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It's time to get rid of the average Australian farmer.

- Thursday, October 24, 2013

The 'average' farm is a term frequently used, especially in discussions about the financial viability of the Australian farm sector. Analysts invariably talk about average farm income or average return on investment for farm businesses, but few seem to understand that discussing the average financial performance of Australian farms is a bit like discussing the average winnings of Australia golf players, and including in that average anyone who has ever played a single round of golf.

There are at least three different definitions of farms and farmers that are currently used in Australia. The Australian Tax Office defines a farmer (primary producer) as someone who is involved in farming activities for business purposes, and either generates a profit or has the intention of generating a profit from that activity. The ABS counts as a farmer any person owning a farm which has annual output valued at more than $5,000. ABARES collects statistics on broadacre and dairy farms only, and includes broadacre or dairy farms with more than $40,000 in annual output. Based on these definitions, there are more than 200,000 (ATO) or 135,000 (ABS) farms in Australia, of which 62,000 are broadacre or dairy farms (ABARES). Depending on which of these statistics is used, the 'average' size of farms or their financial performance varies enormously.

This is highlighted by looking more closely at the characteristics and financial performance of farms in different size categories, using information from ABARES annual farm surveys. The following three graphs illustrate this point.

The first shows changes in the proportion of farms in different output categories, ranging from those with less than $100,000 in annual value of output, to those with more than $400,000 (all adjusted for annual inflation). It shows that there are about 30% of farms that generate less that $100,000 in annual output, and there are about 30% that generate more than $400,000 in annual output.

Looking at the total value of agricultural output generated by farms in different size categories, the second graph shows that those 30% of farms with less than $100,000 in annual output produce about 4% of the total value of national agricultural output, while those 30% of farms with more than $400,000 of annual output generate more than 70% of total national output.

The final graph shows the 'non-farm' income earned by the average farm in each of these size categories, as a proportion of the total income (farm and non-farm) earned. 

It highlights that, for those farm business with less than $100,000 in annual output, more than 90% of their annual income is earned off-farm, and most is earned as wages. Clearly, the vast majority of the 30% of broadacre farms with less than $100,000 in output are non-commercial farms which the owners operate on a part-time basis, often more for lifestyle rather than commercial reasons. The owners of these farms make an extremely valuable contribution to regional communities, but including these in any statistics of farm business or financial performance creates a very distorted picture of the performance of the 'average' commercial farm business.

Perhaps it is time to stop referring to the 'average' farm, and instead adopt the use of farm categories similar to those used by the US Department of Agriculture, enabling more sensible and informed discussions to occur about the state of farming in Australia. Of course, that could only occur if some substantial improvements were made to the agricultural statistics system in Australia, something that appears unlikely to eventuate any time soon!

John Doyle commented on 20-Jul-2015 01:41 PM
The federal government, being monetary sovereign can pay any cost, any bill, any invoice at NO COST to taxpayers. Therefore it is a financially simple operation for the RBA to fund a scheme whereby the cost of restoring or rebuilding the land is paid to farmers. Details need to be worked out according to set criteria such as the size and type of property, But farmers who should look after their land anyway are too often squeezed by drought etc. and it can be difficult to remain viable. Looking after, husbanding, the land will be beneficial for them, for their community and for the nation. We cannot afford the continual degradation of our natural capital. So it's in the Government's interest to fund such work. Only political idiocy stands in the way!

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