March 16, 2007
Australian broadacre industries post lowest incomes in 30 years
Severe drought across southern and central Australia is projected to reduce average farm incomes for all broadacre industries in 2006-07 to their lowest level in over 30 years, to $26,600 per farm, according to the Australian Commodities released by the Australian Bureau of Agricultural Resources and Economics (ABARE).
Grain growers are expected to be the hardest hit in 2006-07, with farm cash incomes falling 95 percent to just $7,100 per farm, due to the large fall in crop receipts. However, one of the major reasons for the low farm cash income is the relatively high level of farm expenditure anticipated for the planting of the forthcoming 2007 winter crop.
Dairy farms are also expected to register a large 79 percent fall in incomes, to $17,800 per farm. Restricted pasture supplies and increased numbers of sheep turned off in poor condition will reduce sheep producer's incomes in 2006-07, to $27,800.
Beef farms are expected to fair better in 2006-07, with an average farm cash income of $41,900 per farm. Large beef farms (those with more than 300 beef cattle), are expected to receive farm cash incomes of $57,784 per farm.
Contributing to the 49 percent fall in average beef farm incomes lower than expected prices is the continued herd rebuilding efforts in northern Australia and the higher feed costs and increased turnoff in the south.
The report also noted that with a large projected increase in the proportion of farm businesses recording negative farm cash income in 2006-07 (42 percent), many farms may need to increase borrowing for working capital, particularly those with low liquid assets. However, average equity ratios are expected to remain relatively high at 88 percent, provided land values remain relatively steady.
However, several positive factors remain that will help support a recovery in farm cash incomes after 2006-07, including high levels of farm investment and strong returns for major commodities, including grains and beef.
