Doudle et al. (2009) evaluated a number of farm businesses in southern Australia that had survived a period of drought and concluded that successful businesses had sound farm management practices and targeted a high equity position. Lawes and Kingwell (2012) report a somewhat similar finding for farms in the northeast grainbelt of Western Australia. When periods of drought or poor seasons occur, often farm operating profits are reduced due to low yields, in spite of reductions farmers typically make in their operating costs per hectare. Reduced crop revenues worsen the debt to income ratio, lessen the operating profit per hectare and lead to increased borrowings that erode the business equity of the farm.
The current study revealed that most farms reduced their equity in percentage terms over the study period of 10 years, but farm equity in dollar terms improved. Most farms
Broadacre Farmers Adapting To A Changing Climate 103 had starting equities greater than 80 per cent, supporting the findings of Doudle et al. (2009). In short, in spite of the drying and warming trend that farmers experienced, overlain with weather-year and market volatility, most farmers improved their business performance by increasing their wealth. However, this finding may over-state the true situation as the sample of farms in this study necessarily only included businesses that were sufficiently financially sound to endure the decade. Also there are farms in the low rainfall east and south-east of the WA grainbelt that are under-represented in the farm sample and it is known that many farms in these particular regions are more likely to be currently in financial duress due to more frequent poor seasons. Also the finding of a significant increase in the debt to income ratio among the sample population is concerning as it suggests that debt-servicing is liable to become problematic, at least for some farmers and perhaps for farms in particular regions.
Kingwell (2002) commented on crop-dominant farming systems in Australia that: ‘‘. . .a switch into more cropping means a more capital-intensive business with greater demands for working capital. With such a business structure a few poor seasons, especially if coupled with poor prices, can rapidly cripple a farm business.’’ (p. 10). Consistent with this view were findings by Lawes and Kingwell (2012). They found that the consecutive years of drought in 2006 and 2007 greatly challenged the profitability of farm businesses in the northeast part of the grainbelt of Western Australia. Almost two-thirds of farms experienced a decline in business equity over the period 2004 to 2009.
The current study suggests that over the decade 2002 to 2011, the frequency of poor seasons in the study region was insufficient to jeopardise greatly the profitability of most farm businesses. Rather, due to season and market conditions, most farms prospered. The degree to which any particular farm business prospered was likely to be due to the farm’s location, enterprise mix and management. The particular
characteristics of a farm business were the main explanator of farm performance, implying that few generalisations are possible. However, there are some; particularly regarding farm management that have possible relevance to other regions and that have implications for policy-makers.
We found that:
• Farmers’ dependence on wheat-growing as a principal source of farm income appears to be a sensible adaptation strategy. Moreover, the biological
prospects for wheat yield in the study region and in other regions of southern Australia generally appear very sound in the face of projected climate change. • Over the study period farm profitability improved, supported by productivity
growth, in spite of no lasting improvement in the terms of trade. Productivity improvement has allowed a majority of farm businesses to prosper during this period of climatic challenge and market volatility. The important role played by productivity growth in supporting farm profitability is a general finding applicable to other regions. Moreover, it points to the important role that policy-making can play in supporting and helping create environments that facilitate
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• Farms improved their productivity, not so much by investing in new
technologies that may have shifted outwards their production possibilities, but rather through better use of existing technologies, including technologies that offered scale economies. Farm businesses that grew substantially were often better managed and achieved greater productivity growth. These findings point to the beneficial role played by superior management and these findings are likely to be widely applicable. Hence, agricultural educators, administrators and policy-makers need to be aware of the value generated by improved farm management. Accordingly, provision of farm management and business training and education is likely to generate beneficial productivity and
profitability outcomes (Keogh et al, 2011, George et al, 2007 & 2009). Growing and strong farms, when compared to less secure farms, on average made greater use of leasing, contractors, superannuation funds, succession planning, Farm Management Deposits and off-farm assets. Also, growing farms, when compared to less secure farms, on average adopted and made greater use of farm business software, marketing strategies, decision support tools, precision technology, electronic paddock recording and GPS technology.
• Growing farms, when compared to less secure or secure farms, on average were more involved in their local community involvement and expressed more care regarding their work-life balance. This important social dimension to farm performance is often over-looked in agricultural and climate change policy. Hence, supporting and encouraging community engagement generates not only social rewards but, as suggested by this study’s findings, it is also positively linked to farm business performance.
• In addition, many growing and strong farm businesses were found to be underpinned by moderate to high productivity growth that in turn was fed by farmers’ commitment to training and use of many modern technologies and management practices. The positive role of education, training and adoption of modern technologies indicates a potentially important role for extension in equipping farmers to enhance their knowledge and skill in farm management.
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