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Will ageing farmers limit future farm productivity?

- Tuesday, April 05, 2016

Accepted wisdom is often a dangerous thing, as it provides an easy path for those wishing to advance a particular argument but who can't be bothered to first build the evidence. An example may well be the accepted wisdom that farmers as a general group are progressively ageing, and that this will result in reduced rates of productivity growth and a loss of competitiveness for the sector in the future. 

Concern has been frequently expressed about the ageing demographic of farmers, with organisations such as the Productivity Commission (see here) and the Australian Bureau of Statistics (see here) both highlighting that farming is an ageing workforce, and that this may have implications for future productivity and investment in the sector. The age profile graph provided by the ABS that compared farmers ages in 1981 and 2011 has regularly been used to reinforce the 'ageing' farmer story. It shows that since 1981, the average age of both males and females working in agriculture has increased considerably, with the average now exceeding 53 years.

The ageing of the average Australian farmer over the past thirty years is paralleled by the ageing of the general Australian population, although the ageing in the general population has certainly been less than that observed in the farm population. Factors that are likely to exacerbate the ageing trend among farmers includes the consolidation of farm businesses (existing farmers buying their neighbour's property rather than it being purchased by a new, younger industry entrant), the replacement of farm labour with machinery which means less young people being employed as jackeroos and stationhands, the tendency of retirees and tree-changers to buy a small farm and become farmers later in life, and for farmers to retire later than other workers in the community.

The issue of ageing farmers is of significance when it comes to changes in rates of farm productivity growth, with a number of commentaries inferring that the slowing rates of agricultural productivity growth observed since the mid-1990s in Australia may be related to the ageing farmer demographic, the assumption being that older farmers are less likely to adopt new technologies or seek opportunities to innovate. 

However, an analysis of some ABARES data available from the AGsurf database (for broadacre farms only) provides some evidence that assumption may not be correct, given the different age profiles of owners and managers of different sized farms. The data are displayed in the following graph.

What the graph shows is that the average age of farm owners or managers actually decreases with farm size. The oldest group of farmers are those with farms that have an annual output valued at less than $100,000 per annum. This is consistent with the "tree-changer" narrative, or could also be a result of down-scaling by older farmers who sell off most of their farm, but retain a smaller block as they move into retirement. Given that 30% of total farms are in this category but that they collectively produce only about 6% of farm output, the greater age of this group is unlikely to impact on overall farm sector productivity.

At the other end of the scale, there are 25% of farms which have more than $400,000 in annual output, and which collectively account for more than 75% of total agricultural output. Based on the ABARES data, the farmers and managers running these farms are an average of almost 10 years younger than the average age of the farmers owning farms that are in the smallest annual output category, and five years younger than the 'average' Australian farmer. 

Part of the reason for this difference may be that farms in this category are more likely to be corporate owned and run by a manager rather than an owner-operator, or it my also be the case that this group of farmers are the more successful ones who have managed to accumulate more capital at a younger age. Whatever the explanation, it is interesting to note that, on average, this group is not ageing at the same rate as all other categories, and their average age has remained unchanged for the past six years.

The implications of this in relation to the adoption of new technologies and innovation are important. If the rate of uptake of these is more likely to be higher among younger farmers, then the outlook for future farm productivity growth in the agriculture sector is much more positive than the somewhat gloomy scenarios that some have painted. These younger farmers who account for more than three quarters of total agricultural output may be much more receptive to new technologies than farm-sector 'average age' statistics suggest. 

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