Australian grainsdata.daff.gov.au/data/warehouse/9aas/agfpg/agfpg2016/...Australian grains Financial...

Australian grains Financial performance of grain farms, 2013–14 to 2015–16 Dale Ashton, Mark Oliver and Haydn Valle

Research by the Australian Bureau of Agricultural and Resource Economics and Sciences

Research report 16.11 October 2016

© Commonwealth of Australia 2016 Ownership of intellectual property rights Unless otherwise noted, copyright (and any other intellectual property rights, if any) in this publication is owned by the Commonwealth of Australia (referred to as the Commonwealth). Creative Commons licence All material in this publication is licensed under a Creative Commons Attribution 3.0 Australia Licence, except for content supplied by third parties, logos and the Commonwealth Coat of Arms.

The Creative Commons Attribution 3.0 Australia Licence is a standard form licence agreement that allows you to copy, distribute, transmit and adapt this publication provided you attribute the work. A summary of the licence terms is available from creativecommons.org/licenses/by/3.0/au/deed.en. The full licence terms are available from creativecommons.org/licenses/by/3.0/au/legalcode. Cataloguing data Ashton, D, Oliver, M & Valle, H 2016, Australian grains: financial performance of grain farms, 2013‒ 14 to 2015‒ 16, ABARES research report 16.11, Canberra, September. CC BY 3.0. ISSN 1447–8358 ISBN 978–1-74323–309–2 ABARES project 43010 Internet Australian grains: financial performance of grain farms, 2013‒14 to 2015‒16 is available at agriculture.gov.au/abares/publications. Contact Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Postal address GPO Box 858 Canberra ACT 2601 Switchboard +61 2 6272 3933 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 and Water Resources, 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 and Water Resources, its employees and its 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 on 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 Australian Agricultural and Grazing Industries Survey is funded by the Department of Agriculture and Water Resources, Meat & Livestock Australia and the Grains Research and Development Corporation (GRDC). Thanks to Terence Farrell (GRDC) for reviewing an earlier draft of this report.

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Australian grains: financial performance of grain farms, 2013–14 to 2015–16 ABARES

iii

Contents Key points v

1 Introduction 1

2 Industry overview 2

3 Crop production and areas 5

4 Farm incomes, costs and profit 9

5 Investment, capital and debt 16

6 Productivity 19

Appendix A: Variation in farm returns 22

Appendix B: Selected physical and financial performance estimates 24

Appendix C: Survey method and definitions 33

Glossary 38

References 42

Further information 44

Tables Table 1 Proportion of farms and production by crop area, Australia, 2014‒15 3

Table 2 Winter crop production, Australia, 2013‒14 to 2015‒16 5

Table 3 Summer crop production, Australia, 2013‒14 to 2015‒16 6

Table 4 Area harvested by major crop type, by region, 2013–14 and 2014–15 7

Table 5 Financial performance by farm group, Australia, 2013‒14 to 2015‒16 9

Table 6 Farm financial performance, by region, 2013–14 to 2015–16 10

Table 7 Average annual cropping TFP growth, by region, 1977–78 to 2013–14 19

Table 8 Proportion of farms by area planted, Australia, 2014‒15 24

Table 9 Financial performance, grain farms, 2013–14 and 2014–15 25

Table 10 Financial performance, specialist farms, 2013–14 and 2014–15 26

Table 11 Financial performance, non-specialist farms, 2013–14 and 2014–15 27

Table 12 Financial performance, Northern region, 2013–14 and 2014–15 28

Table 13 Financial performance, Southern region, 2013–14 and 2014–15 29

Table 14 Financial performance, Western region, 2013–14 and 2014–15 30

Table 15 Financial performance by crop area, grain farms, 2014–15 31

Table 16 On-farm grain stocks at 30 June, Australia, 2000 to 2015 32


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Figures Figure 1 Gross value of production by commodity, Australia, 2014–15 2

Figure 2 Production and gross value by crop type, Australia, 2014–15 2

Figure 3 Grains gross value and farm numbers, Australia, 2000–01 to 2014–15 3

Figure 4 Proportions of farms by area, by region, 2014–15 4

Figure 5 Number of grain farms by crop area, Australia, 2000–01 to 2014–15 4

Figure 6 Winter crop production, Australia, 2000‒01 to 2015‒16 5

Figure 7 Summer crop production, Australia, 2000‒01 to 2015‒16 6

Figure 8 Area harvested by major crop type, by region, 2000–01 to 2014–15 8

Figure 9 Changes in receipts, costs and income, by region, 2013–14 to 2014–15 11

Figure 10 Changes in receipts, costs and income, by region, 2014–15 to 2015–16 11

Figure 11 Shares of total receipts, by region, 2000–01 to 2014–15 12

Figure 12 Shares of total costs by selected item, by region, 2000–01 to 2014–15 13

Figure 13 Farm cash income by group, Australia, 2000–01 to 2015–16 14

Figure 14 Farm cash income by group, by region, 2000–01 to 2015–16 15

Figure 15 Capital investments, Australia, 2014–15 16

Figure 16 Shares of farm business debt, Australia, average for 2012–13 to 2014–15 17

Figure 17 Farm business debt, by region, 2000–01 to 2015–16 17

Figure 18 Farm business debt by amount and crop area, by region, 2014–15 18

Figure 19 Average productivity growth, by industry, 1977–78 to 2013–14 20

Maps Map 1 GRDC grain regions 1

Map 2 ABARES Australian broadacre zones and regions 37

Boxes Box 1 Index of fertiliser price and quantity, Australia, 1989–90 to 2014–15 13

Box 2 Climate adjusted total factor productivity 21


v

Key points This report presents detailed financial performance estimates for Australian grain producing farms for 2013‒14 to 2015‒16. Grain farms are defined as broadacre farms that grew at least 40 hectares of grain, oilseed or pulse crops.

Results are also variously presented for the three Grains Research and Development Corporation regions (Northern, Southern and Western) as well as for specialist and non-specialist farms, defined as grain farms that obtained more than 50 per cent and less than 50 per cent of their total receipts from crops sales, respectively.

The estimated gross value of production for the grains industry in 2014–15 was almost $14 billion. Wheat is the most important individual crop by tonnage and value. In 2014–15 wheat accounted for half of the grains industry gross value and almost 55 per cent of grains industry tonnage.

Farm financial performance Farm cash income for grain farms is estimated to have increased by 7 per cent in 2014–15 to an average of $229 000 a farm as higher total cash receipts more than offset a small rise in total cash costs. The average rate of return was 2.8 per cent.

In 2015–16 average farm cash income is estimated to have increased further to around $258 000 and the average rate of return to have increased to around 3.5 per cent.

Specialist grain farms recorded an average farm cash income of $304 000 in 2014–15; for non-specialist farms it was about $124 000. On average, from 2000–01 to 2015–16, specialist farms recorded farm cash incomes around $125 000 higher than non-specialist farms.

The Western region recorded higher average farm incomes and rates of return than the Northern and Southern regions in 2014–15. The Western region is estimated to have again been the best performing region in 2015–16.

Investment, capital and debt The two largest components of total average farm debt were working capital debt at 41 per cent and land purchase debt at 37 per cent. Although less than 10 per cent of farms purchase land in any year, the investment value is substantial. In 2014–15 the average value was almost $1 million.

In all three regions, those farms with the largest average crop areas tended to have the largest average total farm business debt.

Productivity Productivity growth, measured using total factor productivity, is important for maintaining international competitiveness and profitability.

The cropping industry recorded the second highest total factor productivity growth—at 1.79 per cent—of all broadacre industries between 2000–01 and 2013–14. Key drivers of cropping industry productivity include new plant varieties, better water management and improvements in cropping equipment technology.


1

1 Introduction The Australian grains industry makes an important contribution to the Australian economy. In 2014–15 it accounted for around 26 per cent of the total gross value of farm production and the total value of agricultural exports (ABARES 2016a).

This report presents detailed financial performance estimates for grain producing farms for 2013‒14 to 2015‒16, focusing on 2014‒15 results. Grain farms are defined as those Australian broadacre farm businesses that grew at least 40 hectares of grain, oilseed or pulse crops in 2014–15.

The information presented in this report complements farm survey results published in Martin (2016). Detailed results for previous years are available from the ABARES and Grains Research and Development Corporation (GRDC) websites (see Further information section).

Farm performance data are provided variously at national and regional scales. Regions are based on those defined by the GRDC (2015)—the Northern, Southern and Western regions (Map 1).

The report draws on data from the ABARES annual Australian Agricultural and Grazing Industries Survey (AAGIS). This survey has been conducted by ABARES and its predecessors since 1977–78 and provides government and industry stakeholders with important data for analysing and monitoring changes in Australia’s broadacre industries.

The AAGIS is funded by the Department of Agriculture and Water Resources, Meat & Livestock Australia and the Grains Research and Development Corporation. The Grains Research and Development Corporation commissioned and funded preparation of this report.

Map 1 GRDC grain regions

Source: Grains Research and Development Corporation


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2 Industry overview A diverse range of grains, oilseeds and pulse crops are grown in Australia. In 2014–15 estimated gross value of production (GVP) for the grains industry was almost $14 billion (Figure 1). Wheat is the most important individual crop by tonnage and value. In 2014–15 the estimated GVP for wheat was $7.1 billion or half of total GVP for the grains industry (Figure 2). Estimated total production of wheat in 2014–15 was around 23.7 million tonnes or almost 55 per cent of total grains industry tonnage.

Figure 1 Gross value of production by commodity, Australia, 2014–15

Source: ABARES 2016a

Figure 2 Production and gross value by crop type, Australia, 2014–15

Source: ABARES 2016a

Between 2000–01 and 2014–15 the GVP for grains, oilseeds and pulses varied significantly—ranging from roughly $6 billion (2006–07) to $16 billion (2000–01). Figure 3 shows grains industry GVP in real terms as a moving three-year average. The downward trend from around 2001–02 to around 2007–08 reflected generally drier seasonal conditions during this period. A return to more favourable conditions in late 2009 reversed this trend.

The number of grain farms trended downwards from 2000–01 to 2014–15 (Figure 3). Farm numbers (a three-year moving average) declined from around 34 000 farms in the early 2000s to around 24 000 farms by 2014–15. As a result of falling farm numbers and increased total GVP, average crop GVP per farm almost doubled between 2000–01 and 2014–15. The increase in average crop areas is discussed in the Grain farm numbers and crop areas section.

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Figure 3 Grains gross value and farm numbers, Australia, 2000–01 to 2014–15

Source: ABARES 2015c ABARES estimates

Grain farm numbers and crop areas In this report, farms have been divided into four groups according to total average crop area:

• farms growing fewer than 600 hectares • farms growing between 600 and 1 200 hectares • farms growing between 1 200 and 2 400 hectares • farms growing more than 2 400 hectares.

In 2014–15 there were around 24 000 grain producing farms in Australia (Table 1). Just over 60 per cent of these farms planted less than 600 hectares to grain, oilseed or pulse crops. Around 30 per cent of farms grew between 600 and 2 400 hectares of crop and 10 per cent planted more than 2 400 hectares.

Just 10 per cent of farms planted more than 2 400 hectares, but this group accounted for more than 40 per cent of total grain, oilseed and pulse production in 2014–15. Conversely, the 62 per cent of farms planting less than 600 hectares accounted for just 16 per cent of total production.

Table 1 Proportion of farms and production by crop area, Australia, 2014‒15

Area planted to grains, oilseeds or pulses in Australia

Proportion of farms

(%)

Proportion of production

(%)

Less than 600 hectares 61 16 600 to 1 200 hectares 16 17 1200 to 2 400 hectares 13 25 More than 2 400 hectares 10 42 Total 100 100

Source: ABARES Australian Agricultural and Grazing Industries Survey

In 2014–15 around 45 per cent, 36 per cent and 19 per cent of grain producing farms were in the Northern, Southern and Western regions, respectively. While having fewer grain farms than other regions, the Western region had a much higher proportion of farms growing large areas of crops. In 2014–15 almost 50 per cent of grain farms in Western region cropped more than 1 200 hectares (Figure 4). In the Northern region the comparable estimate was less than 15 per cent

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and the Southern region estimate (21 per cent) was closer to the national estimate of 23 per cent.

Figure 4 Proportions of farms by area, by region, 2014–15


National trends in farm numbers between 2000–01 and 2014–15 are shown in Figure 5—numbers are presented as an index with 2000–01 the base year. Both the numbers of farms planting less than 600 hectares and those planting 600 to 1 200 hectares of crops showed a general downward trend. Between 2000–01 and 2014–15, estimated farm numbers in these two groups declined by around 34 per cent and 48 per cent, respectively, as relatively smaller farms exited the industry.

The number of farms growing between 1 200 and 2 400 hectares showed no consistent trend while the number of farms growing more than 2 400 hectares has trended upwards. Between 2000–01 and 2014–15, farms in this group increased by more than 75 per cent (Figure 5). Much of the increase in the number of farms growing more than 2 400 hectares was in Western Australia.

Figure 5 Number of grain farms by crop area, Australia, 2000–01 to 2014–15


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3 Crop production and areas Winter crop production Total winter crop production in each of 2013–14, 2014–15 and 2015–16 exceeded the 2000–01 to 2015–16 average of around 35.4 million tonnes (Figure 6). The 2013–14 winter crop was the third largest over this period.

Figure 6 Winter crop production, Australia, 2000‒01 to 2015‒16

Note: 2015–16 figures are estimates. Source: ABARES 2010, 2016b

In 2013–14 total production was almost 4 million tonnes higher than in the previous year, largely driven by a 47 per cent increase in production in Western Australia. Production also increased in South Australia but fell in New South Wales and Queensland because of unfavourable seasonal conditions during both winter and spring (ABARES 2013).

Total crop area in 2014–15 was similar to the previous year, but average crop yield was lower. As a result, total production in 2014–15 declined to 39.2 million tonnes (Table 2). The largest production falls were recorded in Western Australia and Victoria.

Table 2 Winter crop production, Australia, 2013‒14 to 2015‒16

Year Unit NSW Vic. Qld SA WA Aus.

2013–14 Mt 9.8 6.8 1.5 7.2 16.5 41.9

2014–15 Mt 10.4 5.1 1.5 7.4 14.7 39.2

2015–16 Mt 11.4 4.2 2.2 7.2 14.7 39.6 Note: 2015–16 figures are estimates. Source: ABARES 2016b

Despite a generally favourable start to the 2015–16 winter crop, unfavourable conditions during spring limited total production to around 39.6 million tonnes (ABARES 2015b, 2016b). Production in Western Australia was unchanged and increases in Queensland and New South Wales marginally offset falls in Victoria and South Australia.

Summer crop production Total summer crop production from 2013–14 to 2015–16 fell significantly, following high summer rainfall during the 2010 to 2012 La Niña years (Bureau of Meteorology 2015).

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Production from the 2013–14 and 2015–16 summer crops fell below the 2000–01 to 2015–16 average of 4.1 million tonnes (Figure 7).

Figure 7 Summer crop production, Australia, 2000‒01 to 2015‒16

Note: 2015–16 figures are estimates. Source: ABARES 2010, 2016b

Hot and dry conditions in most summer cropping regions in northern New South Wales and Queensland reduced both the area of summer crop planted and crop yields in 2013–14 (ABARES 2014a). Total summer crop production fell by 30 per cent to 3.8 million tonnes (Table 3). Production fell for all summer crops, particularly grain sorghum. Reduced irrigation water allocations in the southern irrigation districts reduced rice production (ABARES 2014b).

Table 3 Summer crop production, Australia, 2013‒14 to 2015‒16

Year Unit NSW Qld Aus.

2013–14 Mt 2.3 1.5 3.8

2014–15 Mt 2.0 2.1 4.3

2015–16 Mt 1.6 2.1 3.7 Note: 2015–16 figures are estimates. Source: ABARES 2016b

In 2014–15 summer crop production increased to around 4.3 million tonnes, driven by significant increases in grain sorghum average yield and area planted (ABARES 2015a, 2016b). The increase in grain sorghum production more than offset falls in cotton and rice production.

Total summer crop production in 2015–16 is estimated to have fallen by around 14 per cent to 3.7 million tonnes. This was largely because of a significant decline in rice production as falling irrigation water allocations in the Murrumbidgee and Murray valleys significantly reduced rice area planted (ABARES 2016b). Grain sorghum production is also estimated to have fallen because of a reduction in area planted and yield. Partially offsetting these falls was an estimated increase in cotton production, mostly because planted area increased.

Crop areas by region In the Northern and Western regions, average wheat area in 2013–14 and 2014–15 accounted for just over 60 per cent of total average area for the main crop types (Table 4). In the Southern region, wheat area accounted for around 54 per cent of total average area.

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Barley was relatively more important in the Southern region at 27 per cent of total average area, compared with around 13 per cent in the Northern region and 16 per cent in the Western region. Pulse crops accounted for about 8 per cent of area in both the Northern and Southern regions, double the 4 per cent for the Western region.

Oilseeds were relatively more important in the Western region at around 17 per cent of total average area. In the Northern and Southern regions, oilseeds accounted for around 12 per cent of total area. Grain sorghum is a Northern region crop and accounted for 4 per cent of total average area.

Table 4 Area harvested by major crop type, by region, 2013–14 and 2014–15

average per farm

Region

Unit

Wheat

Barley

Pulses

Oilseeds Grain

sorghum

Northern region 2013–14 ha 322 63 45 61 23 2014–15 ha 303 75 48 66 27

Southern region 2013–14 ha 382 191 53 78 0 2014–15 ha 363 177 57 82 0

Western region 2013–14 ha 1 127 282 69 294 0 2014–15 ha 1 105 313 80 310 0


Since 2000–01 average wheat area has generally trended upwards in all three regions (Figure 8). The rate of change has been highest in the Western region at more than 30 per cent, compared with around 12 per cent in the Southern region and 6 per cent in the Northern region.

In the Western region, growing larger areas of both barley and oilseeds has been a trend but average pulse crops area has trended downwards. A modest upward trend in barley area was recorded for the Southern region as well as some increases in oilseeds area since around 2010–11.


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Figure 8 Area harvested by major crop type, by region, 2000–01 to 2014–15

average per farm


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4 Farm incomes, costs and profit Farm financial performance is a key driver of change in the grain growing industry. Key measures of farm profitability are farm cash income and rate of return (see Glossary).

Grain farm cash income increased by 7 per cent in 2014–15 to an average of $229 000 because higher total cash receipts more than offset a small rise in total cash costs (Table 5). This increase in total receipts was the result of an increase in livestock receipts. Total crop receipts fell slightly from 2013–14 to 2014–15.

Both total crop receipts and livestock receipts are estimated to have increased in 2015–16. The resulting increase in total receipts is estimated to have been greater than the rise in costs—as a result, farm cash income is also estimated to have been higher.

Average farm cash income for specialist farms—those grain farms obtaining more than 50 per cent of their total cash receipts from crops sale proceeds—fell by less than 3 per cent to $304 000 in 2014–15. The fall in total cash costs was more than offset by a larger fall in total cash receipts. Total cash receipts fell largely because wheat and oilseeds receipts declined. Increases in average receipts from livestock, barley, grain sorghum and pulse crops were not sufficient to offset the fall in wheat and oilseed receipts.

In 2015–16 average farm cash income is estimated to have increased by about 11 per cent as an estimated increase in total cash receipts is expected to have more than offset an expected rise in total cash costs.

Table 5 Financial performance by farm group, Australia, 2013‒14 to 2015‒16

average per farm Performance measure Unit 2013–14 2014–15 2015–16

(estimate)

Grain farms Total cash receipts $ 720 000 739 000 785 000 Total cash costs $ 506 000 509 000 527 000 Farm cash income $ 214 000 229 000 258 000 Rate of return (excl. capital appreciation) % 3.4 2.8 3.5

Specialist farms Total cash receipts $ 978 000 962 000 1 024 000 Total cash costs $ 666 000 659 000 687 000 Farm cash income $ 312 000 304 000 337 000 Rate of return (excl. capital appreciation) % 5.0 3.7 4.3

Non-specialist farms Total cash receipts $ 381 000 422 000 455 000 Total cash costs $ 296 000 298 000 306 000 Farm cash income $ 85 000 124 000 149 000 Rate of return (excl. capital appreciation) % 0.3 1.1 2.0

Note: Specialist/non-specialist farms are grain farms that obtained greater than or less than 50 per cent of their total cash receipts from crop receipts. 2015–16 figures are estimates. Source: ABARES Australian Agricultural and Grazing Industries Survey


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For non-specialist farms—those grain farms obtaining less than 50 per cent of their total cash receipts from crops sale proceeds—average farm cash income increased by 46 per cent to around $124 000 in 2014–15. Average total cash receipts rose by 11 per cent because of higher livestock receipts. Crop receipts fell slightly in 2014–15.

Rate of return is a measure of the annual profit generated by a business, expressed as a percentage of the value of the capital used to generate that profit. Because it is expressed as a ratio, the rate of return for grain farms can be compared with the rate of return for other farm types or other potential investments.

For grain farms, the average rate of return fell from 3.4 per cent in 2013–14 to 2.8 per cent in 2014–15 (Table 5). Average rate of return also fell for specialist farms, from 5.0 per cent to 3.7 per cent. For non-specialist farms, the average rate of return increased in 2014–15, from 0.3 per cent to 1.1 per cent.

At a regional level, the Western region recorded the highest average farm income, farm business profit and rate of return, in 2013–14 and 2014–15. For example, average rate of return was nearly double that recorded in the next best performing region. The Western region is also estimated to have been the best performing region in 2015–16 (Table 6).

Table 6 Farm financial performance, by region, 2013–14 to 2015–16

average per farm Performance measure Unit 2013–14 2014–15 2015–16

(estimate)

Northern region Farm cash income $ 154 000 185 000 257 000 Farm business profit $ 29 000 55 000 134 000 Rate of return (excl. capital appreciation) % 1.9 2.4 3.8

Southern region Farm cash income $ 207 000 202 000 189 000 Farm business profit $ 79 000 48 000 45 000 Rate of return (excl. capital appreciation) % 3.3 2.3 2.1

Western region Farm cash income $ 378 000 390 000 398 000 Farm business profit $ 249 000 176 000 215 000 Rate of return (excl. capital appreciation) % 6.4 4.3 4.8

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

Regional changes in total cash receipts, total cash costs and farm cash income are shown from 2013–14 to 2014–15 (Figure 9) and from 2014–15 to 2015–16 (Figure 10). The Northern region reported the largest changes in all three variables from 2013–14 to 2014–15. A $19 000 increase in average costs was more than offset by a $48 000 increase in average receipts, resulting in a $30 000 (19 per cent) increase in farm cash income.

In the Southern region, average farm cash income declined by $5 000 (3 per cent) as a $19 000 fall in total receipts was partially offset by a $14 000 fall in total costs. A $5 000 increase in farm cash income in the Western region was mostly the result of a fall in total costs.


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Figure 9 Changes in receipts, costs and income, by region, 2013–14 to 2014–15

average per farm


The Northern region is estimated to have recorded the largest changes from 2014–15 to 2015–16 (Figure 10). Average farm cash income is estimated to have increased by around $73 000 (39 per cent) mainly because of a large increase in average total cash receipts. In the Southern region, farm cash income is forecast to have fallen by about $13 000 (6 per cent) as receipts fell more than costs. For the Western region, a small increase in farm cash income is estimated because total receipts increased marginally more than total cash costs.

Figure 10 Changes in receipts, costs and income, by region, 2014–15 to 2015–16

average per farm


From 2000–01 to 2014–15, wheat receipts made the biggest contribution to total cash receipts in the Western region (Figure 11). On average, wheat accounted for 43 per cent of total cash receipts, ranging from 31 per cent to 49 per cent. Livestock enterprises made the second-highest contribution at 24 per cent; however, the relative importance of livestock has declined since 2000–01. Much of this decline can be attributed to a decline in sheep numbers that fell 40 per cent from 2000–01 to 2014–15. Barley and oilseeds receipts, on average, accounted for 12 per cent and 9 per cent of total cash receipts, respectively. The oilseeds share has trended upwards, from around 5 per cent in 2000–01 to roughly 15 per cent in 2014–15.

In the Northern region, livestock receipts were the most important contributor to total cash receipts, averaging 38 per cent over the period 2000–01 to 2014–15 (Figure 11). As in the other

50

819

-15-4

31

-6

12

Northern Southern WesternTotal cash receipts

Total cash costs

Farm cash income

$`000

-21 ––––

102

-20

3931

-7

32

71

-13

8

Northern Southern WesternTotal cash receipts

Total cash costs

Farm cash income

$`000

–––


12

two regions, livestock’s share of total cash receipts has generally trended downwards. Wheat receipts were the second most important contributor to total receipts with an average of 25 per cent. Receipts from barley, pulses, oilseeds and grain sorghum collectively accounted for 16 per cent of total receipts.

In the Southern region, wheat and livestock were almost equal as contributors to total receipts, averaging 30 per cent and 28 per cent, respectively (Figure 11). Barley receipts were also significant in this region, averaging 15 per cent of total receipts. Receipts from pulses, oilseeds and other crops accounted for almost a further 20 per cent of total cash receipts.

Figure 11 Shares of total receipts, by region, 2000–01 to 2014–15

average per farm


Composition of costs The (imputed) value of owner/manager/family labour, depreciation and fertiliser were the three items accounting for the largest shares of total cash costs in the Southern and Northern regions (Figure 12). The other items accounting for more than 5 per cent of total cash costs in both regions were repairs and maintenance, interest, crop/pasture chemicals and fuel/oil/lubricants.

In the Western region, fertiliser was the largest cost item at 17 per cent of total costs. In 2007–08 fertiliser accounted for as much as 20 per cent of total costs following a significant rise in fertiliser prices—see Box 1 for details.

The next largest cost items—crop and pasture chemicals and depreciation—each accounted for about 10 per cent of total cash costs. Other items accounting for more than 5 per cent of costs were owner/manager/family labour, repairs and maintenance, interest and fuel.

%

25

50

75

2000

–01

2001

–02

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2003

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Western Southern Northern

Wheat Barley Pulses Oilseeds Grain sorghum Livestock


13

Figure 12 Shares of total costs by selected item, by region, 2000–01 to 2014–15


Box 1 Index of fertiliser price and quantity, Australia, 1989–90 to 2014–15

The figure shows indexes of fertiliser prices and quantity of fertiliser applied on grain farms. A spike in fertiliser prices in 2006–07 coincided with drought throughout eastern Australia, resulting in a sharp reduction in the total quantity of fertiliser applied. Fertiliser prices fell by around 35 per cent in 2008–09 and have remained relatively steady over the ensuing period to 2015–16. Over the same period (2008–09 to 2015–16) the quantity of fertiliser applied by grain farms has increased by around one-third. In part, the increase in the quantity of fertiliser applied has been related to changes in the mix of crops produced on grain farms and the need for higher fertiliser inputs for some crop types.


Specialist farms’ performance Figure 13 shows average farm cash income (in real terms) from 2000–01 to 2015–16 for specialist and non-specialist farms. Specialist farms derived at least 50 per cent of their total

Ow

ner/

man

ager

/fam

ily la

bour

Depr

ecia

tion

Inte

rest

Repa

irs a

nd m

aint

enan

ce

Fert

ilise

r

Live

stoc

k pu

rcha

ses

Fuel

, oil

and

lubr

ican

ts

Crop

/pas

ture

che

mic

als

Hire

d la

bour

Cont

ract

s

Frei

ght

Fodd

er

Seed

Leas

e pa

ymen

ts

Western region

Southern region

Northern region

10

10

%

%

%

10

Index (1989–90=base)

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300

1989

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1991

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Fertiliser price

Fertiliser quantity


14

cash receipts from crops receipts while non-specialist farms obtained less than 50 per cent of total cash receipts from crops receipts.

In all years, specialist farms achieved higher average farm cash incomes than non-specialist farms. The advantage in farm cash income to specialists ranged from around $44 000 in 2005–06 to more than $235 000 in 2013–14. On average, from 2000–01 to 2015–16, specialist farms recorded farm cash incomes around $125 000 higher than non-specialist farms.

The largest proportional difference in farm cash income between the two groups was from 2006–07 to 2008–09. These three years were among the worst years of the Millennium Drought (from around late 1996 to mid 2010) (Bureau of Meteorology 2015). From 2006–07 to 2008–09, specialist farms recorded average farm cash incomes at least three times higher than non-specialist farms.

Despite differences in absolute amounts, farm cash income trends from 2000–01 to 2015–16 were similar for specialist and non-specialist farms. After mostly declining from 2000–01 to 2006–07, average incomes for specialist and non-specialist farms thereafter trended generally upwards.

Figure 13 Farm cash income by group, Australia, 2000–01 to 2015–16

average per farm


Figure 14 shows average farm cash income for specialist and non-specialist farms by region. In almost all years, specialist farms recorded higher average farm cash incomes than non-specialist farms. The only exceptions were 2000–01 and 2001–02 in the Western region, when non-specialists reported higher average farm cash incomes.

2015–16 $

100 000

200 000

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Specialist

Non-specialist


15

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

average per farm


Northern Southern Western

-50 000

2015–16 $

50 000

100 000

150 000

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16

5 Investment, capital and debt 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 (Martin 2016).

Figure 15 shows the proportions of grain farms making investments in 2014–15 and the average value of those investments. Investments are categorised into land, motor vehicles, cropping equipment (includes tractors, planting equipment and harvesters) and farm improvements (includes farm buildings, livestock equipment, irrigation equipment and silos).

Only a relatively small proportion of grain farms buy land in any one year—just 7 per cent in 2014–15. Although few farms purchase land, the investment value is substantial. In 2014–15 the average investment amount for those buying land was around $970 000.

Significantly more grain farms reported investing in motor vehicles and cropping equipment. An estimated 29 per cent and 38 per cent of farms purchased motor vehicles and cropping equipment, respectively. The average net investment in motor vehicles was just over $40 000 and for cropping equipment was around $119 000.

Almost all grain farms reported investments in general farm improvements. Although a high proportion of farms invested in farm improvements, the average amount invested was the smallest in 2014–15 at around $37 000.

Figure 15 Capital investments, Australia, 2014–15

average per farm

Note: Net investment amounts are an average for those farms making investments in that capital item. Source: ABARES Australian Agricultural and Grazing Industries Survey

Farm debt When calculated as an average over the three years 2012–13 to 2014–15, working capital debt and land purchase debt were the two largest components of total average farm debt at 41 per cent and 37 per cent, respectively (Figure 16). All other debt purposes collectively accounted for just over 20 per cent.

Land

Cropping equipment

Motor vehicles

Farm improvements

Net investment ($) Proportion of farms (%)

$1.0M 50% 100%$0.5M


17

Figure 16 Shares of farm business debt, Australia, average for 2012–13 to 2014–15

average per farm


Working capital debt in the broadacre industries has increased since the early 2000s. Martin (2016) attributes this increase to factors such as a movement away from less input-intensive wool production into more intensive cropping, changes in grain payment methods, higher variability in crop incomes compared with livestock incomes, higher borrowing during the 2000s drought to meet working capital requirements and higher borrowing for ongoing working capital because of increases in average farm size.

For 2015–16 average farm business debt for the Northern, Southern and Western regions is forecast to have been around $833 000, $554 000 and $1 260 000, respectively. Average farm debt has trended upwards since 2000–01 (Figure 17). Growth in average debt in broadacre industries, including the grains industry, has slowed since 2009–10 as a result of a reduction in new borrowing and continued debt repayments (Martin 2016).

Figure 17 Farm business debt, by region, 2000–01 to 2015–16

average per farm

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

Farms with the largest average crop areas tend to have the largest average total farm business debt. Figure 18 shows the proportions of farms with debt in 2014–15, disaggregated by region, by average crop area and by size of debt.

% 10 20 30 40 50

Working capital

Land purchase

Machinery/plant/vehicles

Reconstructured debt

Land development

Buildings/structures

Northern Southern Western

2015–16 $

500 000

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18

In the Western region, of those farms cropping more than 2 400 hectares, 44 per cent had an average debt between $1 million and $2 million and 41 per cent a debt exceeding $2 million in 2014–15. The Northern region was similar—85 per cent of farms cropping more than 2 400 hectares reported an average debt of more than $1 million. In the Southern region, the equivalent figure was 61 per cent of farms.

Conversely, farms with the smallest cropping areas tended to have the smallest average debt. For example, in the Western region, 78 per cent of farms with less than 600 hectares of crop had an average debt of less than $100 000. In the Southern and Western regions, the equivalent estimates were 58 per cent and 45 per cent, respectively.

Figure 18 Farm business debt by amount and crop area, by region, 2014–15

proportion of farms


< 600 hectares600 – 1 200 hectares

1 200 – 2 400 hectares> 2 400 hectares





Nor

ther

nSo

uthe

rnW

este

rn

<$100K 100‒$250K 250‒$500K 500K‒$1M 1‒$2M >$2M

% 50 % 50 % 50 % 50 % 50 % 50


19

6 Productivity Productivity is an important measure of performance for Australian agriculture because it reflects improvements in the efficiency with which inputs such as land, labour and capital are used to produce outputs such as crops, meat, wool and milk. Productivity growth is important for maintaining international competitiveness and profitability given long-term declines in Australian farmers’ terms of trade.

Productivity growth is determined as an increase in output beyond any associated increase in input (or a decrease in the quantity of inputs needed to produce a unit of output). ABARES measures productivity using total factor productivity (TFP), which takes into account the full range of inputs and outputs that are generated on farm. Productivity growth is generally measured over the long term because it is treated as an indicator of technological progress, which can involve significant time lags in on-farm implementation and realised benefits. Further, short-term variability in productivity can reflect seasonal conditions rather than shifts in underlying technology or efficiency.

Drivers of productivity across the Australian farm sector include climate conditions, structural adjustment, research and development, increasing farm size and management ability. For the grains industry to achieve ongoing productivity growth, it must be able to continue adopting new technologies and management practices that generate improvements in efficiency.

Trends in cropping industry productivity The cropping industry has the highest TFP growth of all industries and, with the exception of the sheep industry, had the highest productivity growth in the past decade. Average TFP growth of cropping specialists (1.5 per cent a year) exceeded that for mixed crop–livestock (0.9 per cent a year) between 1977–78 and 2013–14 (Table 7).

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

Region Input growth (%)

Output growth (%) Productivity growth (%)

Cropping specialists All 1.1 2.6 1.5 Southern region 1.0 2.9 1.9 Northern region 0.6 1.9 1.4 Western region 2.2 3.6 1.4

Mixed crop–livestock All –1.7 –0.8 0.9 Southern region –1.5 0.1 1.6 Northern region –1.4 –1.0 0.5 Western region –2.4 –1.3 1.1


Despite periods of weather-driven volatility (see Box 2), total output from specialist cropping farms grew on average at around 2.6 per cent a year over the period 1977–78 to 2013–14, a result of increasing input use (1.1 per cent a year) and productivity growth (Table 7). In contrast, total output from mixed crop–livestock farms declined by 0.8 per cent a year between 1977–78 and 2013–14, driven by a significant decline in input use (1.7 per cent a year) and


20

partly offset by productivity gains. This reflects a shift in the broadacre sector away from mixed crop–livestock enterprises towards more specialised cropping or livestock operations.

Jackson (2010) and Knopke, O’Donnell and Shepherd (2000) attributed productivity growth in the cropping industry to developments in technology such as larger machinery and cropping equipment, new plant varieties, better water management and a better understanding of harvesting and planting strategies.

In some regions, productivity growth in the cropping industry has been constrained by land degradation, such as dryland salinity and loss of top soil, as well as increased cropping in more marginal growing areas. Consequently, the level of output has reduced given the same amount of inputs. Resistance of weeds and pests to herbicides and pesticides can also constrain productivity growth.

Productivity growth in the Southern region averaged 1.9 per cent a year between 1977–78 and 2013–14 (Table 7). This was driven by strong output growth that outpaced growth in input use. Average productivity growth in the Northern and Western regions was slightly slower, at 1.4 per cent a year on average, although the drivers of this growth were different between the regions. In the Western region, productivity growth was driven by a relatively large expansion in output and input use; in the Northern region, growth in inputs and outputs was somewhat more constrained.

The cropping and mixed crop–livestock industries had much higher productivity growth between 1977–78 and 1988–89 than in the two subsequent decades (Figure 19). This has been attributed to drought, the slower spread of new technology, a decline in the increment of technological progress, knowledge constraints, the loss of a profitable break crop and broader focus for research and development investment beyond productivity-related factors.

Figure 19 Average productivity growth, by industry, 1977–78 to 2013–14


–2

–1

%

1

2

3

4

All b

road

acre

Beef

Shee

p

Mix

ed c

rop–

lives

tock

Crop

ping

1977–78 to 1988–89

1988–89 to 2000–01

2000–01 to 2013–14


21

Box 2 Climate adjusted total factor productivity

A climate-adjusted total factor productivity index was generated by mapping spatial climate data to individual farms in the ABARES farm surveys database using geographic information system techniques (Hughes et al. 2011). Climate variables taken into account included rainfall, temperature and soil moisture.

The figure shows the average estimated climate-adjusted productivity series for crop farms from 1977–78 to 2013–14. The climate adjusted series displays significantly less annual volatility than the (non-adjusted) total factor productivity series.

Sources: ABARES unpublished data, ABARES Australian Agricultural and Grazing Industries Survey

%

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2011

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Climate adjusted TFP

Climate effect

Total factor productivity


22

Appendix A: Variation in farm returns The performance of farm businesses is determined by both the level and variability of profits. For individual farms, variation in profits over time is mainly driven by changes in seasonal conditions and commodity prices. This variation is managed by farmers in a variety of ways, including diversification of farm enterprises, maintaining relatively high equity levels, engaging in off-farm work and adopting new technologies that seek to reduce the effects of unfavourable events.

Figure A1 summarises variation in the rate of return on capital (excluding capital appreciation) for the period 2000-01 to 2015-16. For each year, the returns generated by individual farms in each region have been averaged. As a result, the variation in returns shown in Figure A1 reflects changes over time in the average seasonal conditions and commodity prices experienced by farms in each region. Individual farms are likely to have experienced somewhat different variation in returns over this period, depending on the specific seasonal conditions and commodity prices that were realised and other farm-specific factors such as enterprise mix and the skill of the manager. Nonetheless, these regional statistics give some high-level insight into the variation in profits that grain farmers face.

Figure A1 contains ‘boxes’ that are defined by the rates of return generated in the most moderate 50 per cent of years between 2000–01 and 2015–16. These rates of return are 1.1 per cent to 2.5 per cent for farms in the Northern region, 1.4 per cent to 3.3 per cent for farms in the Southern region and 1.5 per cent to 4.4 per cent for farms in the Western region. On average, farm profit will be in these ranges five years in every ten. The best and worst 25 per cent of years fall above and below the boxes, respectively, with the ‘whiskers’ representing the highest and lowest rates of return earned in a particular year during the period. These are –1.1 per cent and 4.8 per cent for Northern region farms, –1.8 per cent and 7.8 per cent for Southern region farms and –1.5 per cent and 6.4 per cent for Western region farms. The line within each box represents the average rate of return generated over the period—1.7 per cent for Northern region farms, 2.5 per cent for Southern region farms and 2.9 per cent for Western region farms.

Figure A1 Rate of return excluding capital appreciation, by region, 2000–01 to 2015–16

Figure A1 shows substantial differences in variation between regions, with farms in the Southern region generating a relatively wide range of returns over the past 16 years. However,


23

Figure A1 also reveals that, while grain farmers in the Southern region experienced the greatest overall variation in returns over this period, very low and negative rates of return occurred no more often than in the other regions. For many farmers, the occurrence of relatively low profits is of greater concern than overall variability. This highlights the importance of considering the variability and level of profits together, rather than in isolation, when evaluating farm performance.


24

Appendix B: Selected physical and financial performance estimates Table 8 Proportion of farms by area planted, Australia, 2014‒15

Area planted to grains, oilseeds or pulses

Share of farms (%)

Share of production (%)

Northern region

Less than 600 hectares 72 25

600 to 1 200 hectares 14 21

1 200 to 2 400 hectares 9 25

More than 2 400 hectares 5 29

Total 100 100

Southern region


600 to 1 200 hectares 18 22

1 200 to 2 400 hectares 15 30


Total 100 100

Western region


600 to 1 200 hectares 16 9

1 200 to 2 400 hectares 18 22


Total 100 100

Australia


600 to 1 200 hectares 16 17

1200 to 2 400 hectares 13 25


Total 100 100 Source: ABARES Australian Agricultural and Grazing Industries Survey


25

Table 9 Financial performance, grain farms, 2013–14 and 2014–15

average per farm Financial performance measure Unit 2013–14 2014–15

Farm cash receipts

Wheat $ 263 200 256 100 (5)

Barley $ 76 400 81 800 (7)

Grain sorghum $ 6 800 9 300 (17)

Pulses $ 20 100 27 300 (10)

Oilseeds $ 79 900 65 600 (8)

Livestock and livestock products $ 175 400 198 300 na

Total cash receipts $ 720 300 738 500 (3)

Farm cash costs

Hired labour costs $ 29 900 30 400 (5)

Fertiliser $ 74 000 80 100 (5)

Fodder $ 7 800 7 300 (18)

Seed $ 6 800 6 900 (7)

Crop and pasture chemicals $ 58 700 61 000 (5)

Fuel, oil and lubricants $ 44 000 42 000 (4)

Electricity $ 4 600 4 800 (5)

Repairs and maintenance $ 45 800 49 500 (3)

Freight $ 21 800 20 100 (6)

Contracts $ 25 600 25 800 (7)

Lease payments $ 1 000 1 000 (25)

Interest paid $ 51 300 46 500 (5)

Livestock purchases $ 20 800 20 500 (9)

Total cash costs $ 506 100 509 400 (3)

Farm capital and debt

Farm capital at 30 June $ 4 734 700 5 120 914 (3)

Farm debt at 30 June $ 801 200 784 800 (5)

Equity ratio % 83 83 (2)

Farm financial performance

Farm cash income $ 214 200 229 000 (5)

Farm business profit $ 87 300 74 800 (12)

Profit at full equity $ 155 400 137 000 (7)

Rate of return

— excluding capital appreciation % 3.4 2.8 (6)

— including capital appreciation % 3.9 5.9 (8)

na Not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate (see Survey methods and definitions). Source: ABARES Australian Agricultural and Grazing Industries Survey


26

Table 10 Financial performance, specialist farms, 2013–14 and 2014–15


Farm cash receipts

Wheat $ 425 600 406 800 (5)

Barley $ 125 500 131 400 (7)

Grain sorghum $ 11 600 14 300 (19)

Pulses $ 33 600 43 700 (11)

Oilseeds $ 129 200 102 600 (9)



Farm cash costs


Fertiliser $ 110 800 116 600 (6)

Fodder $ 2 700 2 900 (20)

Seed $ 9 400 9 300 (8)



Electricity $ 5 300 5 300 (7)


Freight $ 31 300 26 900 (6)

Contracts $ 34 300 34 600 (8)

Lease payments $ 1 400 1 100 (29)

Interest paid $ 66 500 59 000 (6)


Total cash costs $ 665 800 658 700 (4)



Farm debt at 30 June $ 1 042 700 1 011 900 (6)



Farm cash income $ 312 200 303 600 (5)



Rate of return



na Not available. Note: Specialist farms are defined as those grain farms that obtained more than 50 per cent of their total cash receipts from crop receipts. Figures in parentheses are standard errors expressed as a percentage of the estimate (see Survey methods and definitions). Source: ABARES Australian Agricultural and Grazing Industries Survey


27

Table 11 Financial performance, non-specialist farms, 2013–14 and 2014–15


Farm cash receipts

Wheat $ 49 600 43 000 (14)

Barley $ 11 700 11 700 (34)

Grain sorghum $ 500 2 100 (31)

Pulses $ 2 200 4 000 (24)

Oilseeds $ 15 200 13 300 (42)



Farm cash costs


Fertiliser $ 25 700 28 457 (15)

Fodder $ 14 600 13 605 (26)

Seed $ 3 400 3 494 (10)



Electricity $ 3 691 4 084 (6)


Freight $ 9 236 10 443 (12)

Contracts $ 14 111 13 281 (11)

Lease payments $ 357 807 (47)

Interest paid $ 31 261 28 947 (12)


Total cash costs $ 295 891 298 325 (8)



Farm debt at 30 June $ 483 458 463 701 (12)



Farm cash income $ 85 322 123 622 (10)

Farm business profit $ –27 682 9 025 (95)


Rate of return



na Not available. Note: Non-specialist farms are defined as those grain farms that obtained less than 50 per cent of their total cash receipts from crop receipts. Figures in parentheses are standard errors expressed as a percentage of the estimate (see Survey methods and definitions). Source: ABARES Australian Agricultural and Grazing Industries Survey


28

Table 12 Financial performance, Northern region, 2013–14 and 2014–15


Farm cash receipts

Wheat $ 179 900 171 600 (6)

Barley $ 25 800 34 300 (14)

Grain sorghum $ 14 800 20 300 (17)

Pulses $ 17 100 30 200 (13)

Oilseeds $ 44 600 42 300 (12)



Farm cash costs


Fertiliser $ 48 000 53 500 (6)

Fodder $ 10 800 9 400 (28)

Seed $ 6 700 8 500 (7)



Electricity $ 5 800 6 100 (7)


Freight $ 12 700 12 700 (8)

Contracts $ 28 200 29 300 (10)

Lease payments $ 1 300 1 600 (28)

Interest paid $ 47 100 47 400 (7)

Livestock purchases $ 25 600 27.800 (11)

Total cash costs $ 435 800 455 000 (4)



Farm debt at 30 June $ 745 700 809 200 (7)



Farm cash income $ 154 200 185 300 (6)



Rate of return





29

Table 13 Financial performance, Southern region, 2013–14 and 2014–15


Farm cash receipts

Wheat $ 218 200 195 800 (14)

Barley $ 85 900 84 800 (8)

Grain sorghum $ 0 0 (–)

Pulses $ 23 600 24 000 (15)

Oilseeds $ 64 200 45 400 (20)



Farm cash costs


Fertiliser $ 64 400 61 000 (14)

Fodder $ 4 900 5 200 (25)

Seed $ 5 600 5 400 (15)



Electricity $ 3 400 3 300 (12)


Freight $ 12 900 10 900 (10)

Contracts $ 19 400 17 200 (11)

Lease payments $ 1 000 700 (57)

Interest paid $ 36 600 33 300 (8)


Total cash costs $ 411 200 395 700 (8)



Farm debt at 30 June $ 572 100 567 800 (9)



Farm cash income $ 207 400 201 600 (9)



Rate of return





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Table 14 Financial performance, Western region, 2013–14 and 2014–15


Farm cash receipts

Wheat $ 559 800 580 300 (8)

Barley $ 184 800 192 800 (13)

Grain sorghum $ 0 0 (-)

Pulses $ 20 400 26 300 (36)

Oilseeds $ 199 000 161 800 (13)


Total cash receipts $ 1 244 500 1 252 700 (6)

Farm cash costs


Fertiliser $ 158 000 182 400 (7)

Fodder $ 6 000 6 600 (23)

Seed $ 9 200 6 000 (18)



Electricity $ 3 800 4 400 (8)


Freight $ 61 900 57 000 (9)

Contracts $ 31 164 33 700 (13)

Lease payments $ 100 100 (97)

Interest paid $ 90 100 69 800 (12)


Total cash costs $ 866 500 862 900 (6)



Farm debt at 30 June $ 1 385 300 1 143 800 (12)



Farm cash income $ 378 000 389 800 (9)



Rate of return





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Table 15 Financial performance by crop area, grain farms, 2014–15

average per farm Financial performance measure Unit < 600 ha 600 – 1 200

ha 1 200 –

2 400 ha > 2 400 ha

Farm cash receipts

Wheat $ 48 300 225 200 494 200 1285 800

Barley $ 20 000 83 200 152 300 371 900

Grain sorghum $ 4 000 16 600 16 600 20 700

Pulses $ 6 700 28 300 68 500 99 700

Oilseeds $ 15 600 90 100 138 600 241 800

Livestock and livestock products $ 170 700 261 200 218 200 243 400

Total cash receipts $ 319 000 843 000 1 224 300 2 542 400

Farm cash costs

Hired labour costs $ 14 300 32 300 43 700 110 700

Fertiliser $ 24 500 89 400 138 200 334 500

Fodder $ 7 600 8 500 6 300 4 800

Seed $ 3 500 9 200 11 300 18 500

Crop and pasture chemicals $ 13 200 60 400 117 600 284 400

Fuel, oil and lubricants $ 16 700 45 300 69 300 157 400

Electricity 3 200 5 800 7 100 10 100

Repairs and maintenance $ 24 700 57 900 74 900 157 000

Freight $ 7 500 20 300 31 300 83 300

Contracts $ 12 500 29 700 39 500 83 800

Lease payments $ 400 1 700 2 800 1 100

Interest paid $ 19 000 49 600 84 200 163 500

Livestock purchases $ 15 500 26 400 24 700 36 700

Total cash costs $ 222 100 570 945 822 500 1 787 000


Farm capital at 30 June $ 3 160 600 6 059 100 7 525 500 12 653 800

Farm debt at 30 June $ 320 000 829 000 1 384 200 2 818 600

Equity ratio % 88 87 84 70


Farm cash income $ 96 900 272 100 401 800 755 400

Farm business profit $ 3 000 91 100 164 500 377 300

Profit at full equity $ 26 700 160 300 281 100 596 900

Rate of return

— excluding capital appreciation % 0.9 2.8 4.0 5.0

— including capital appreciation % 2.9 8.1 7.9 7.6 na Not available. Source: ABARES Australian Agricultural and Grazing Industries Survey


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Table 16 On-farm grain stocks at 30 June, Australia, 2000 to 2015

Year Wheat (Mt) Oats (Mt) Barley (Mt) Grain sorghum

(Mt)

Oilseeds (Mt)

Pulses (Mt) Other grains (Mt)

2000–01 0.627 0.617 0.394 0.225 0.037 0.304 0.259

2001–02 0.826 0.712 0.697 0.220 0.049 0.482 0.233

2002–03 0.746 0.312 0.309 0.168 0.019 0.248 0.099

2003–04 0.692 0.651 0.785 0.371 0.022 0.367 0.372

2004–05 0.555 0.374 0.459 0.538 0.117 0.264 0.282

2005–06 1.127 0.468 1.092 0.230 0.039 0.597 0.393

2006–07 0.854 0.161 0.374 0.235 0.010 0.211 0.092

2007–08 0.740 0.365 0.540 0.786 0.072 0.280 0.119

2008–09 1.844 0.277 0.989 0.424 0.119 0.297 0.176

2009–10 1.612 0.308 1.149 0.490 0.065 0.593 0.181

2010–11 2.838 0.504 1.431 0.558 0.064 1.052 0.250

2011–12 2.585 0.518 1.030 0.521 0.131 0.678 0.133

2012–13 1.748 0.307 0.727 0.382 0.120 0.377 0.176

2013–14 1.993 0.344 0.971 0.176 0.062 0.494 0.154

2014–15 2.169 0.283 0.669 0.325 0.147 0.287 0.173



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Appendix C: Survey method 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. Since 1977–78 ABARES has conducted the annual Australian Agricultural and Grazing Industries Survey (AAGIS) to provide a set of data that are collected nationally using a consistent methodology.

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 (class 0146 and 0149)

- farms engaged mainly in growing rice, other cereal grains, coarse grains, oilseeds, pulses

• mixed livestock–crops industry (class 0145)

- farms engaged mainly in running sheep, beef cattle and growing cereal grains, coarse grains, oilseeds, pulses

• sheep industry (class 0141)

- farms engaged mainly in running sheep

• beef industry (class 0142)

- farms engaged mainly in running beef cattle

• sheep–beef industry (class 0144)

- farms engaged mainly in running both sheep and beef cattle.

Target populations AAGIS is designed from a population list drawn from the Australian Business Register (ABR) and maintained by the Australian Bureau of Statistics. The ABR comprises businesses registered with the Australian Taxation Office. The ABR-based population list provided to ABARES consists of agricultural establishments with their corresponding geography code (currently Australian Statistical Geography Standard), ANZSIC, and a size of operation variable.

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.


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The size of operation variable used in ABARES survey designs is usually estimated value of agricultural operations (EVAO). EVAO is a standardised dollar measure of the level of agricultural output. However, in some surveys in recent years other measures of agricultural production have also been used.

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 1990–91 the survey included establishments with an EVAO of $20 000 or more. Before 1987–88 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 are 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 1 600 farms.

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 the latter part of 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 and numbers of livestock correspond as closely as possible to the most recently available Australian Bureau of Statistics 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.


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Generally, larger farms have smaller weights and smaller farms have larger weights. This reflects both the strategy of sampling a higher fraction of the larger 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 2013–14 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 2014–15 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 2015–16 estimates are projections developed from the data collected through on-farm and telephone interviews between September 2015 and December 2015. The estimates include crop and livestock production, receipts and expenditure up to the date of interview, together with expected production, receipts and expenditure for the remainder of the financial year. Modifications have been made to expected receipts and expenditure for the remainder of 2015–16 where prices have changed significantly since the 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.

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.


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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 $6 000. 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 $6 000).

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 is $9 605, estimated as the square root of:

((6 x $100 000/100)2 + (6 x $125 000/100)2)

A 95 per cent confidence interval for the difference is therefore:

$25 000 ± 1.96 x $9 605 = ($6 174; $43 826)

Hence, if a large number (towards infinity) of different samples are taken, in approximately 95 per cent of them, the difference between these two estimates will lie between $6 174 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 statistics are also available by region (Map 2). These regions represent the finest level of geographical aggregation for which the survey is designed to produce reliable estimates.


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Map 2 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


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Glossary Term Definition

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.

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.

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.


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Term Definition

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 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 farm gate 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.


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Term Definition

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.

total cash costs (cont.) Handling and marketing expenses include commission, yard dues and levies for farm produce sold. Administration costs include accountancy fees, banking and legal expenses, postage, stationery, subscriptions and telephone. Contracts paid refer 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.

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.


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Term Definition

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 cost Payments for owner–manager and family labour may bear little relationship to the actual work input. An estimate of the labour input of 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. Rate of return excluding capital appreciation and rate of return including capital appreciation are estimated.


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References Unless otherwise indicated, ABARES publications listed here are available at agriculture.gov.au/abares/publications.

ABARES 2010, Australian crop report, no. 156, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, December.

—— 2013, Australian crop report, no. 168, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, December.

—— 2014a, Australian crop report, no. 169, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, February.

—— 2014b, Australian crop report, no. 170, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, June.

—— 2015a, Australian crop report, no. 174, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, June.

—— 2015b, Australian crop report, no. 176, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, December.

—— 2015c, Agricultural commodity statistics 2015, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

—— 2016a, Agricultural commodities: June quarter 2016, vol. 6, no. 2, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

—— 2016b, Australian crop report, no. 178, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, June.

ABS 2006, Australian and New Zealand Standard Industrial Classification (ANZSIC), Australian Bureau of Statistics, Catalogue no. 1292.0, Canberra.

Bardsley, P & Chambers, R 1984, ‘Multipurpose estimation from unbalanced samples’, Journal of the Royal Statistical Society, Series C (Applied Statistics), vol. 33, pp. 290–299.

Bureau of Meteorology 2015, ‘Recent rainfall, drought and southern Australia’s long-term rainfall decline’, April, available at bom.gov.au/southern rainfall decline.

GRDC 2015, ‘Our grains industry’, Grains Research and Development Corporation, Canberra, available at grdc.com.au/our grains industry.

Hughes, N, Lawson, K, Davidson, A, Jackson, T & Sheng, Y 2011, Productivity pathways: climate adjusted production frontiers for the Australian broadacre cropping industry, research report 11.5, Australian Bureau of Agricultural and Resource Economics, Canberra.

Jackson, T 2010, Harvesting productivity: ABARE–GRDC workshops on grains productivity growth, ABARE research report 10.6 for Grains Research and Development Corporation, Australian Bureau of Agricultural and Resource Economics, Canberra.

http://agriculture.gov.au/abares/publications

http://www.bom.gov.au/climate/updates/articles/a010-southern-rainfall-decline.shtml

https://grdc.com.au/About-Us/Our-Grains-Industry


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Knopke, P, O’Donnell, V & Shepherd, A 2000, Productivity growth in the Australian grains industry, ABARE research report 2000.1 for Grains Research and Development Corporation, Australian Bureau of Agricultural and Resource Economics, Canberra.

Martin, P 2016, ‘Farm performance: broadacre and dairy farms, 2013–14 to 2015–16’, Agricultural commodities: March quarter 2016, vol. 6, no. 1, pp. 168–214, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.


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Further information ABARES farm survey data for the grains and other broadacre industries agriculture.gov.au/agsurf

Grains Research and Development Corporation Level 4, East Building, 4 National Circuit, Barton, ACT 2600 Postal address: PO Box 5367, Kingston, ACT 2604 Phone: 02 6166 4500 Fax: 02 6166 4599 Email: [email protected] Web: grdc.com.au/

http://apps.daff.gov.au/agsurf/


http://www.grdc.com.au/

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