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What do farm cash incomes and debt trends mean for your business?
Each year, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) releases insights into the financial performance of Australian farms, utilising survey and interview data from nearly 2,000 farm operators. This year’s report includes FY13 (actual results), FY14 (preliminary results) and FY15 (provisional estimates). The data distinguishes between commercial-scale dairy farms and all other farms, so called 'broadacre industries', and in this edition of the Agribusiness Bulletin we take a closer look at farm cash incomes (being total cash receipts less total cash costs) and high-level trends in farm debt.
Farm cash incomes
The most recent farm survey report paints an improved picture for broadacre farms with farm cash incomes continuing to exceed long-term averages as a result of:
- Generally speaking, a good wheat crop for WA and SA in FY15 (noting this period includes the crop income received in FY15 (i.e. 2014 winter crops and 2014/2015 summer crops) and more broadly, favourable seasonal conditions and market prices for the broadacre sub-sectors (livestock and mixed farms)
- 2% decline in farm costs, particularly fuel (and associated freight costs) and lower interest payments.
The dairy industry has not had it quite so good:
- Expenditure on fodder, grain and fertiliser in an effort to lift production and take advantage of higher milk prices in FY14 resulted in a relative over-supply of milk into FY15, and ultimately lower milk prices
- Whilst interest rates, fuel and cattle prices were lower, the decreases were not enough to offset the lower farm receipts, so farm cash incomes are forecast by ABARES to be considerably lower in FY15.
A summary of the cash incomes and commentary is shown below.