Rural Affairs
Issue No. 9 - February/March 2003
Growing the Farm
Chris Heinjus reports on the significant changes in the agribusiness world with professional business practices replacing lifestyle ideals.
by Chris Heinjus
A recent ABARE report has confirmed observations that farms are getting bigger as families steadily leave the industry. The number of commercial farms has halved over the last 40 years from 200,000 in 1961 to just over 100,000 in 2001.
ABARE reports this has been a continual process, not a result of a catastrophe.
The style of management is also changing from a lifestyle business to a professional agribusiness. Amongst these businesses are a cluster of very exciting and innovative business managers, who live the belief that the future belongs to those who plan and manage for it.
Benchmarking and continuous improvement drives the development of their farming businesses and gives them the motivation to build new opportunities in food, livestock feed and grain processing.
Rural Directions Pty Ltd client benchmarking results from the 2001 season were exceptional. Most clients achieved returns on capital of greater than 15%. Some businesses performed as high as 30%. While these are outstanding results for a capital intensive business like farming, I feel the 2002 results will not be anywhere near the results of 2001.
The few businesses I have analysed so far this year have achieved a return on capital of between 4% and 6%. This is an acceptable result given the drought. The picture of actual performance will become clearer as we begin benchmarking over 120 businesses throughout the state.
Over the next five years, my sense is there will be a continual polarisation in business performance. Some of this will be due to rainfall, but most of it will be due to business management effectiveness and the attitude of the farming family.
ABS figures for broadacre farms (nationally) over the last 10 years indicates the following:
- 50% of broadacre farmers generated 15% of the revenue and all made a loss (i.e. they are living off inherited capital and depreciation and probably working off-farm).
- The next 30% produced 35% of the...
