10

15

20

25

30

19

93–

94

19

94–

95

19

95–

96

19

96–

97

19

97–

98

19

98–

99

19

99–

00

20

00–

01

20

01–

02

20

02–

03

20

03–

04

20

04–

05

20

05–

06

20

06–

07

20

07–

08

20

08–

09

20

09–

10

20

10–

11

20

11–

12

20

12–

13

p20

13–

14y

Farms with greater than 15% interest-

to-receipt ratio

Farms with less than 70% equity

ratio

Farms with both low equity and high

interest-to-receipts ratio


49

6 Productivity Total factor productivity (TFP) is the key indicator ABARES uses to measure productivity of the

broadacre and dairy industries. TFP is defined as the ratio of total market outputs produced

(such as crops, livestock and wool) to total market inputs used (land, labour, capital, materials

and services). See Box 2 for an overview of ABARES productivity estimates and for Australian

Bureau of Statistics definitions of the beef industry used in this section of the report.

Compared with single input or partial factor productivity (PFP) measures (such as labour

productivity or crop yield per hectare), TFP is a better indication of the overall productivity

performance of agricultural industries. This is because PFP measures attribute the combined

effects of changes in all aspects of farm production systems solely to one input. This may result

in a misleading assessment of the drivers of productivity growth.

Box 2 ABARES productivity estimates

ABARES has published statistics and analysed the productivity of Australia’s broadacre (non-irrigated cropping and grazing) and dairy industries since the early 1990s using data collected through its national farm survey programme. ABARES has applied a consistent methodology to the annual surveys of broadacre farms since 1977‒78 and of dairy farms since 1978‒79.

ABARES estimates TFP as the ratio of a quantity index of total market outputs relative to a quantity index of market inputs. Multiple outputs and inputs are aggregated across farms to the industry level, using the Fisher index, and then TFP is calculated by taking a ratio of total outputs to total inputs. Annual TFP growth rates (percentage change over time) are estimated by fitting an exponential trend line (for details of ABARES TFP index methodology, see Zhao, Sheng & Gray 2012).

The broadacre and dairy industries are defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC) (ABS 2006):

Crops industry (ANZSIC06 Class 0146 and 0149)—farms engaged mainly in growing cereal grains, coarse grains, oilseeds, rice and/or pulses.

Mixed crop–livestock industry (ANZSIC06 Class 0145)—farms engaged mainly in running sheep or beef cattle, or both, and growing cereal grains, coarse grains, oilseeds and/or pulses.

Beef industry (ANZSIC06 Class 0142)—farms engaged mainly in running beef cattle.

Sheep industry (ANZSIC06 Class 0141)—farms engaged mainly in running sheep.

Sheep–beef industry (ANZSIC06 Class 0144)—farms engaged mainly in running both sheep and beef cattle. TFP estimates are not reported separately for these farms, although they are included within the aggregate broadacre estimates.

Dairy industry (ANZSIC06 Class 0160)—farms engaged mainly in farming dairy cattle.

Together, the broadacre and dairy industries account for 68 per cent of commercial-scale Australian farm businesses and for an estimated 55 per cent of the total gross value of Australian agricultural production in the five years ending 2012‒13. These farms are also responsible for managing more than 90 per cent of the total area of agricultural land in Australia and account for most of Australia’s family-owned and operated farms (ABARES 2013).

In 2013 ABARES developed a growth-accounting based measure of Australian agricultural TFP. The ABARES all agriculture TFP index includes all agricultural industries, and uses growth accounting and national accounts data to estimate long-term total factor productivity of Australia’s agriculture industry. Industries included in the all agriculture index are the cropping industries (grains, oilseeds, vegetables and melons, fruits and nuts, cotton, tobacco and other horticulture, and other crops), livestock industries (red meat, poultry, eggs, wool, milk and dairy products, and other livestock products) and other outputs.

Beef industry productivity increased at an average annual rate of 0.8 per cent from 1977‒78

to 2011‒12, driving output growth of around 0.5 per cent a year on average. Over the same

period, beef specialists reduced inputs by around 0.3 per cent a year on average (Table 15).

Several factors contributed to higher productivity across the beef industry. In particular,

improved pastures, herd genetics and disease management increased branding rates (calves

marked as a percentage of cows mated) and reduced mortalities, thereby increasing productivity

(ABARE 2006).


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Table 15 Average annual broadacre productivity growth by industry, 1977‒78 to 2011‒12

Category All broadacre (%)

Cropping (%) Mixed

crop-livestock (%)

Beef (%) Sheep (%)

Total factor productivity

Productivity 1.0 1.6 0.9 0.8 0.1

Outputs 0.0 2.6 –0.8 0.5 –2.6

Inputs –1.0 1.0 –1.7 –0.3 –2.6

Partial factor productivity

Land 1.0 1.4 0.4 0.9 –0.2

Labour 2.2 3.3 2.0 1.3 0.8

Capital 1.6 2.8 2.0 0.4 1.3

Materials –1.8 –1.5 –1.6 –1.8 –2.0

Services 0.9 1.9 0.9 0.4 0.2

Input use

Land –0.9 1.2 –1.3 –0.3 –2.4

Labour –2.1 –0.7 –2.8 –0.8 –3.3

Capital –1.5 –0.2 –2.8 0.2 –3.8

Materials 1.9 4.1 0.8 2.3 –0.6

Services –0.9 0.8 –1.7 0.2 –2.7

Source: ABARES

Beef industry productivity growth rates have varied by region, with long-run TFP growth in

northern Australia (0.9 per cent a year) exceeding that in southern Australia (0.1 per cent a

year) (Table 16 and Figure 30). In northern Australia, the brucellosis and tuberculosis

eradication campaign (BTEC) in the 1980s and the expansion of the feedlot sector and live

export trade with Indonesia in the 1990s have helped improve the productivity of beef

specialists. In the 1980s BTEC coincided with negative productivity growth, as producers

invested in on-farm infrastructure and improved stock handling facilities to properly test and

monitor cattle. However, much of the strong productivity growth during the 1990s was a result

of improved reproductive performance and reduced death rates that resulted from BTEC. In

addition, expansion of the feedlot sector and live export trade with Indonesia led to a shift in

herd structure, to a higher proportion of Bos indicus breeds and more breeder operations. This

was aimed at increasing turn-off of smaller and younger cattle for the live export market

(Gleeson et al. 2012). In the past decade, productivity of the northern beef industry has returned

to near trend growth following droughts that affected the region for much of the early and mid

2000s.

Table 16 Average annual beef total factor productivity growth, 1977‒78 to 2011‒12

Category unit Productivity growth Output growth Input growth

All beef specialists % 0.8 0.5 –0.3

Southern Australia % 0.1 0.7 0.5

Northern Australia % 0.9 0.5 –0.5


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Figure 30 Beef industry total factor productivity growth, 1977‒78 to 2011‒12

Note: Over shorter time periods, total factor productivity levels at the beginning and end of the period can have a significant effect on estimated growth rates. Source: ABARES

Productivity growth in the southern beef industry was slower and more variable than in the

northern industry (Table 16 and Figure 30). Although better pasture and herd management

practices also improved productivity in the southern beef industry, the smaller scale of

operations in many areas may have constrained productivity growth. From 1977‒78

to 2011‒12, industry output and input use were highly variable, largely because of climate

factors. Southern beef producers tend to be smaller, more intensive operations that rely on

improved pastures (reflected by higher average stocking rates), and are more diversified than

northern producers (Nossal, Sheng & Zhao 2008). As a result, productivity growth in the

southern region is more sensitive to drought conditions that increase use of purchased feed,

adversely affect crop yields, and drive significant destocking and restocking activities that

hamper output growth (Dahl, Leith & Grey 2013).


52

Survey methods and definitions ABARES has conducted surveys of selected Australian agricultural industries since the 1940s.

These surveys provide a broad range of information on the economic performance of farm

business units in the rural sector. This comprehensive dataset is used for research and analysis

that forms the basis of many publications, briefing material and industry reports.

The annual agricultural surveys are:

Australian Agricultural and Grazing Industries Survey (AAGIS)

Australian Dairy Industry Survey (ADIS).

Definitions of industries

Industry definitions are based on the 2006 Australian and New Zealand Standard Industrial

Classification (ANZSIC06). This classification is in line with an international standard applied

comprehensively across Australian industry, permitting comparisons between industries, both

within Australia and internationally. Farms assigned to a particular ANZSIC have a high

proportion of their total output characterised by that class. Further information on ANZSIC and

on farming activities included in each of these industries is provided in Australian and New

Zealand Standard Industrial Classification (ABS 2006).

The five broadacre industries covered by AAGIS are:

Wheat and other crops industry (ANZSIC06 Class 0146 and 0149)

- farms engaged mainly in growing rice, other cereal grains, coarse grains, oilseeds and/or pulses

Mixed livestock–crops industry (ANZSIC06 Class 0145)

- farms engaged mainly in running sheep and/or beef cattle and growing cereal grains, coarse grains, oilseeds and/or pulses

Sheep industry (ANZSIC06 Class 0141)

- farms engaged mainly in running sheep

Beef industry (ANZSIC06 Class 0142)

- farms engaged mainly in running beef cattle

Sheep–beef industry (ANZSIC06 Class 0144)

- farms engaged mainly in running both sheep and beef cattle.

ADIS covers farms that are engaged in dairying.

Target populations

AAGIS is designed from a population list drawn from the Australian Business Register (ABR) and

maintained by the Australian Bureau of Statistics (ABS). The ABR comprises businesses

registered with the Australian Taxation Office. The ABR-based population list provided to


53

ABARES consists of agricultural establishments with their corresponding geography code

(currently Australian Statistical Geography Standard), ANZSIC, and a size of operation variable.

The population list for ADIS is derived from farms that have paid levies based on their milk

deliveries. This list is provided to ABARES by Dairy Australia and consists of dairy businesses

with their corresponding region and total milk production. The design measure for ADIS is total

milk production for each dairy business on the frame.

ABARES surveys target farming establishments that make a significant contribution to the total

value of agricultural output (commercial farms). Farms excluded from ABARES surveys will be

the smallest units and in aggregate will contribute less than 2 per cent to the total value of

agricultural production for the industries covered by the surveys.

The size of operation variable used in ABARES survey designs is usually ‘estimated value of

agricultural operations’ (EVAO). However, in some surveys in recent years other measures of

agricultural production have also been used. EVAO is a standardised dollar measure of the level

of agricultural output. A definition of EVAO is given in Agricultural industries: financial statistics

(ABS 2001). Since 2004‒05 the ABARES survey has included establishments classified as having

an EVAO of $40 000 or more. Between 1991‒92 and 2003‒04 the survey included

establishments with an EVAO of $22 500 or more. Between 1987‒88 and 1991‒92 the survey

included establishments with an EVAO of $20 000 or more. Before 1986‒87 the survey included

establishments with an EVAO of $10 000 or more.

Survey design

The target population is grouped into strata defined by ABARES region, ANZSIC and size of

operation. The sample allocation is a compromise between allocating a higher proportion of the

sample to strata with high variability in the size variable and an allocation proportional to the

population of the stratum.

A large proportion of sample farms is retained from the previous year’s survey. The sample

chosen each year maintains a high proportion of the sample between years to accurately

measure change while meeting the requirement to introduce new sample farms. New farms are

introduced to account for changes in the target population, as well as to reduce the burden on

survey respondents.

The sample size for AAGIS is usually around 1600 farms and for ADIS around 300.

The main method of collecting data is face-to-face interviews with the owner–manager of the

farm business. Detailed physical and financial information is collected on the operations of the

farm business during the preceding financial year. Respondents to AAGIS are also contacted by

telephone in October each year to obtain estimates of projected production and expected

receipts and costs for the current financial year. ABARES surveys also allow supplementary

questionnaires to be attached to the main or to the telephone surveys. These additional

questions help address specific industry issues—such as grain cost of production, livestock

management practices and adoption of new technologies on dairy farms.

Sample weighting

ABARES survey estimates are calculated by appropriately weighting the data collected from each

sample farm and then using the weighted data to calculate population estimates. Sample weights

are calculated so that population estimates from the sample for numbers of farms, areas of crops


54

and numbers of livestock correspond as closely as possible to the most recently available ABS

estimates from its Agricultural Census and surveys.

The weighting methodology for AAGIS uses a model-based approach, with a linear regression

model linking the survey variables and the estimation benchmark variables. The details of this

method are described in Bardsley and Chambers (1984).

For AAGIS, the benchmark variables provided by the ABS include:

total number of farms in scope

area planted to wheat, rice, other cereals, grain legumes (pulses) and oilseeds

closing numbers of beef and sheep.

For ADIS, the benchmark variables provided by Dairy Australia are:

total number of in-scope dairy farms

total milk production.

Generally, larger farms have smaller weights and smaller farms have larger weights. This reflects

both the strategy of sampling a higher fraction of the large farms than smaller farms and the

relatively lower numbers of large farms. Large farms have a wider range of variability of key

characteristics and account for a much larger proportion of total output.

Reliability of estimates

The reliability of the estimates of population characteristics published by ABARES depends on

the design of the sample and the accuracy of the measurement of characteristics for the

individual sample farms.

Preliminary estimates and projections

Estimates for 2011‒12 and all earlier years are final. All data from farmers, including accounting

information, have been reconciled; final production and population information from the ABS

has been included and no further change is expected in these estimates.

The 2012‒13 estimates are preliminary, based on full production and accounting information

from farmers. However, editing and addition of sample farms may be undertaken and ABS

production and population benchmarks may also change.

The 2013‒14 estimates are projections developed from the data collected through on-farm and

telephone interviews from October to December, as well as from the preliminary estimates.

Projection estimates include crop and livestock production, receipts and expenditure up to the

date of interview together with expected production, and receipts and expenditure for the

remainder of the projection year. Modifications are made to expected receipts and expenditure

where significant production and price change has occurred post interview. Projection estimates

are necessarily subject to greater uncertainty than preliminary and final estimates.

Preliminary and projection estimates of farm financial performance are produced within a few

weeks of the completion of survey collections. However, these may be updated several times at

later dates. These subsequent versions will be more accurate, as they will be based on upgraded

information and slightly more accurate input datasets.


55

Sampling errors

Only a subset of farms out of the total number of farms in a particular industry is surveyed. The

data collected from each sample farm are weighted to calculate population estimates. Estimates

derived from these farms are likely to be different from those that would have been obtained if

information had been collected from a census of all farms. Any such differences are called

‘sampling errors’.

The size of the sampling error is influenced by the survey design and the estimation procedures,

as well as the sample size and the variability of farms in the population. The larger the sample

size, the lower the sampling error is likely to be. Hence, national estimates are likely to have

lower sampling errors than industry and state estimates.

To give a guide to the reliability of the survey estimates, standard errors are calculated for all

estimates published by ABARES. These estimated errors are expressed as percentages of the

survey estimates and termed ‘relative standard errors’.

Calculating confidence intervals using relative standard errors

Relative standard errors can be used to calculate ‘confidence intervals’ that give an indication of

how close the actual population value is likely to be to the survey estimate.

To obtain the standard error, multiply the relative standard error by the survey estimate and

divide by 100. For example, if average total cash receipts are estimated to be $100 000 with a

relative standard error of 6 per cent, the standard error for this estimate is $6000. This is one

standard error. Two standard errors equal $12 000.

There is roughly a two-in-three chance that the ‘census value’ (the value that would have been

obtained if all farms in the target population had been surveyed) is within one standard error of

the survey estimate. This range of one standard error is described as the 66 per cent confidence

interval. In this example, there is an approximately two-in-three chance that the census value is

between $94 000 and $106 000 ($100 000 plus or minus $6000).

There is roughly a 19-in-20 chance that the census value is within two standard errors of the

survey estimate (the 95 per cent confidence interval). In this example, there is an approximately

19-in-20 chance that the census value lies between $88 000 and $112 000 ($100 000 plus or

minus $12 000).

Comparing estimates

When comparing estimates between two groups, it is important to recognise that the differences

are also subject to sampling error. As a rule of thumb, a conservative estimate of the standard

error of the difference can be constructed by adding the squares of the estimated standard

errors of the component estimates and taking the square root of the result.

For example, suppose the estimates of total cash receipts were $100 000 in the beef industry

and $125 000 in the sheep industry—a difference of $25 000—and the relative standard error is

given as 6 per cent for each estimate. The standard error of the difference can be estimated as:

A 95 per cent confidence interval for the difference is:

$25 000 ± 1.96*$9605 = ($6174, $43 826)


56

Hence, if a large number (toward infinity) of different samples are taken, in approximately

95 per cent of them, the difference between these two estimates will lie between $6174 and

$43 826. Also, since zero is not in this confidence interval, it is possible to say that the difference

between the estimates is statistically significantly different from zero at the 95 per cent

confidence level.

Regions

Broadacre and dairy statistics are also available by region (Map 7). These regions represent the

finest level of geographical aggregation for which the survey is designed to produce reliable

estimates.

Map 7 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

For states other than New South Wales and Victoria, the Australian Dairy Industry Survey

regions comprise the entire state (Map 8).


57

Map 8 Australian Dairy Industry Survey regions, New South Wales and Victoria

Note: New South Wales and Victoria are divided into multiple regions. These regions are identified by a unique two-digit code. The first digit identifies the state and the second digit identifies the region within the state. Source: ABARES


58

Glossary Owner–manager The primary decision-maker for the farm business. This person is

usually responsible for day-to-day operation of the farm and may own or

have a share in the farm business.

Physical items

beef cattle Cattle kept primarily for the production of meat, irrespective of breed.

dairy cattle Cattle kept or intended mainly for the production of milk or cream.

hired labour Excludes the farm business manager, partners and family labour and

work by contractors. Expenditure on contract services appears as a

cash cost.

labour Measured in work weeks, as estimated by the owner–manager or

manager. It includes all work on the farm by the owner–manager,

partners, family, hired permanent and casual workers and

sharefarmers but excludes work by contractors.

total area operated Includes all land operated by the farm business, whether owned or

rented by the business, but excludes land sharefarmed on another

farm.

Financial items

capital The value of farm capital is the value of all the assets used on a farm,

including the value of leased items but excluding machinery and

equipment either hired or used by contractors. The value of 'owned'

capital is the value of farm capital excluding the value of leased

machinery and equipment.

ABARES uses the owner–manager’s valuation of the farm property. The

valuation includes the value of land and fixed improvements used by

each farm business in the survey, excluding land sharefarmed off the

sample farm. Residences on the farm are included in the valuations.

Livestock are valued at estimated market prices for the land use zones

within each state. These values are based on recorded sales and

purchases by sample farms.

Before 2001‒02 ABARES maintained an inventory of plant and

machinery for each sample farm. Individual items were valued at

replacement cost, depreciated for age. Each year the replacement cost

was indexed to allow for changes in that cost.

Since 2001‒02 total value of plant and machinery has been based on

market valuations provided by the owner–manager for broad

categories of capital, such as tractors, vehicles and irrigation plant.

The total value of items purchased or sold during the survey year was

added to or subtracted from farm capital at 31 December of the


59

relevant financial year, irrespective of the actual date of purchase or

sale.

change in debt Estimated as the difference between debt at 1 July and the following

30 June within the survey year, rather than between debt at 30 June in

consecutive years. It is an estimate of the change in indebtedness of a

given population of farms during the financial year and is thus

unaffected by changes in sample or population between years.

farm business debt Estimated as all debts attributable to the farm business but excluding

personal debt, lease financed debt and underwritten loans, including

harvest loans. Information is collected at the interview, supplemented

by information contained in the farm accounts.

farm liquid assets Assets owned by the farm business that can be readily converted to

cash. They include savings bank deposits, interest bearing deposits,

debentures and shares. Excluded are items such as real estate, life

assurance policies and other farms or businesses.

receipts and costs Receipts for livestock and livestock products sold are determined at

the point of sale. Selling charges and charges for transport to the point

of sale are included in the costs of sample farms.

Receipts for crops sold during the survey year are gross of deductions

made by marketing authorities for freight and selling charges. These

deductions are included in farm costs. Receipts for other farm products

are determined on a farmgate basis. All cash receipt items are the

revenue received in the financial year.

Farm receipts and costs relate to the whole area operated, including

areas operated by on-farm sharefarmers. Thus, cash receipts include

receipts from the sale of products produced by sharefarmers. If

possible, on-farm sharefarmers’ costs are amalgamated with those of

the sample farm. Otherwise, the total sum paid to sharefarmers is

treated as a cash cost.

Some sample farm businesses engage in off-farm contracting or

sharefarming, employing labour and capital equipment also used in

normal on-farm activities. Since it is not possible to accurately allocate

costs between off-farm and on-farm operations, the income and

expenditure attributable to such off-farm operations are included in

the receipts and costs of the sample farm business.

total cash costs Payments made by the farm business for materials and services and for

permanent and casual hired labour (excluding owner–manager,

partner and other family labour). It includes the value of livestock

transfers onto the property as well as any lease payments on capital,

produce purchased for resale, rent, interest, livestock purchases and

payments to sharefarmers. Capital and household expenditures are

excluded from total cash costs.

Handling and marketing expenses include commission, yard dues and


60

levies for farm produce sold.

Administration costs include accountancy fees, banking and legal

expenses, postage, stationery, subscriptions and telephone.

Contracts paid refers to expenditure on contracts such as harvesting.

Capital and land development contracts are not included.

Other cash costs include stores and rations, seed purchased, electricity,

artificial insemination and herd testing fees, advisory services, motor

vehicle expenses, travelling expenses and insurance. While other cash

costs may comprise a relatively large proportion of total cash costs,

individually the components are relatively small overall and, as such,

have not been listed.

total cash receipts Total of revenues received by the farm business during the financial

year, including revenues from the sale of livestock, livestock products

and crops, plus the value of livestock transfers off a property. It

includes revenue received from agistment, royalties, rebates, refunds,

plant hire, contracts, sharefarming, insurance claims and

compensation, and government assistance payments to the farm

business.

Financial performance measures

build-up in trading

stocks

The closing value of all changes in the inventories of trading stocks

during the financial year. It includes the value of any change in herd or

flock size or in stocks of wool, fruit and grains held on the farm. It is

negative if inventories are run down.

depreciation of

farm

improvements,

plant and

equipment

Estimated by the diminishing value method, based on the replacement

cost and age of each item. The rates applied are the standard rates

allowed by the Commissioner of Taxation. For items purchased or sold

during the financial year, depreciation is assessed as if the transaction

had taken place at the midpoint of the year. Calculation of farm

business profit does not account for depreciation on items subject to a

finance lease because cash costs already include finance lease

payments.

farm business

equity

The value of owned capital, less farm business debt, at 30 June. The

estimate is based on those sample farms for which complete data on

farm debt are available.

farm business

profit

Farm cash income plus build-up in trading stocks, less depreciation

and the imputed value of the owner–manager, partner(s) and family

labour.

farm cash income The difference between total cash receipts and total cash costs.

farm equity ratio Calculated as farm business equity as a percentage of owned capital at

30 June.

imputed labour Payments for owner–manager and family labour may bear little

relationship to the actual work input. An estimate of the labour input of


61

cost the owner–manager, partners and their families is calculated in work

weeks and a value is imputed at the relevant Federal Pastoral Industry

Award rates.

off-farm income Collected for the owner–manager and spouse only, including income

from wages, other businesses, investment, government assistance to

the farm household and social welfare payments.

profit at full equity Farm business profit, plus rent, interest and finance lease payments,

less depreciation on leased items. It is the return produced by all the

resources used in the farm business.

rates of return Calculated by expressing profit at full equity as a percentage of total

opening capital. Rate of return represents the ability of the business to

generate a return to all capital used by the business, including that

which is borrowed or leased. The following rates of return are

estimated: rate of return excluding capital appreciation; and rate of

return including capital appreciation.


62

References ABARE 2006, Australian beef industry: financial performance to 2005‒06, Australian beef

report 06.1, Australian Bureau of Agricultural and Resource Economics, Canberra, available at

data.daff.gov.au/data/warehouse/pe_abarebrs99001365/beef_07.2_for_web.pdf (pdf 0.4mb).

ABS 2014, Agricultural commodities, Australia 2012‒13, Australian Bureau of Statistics,

cat. no. 7121.0, Australian Bureau of Statistics, Canberra, available at

abs.gov.au/ausstats/[email protected]/mf/7121.0.

ABS 2006, Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006

(Revision 1.0), cat. no. 1292.0, Australian Bureau of Statistics, Canberra, available at

abs.gov.au/ANZSIC.

ABS 2001, Agricultural industries, financial statistics, Australia, Preliminary, 1999‒2000,

cat. no. 7506.0, Australian Bureau of Statistics, Canberra, available at

abs.gov.au/ausstats/[email protected]/cat/7506.0.

Bardsley, P & Chambers, RL 1984, ‘Multipurpose estimation from unbalanced samples’,

Journal of the Royal Statistical Society, Series C (Applied Statistics), vol. 33, pp. 290–9.

Dahl, A, Leith, R & Gray, EM 2013, ‘Productivity in the broadacre and dairy industries’,

Agricultural commodities: March quarter 2013.

Gleeson, T, Martin, P & Mifsud, C 2012, Northern Australian beef industry: assessment of risks and

opportunities, report to client prepared for the Northern Australia Ministerial Forum, Australian

Bureau of Agricultural and Resource Economics, Canberra, available at

regional.gov.au/regional/ona/nabis.aspx.

Nossal, K, Sheng Y, & Zhao, S 2008, Productivity in the beef cattle and slaughter lamb industries,

ABARE research report 08.13 for Meat & Livestock Australia, Canberra, available at

data.daff.gov.au/data/warehouse/pe_abarebrs99001592/rr08.13_productivity_beef_lamb.pdf

(pdf 0.2mb).

Zhao, S, Sheng, Y & Gray, EM 2012, ‘Measuring productivity of the Australian broadacre and

dairy industries: concepts, methodology and data’, in KO Fuglie, SL Wang & VE Ball (eds),

Productivity growth in agriculture: an international perspective, CABI, Wallingford, pp. 73–107.

http://data.daff.gov.au/data/warehouse/pe_abarebrs99001365/beef_07.2_for_web.pdf

http://www.abs.gov.au/ausstats/[email protected]/mf/7121.0

http://www.abs.gov.au/ANZSIC

http://www.abs.gov.au/ausstats/[email protected]/cat/7506.0

http://www.regional.gov.au/regional/ona/nabis.aspx

http://data.daff.gov.au/data/warehouse/pe_abarebrs99001592/rr08.13_productivity_beef_lamb.pdf


63

Further information on beef cattle producers ABARES farm survey data for the beef, lamb and sheep industries

apps.daff.gov.au/MLA

Australian Bureau of Agricultural and Resource Economics and Sciences

Postal address: GPO Box 1563, Canberra ACT 2601

Location: 18 Marcus Clarke Street, Canberra ACT 2601

Switchboard: +61 2 6272 3933

agriculture.gov.au/abares

Meat & Livestock Australia Limited

Level 1, 165 Walker Street, North Sydney NSW 2060

Postal address: Locked bag 991, North Sydney NSW 2059

Phone: 02 9463 9333

Fax: 02 9263 9393

Free call: 1800 023 100 (Australia only)

http://apps.daff.gov.au/MLA/

http://www.daff.gov.au/abares

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