Increased yields, improved water-use efficiency and strong grain and livestock prices contributed to a successful 2020 for broadacre farmers, despite trade tensions and the COVID-19 pandemic.
Increased yields, improved water-use efficiency and strong grain and livestock prices contributed to a successful year for Western Australian broadacre farmers in 2020, despite trade tensions and the COVID-19 pandemic.
Agribusiness consultancy Planfarm released its report, Planfarm Benchmarks 2020, this morning at a webinar.
The report found average farm businesses recorded an operating profit of $246 per hectare and a 5.9 per cent return on capital.
Businesses ranked in the top 25 per cent achieved an operating profit of $441 per hectare and a 9.9 per cent return on capital.
These strong results were achieved despite several challenges.
Planfarm farm business and horticulture consultant Tyson Fry said the industry was impacted by China’s decision to impose tariffs on Australian barley in May 2020, a drop in global wool demand, farm labour shortages and international shipping delays.
Mr Fry said China’s tariffs effectively shut the gate on exports of barley from Australia to China.
“The immediate impact on pricing was quite dramatic but as we move through the season, Australian barley actually became price competitive into some of the Southeast Asian and Middle Eastern markets, which was a good thing to see,” Mr Fry told the webinar.
According to the report, China’s tariffs on Australian barley led to a slight decrease in the effective barley area from 18 per cent to 16 per cent.
More broadly, market uncertainty led to a rally in global grain markets and a drop in the Australian dollar which provided early season pricing opportunities.
The sector also benefitted from a collapse in the oil price and government policies including JobKeeper and the instant asset write-off.
A dry start, wind erosion events and below-average growing season rainfall created additional challenges but a mild spring, summer rain, no major frost events and a lack of waterlogging led to above-average yields, Mr Fry said.
The average wheat yield was eight per cent higher than the 10-year average. Barley, canola and lupin, which were between eight to 12 per cent higher.
Water-use efficiency continued to improve.
In 2020, the average business achieved water-use efficiency of 15.4kg of wheat per millimetre of effective rainfall, surpassing the target of 15kg.
The COVID-19 pandemic and subsequent lockdowns also impacted livestock producers in 2020, the report found.
A drop in consumer demand for woolen garments due to lockdowns caused by the COVID-19 pandemic was reflected in the price, which dropped 30 per cent to $7.73 per kilogram and equated to an $18.9 million drop in the total value of wool grown by producers.
The average sheep sale price increased by 12 per cent to a high of $149/head, due to a restocking program on the east coast.
The total return generated by sheep and wool production rose a further 3 per cent last year to $181/head.
Mr Fry said the long-term performance of broadacre agriculture in WA remained in a strong position after the 2020 season.
From 2011 to 2020, the average broadacre farm has generated a 6.4 per cent return on capital with those ranked in the top 25 per cent achieving an 11 per cent return.
“These returns continue to be highly competitive when you compare them to other investment classes, especially when they don’t account for the significant land value growth we have witnessed in recent years,” Mr Fry said.
The report was launched a few days after the Grain Industry Association of Western Australia released its August crop report which suggested 2021 would produce a record tonnage of 20 million.
