Australia
November 11, 2013
A study has shown that a consistent characteristic of financially successful WA farmers is their capacity to keep abreast of technology advances.
These relate particularly to technologies that enable them to create economies of scale and carry a much lower debt-to-income ratio than farms that are less financially secure.
Details of the study of 249 WA farm business records – covering the period from 2002 to 2011 – are included in a new Grains Research and Development Corporation (GRDC) Ground Cover Farm Business Management Supplement.
The research was funded by the National Climate Change Adaptation Research Facility (NCCARF), the Department of Agriculture and Food and the Australian Export Grain Innovation Centre.
GRDC western grower services manager Darren Hughes said that, despite an extremely difficult decade, almost two-thirds of the WA farm businesses surveyed were financially growing or strong, generating annual rates of return on farm equity of at least eight per cent.
“Interestingly, these profits were the result of productivity increases rather than any consistent rise in commodity prices over the decade-long study,” he said.
In general, the growing farms were:
- larger and generating higher profits;
- generating a higher return to capital and equity;
- carrying less debt per hectare;
- slightly more crop-dominant;
- carrying higher personal and machinery replacement expenses but similar debt repayments;
- carrying a much lower debt-to-income ratio;
- carrying slightly higher equity in percentage terms;
- generating similar livestock income per hectare but much higher crop income per hectare.
Dr Hughes said the Ground Cover supplement also highlighted some of the outcomes from activities undertaken as part of the GRDC Farm Business Management initiative.
“The aim is to provide the tools and knowledge that will enable farm business managers to best manage the specific risk and profit profiles of an individual farm and its assets,” he said.
Dr Hughes said WA grain growers and advisers were encouraged to take advantage of a one-day GRDC Farm Business Update to be held in Merredin on February 13.
The event has been initiated by the GRDC’s Kwinana East Regional Cropping Solutions Network (RCSN) after it identified improved business skills, better knowledge of profit drivers and risk management as big priorities for growers in this region.
“Topics covered will include effective business structures; cash flow management; tax effective debt reduction; keys to ongoing business success; and achieving economies of scale in successful family businesses,” Dr Hughes said.
For more information about the GRDC Farm Business Update and to register online visit www.orm.com.au
The GRDC Ground Cover Farm Business Management Supplement is available at www.grdc.com.au/GCS107
The GRDC has also produced a comprehensive series of fact sheets to assist growers and advisers in understanding the capacity, strengths and weaknesses of the farm business enterprise.
These are available at www.grdc.com.au/FBM-factsheets
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