Australian grain farms financially strong; can expand

Australian grain farms are well placed to expand operations after two years of solid financial performance, the government's Australian Bureau of Agricultural and Resource Economics reported Friday.

 

"Grains industry farms have a relatively strong equity position and should have little trouble continuing to expand in the future should seasonal conditions allow them to," Abare said in a report on the financial performance of grain farms.

 

Australian grain farms experienced substantial growth in their financial performance in the 2007-08 fiscal following a dismal, drought-affected year for farm incomes and profitability in 2006-07, with this improvement projected to continue for most farms into this fiscal year ending June 30, according to the report.

 

Investments in land and capital over the past 10 years should enable many grain producers to expand production and boost productivity, it said.

 

For these farmers, a steady rise in land values has enabled farmers to maintain equity positions despite high growth in debt, it said.

 

Provided land values remain high, grain farms have some capacity to take on additional debt and fund future expansion.

 

Abare reported the number of Australian grain farms cropping 100 hectares or more averaged 28,455 in the nine years to 2007-08, with 16,500 farms defined as high cropping intensity or very high cropping intensity, or 58 percent of total cropping farms, with these sharing 86 percent of total cropping revenue.

 

Of the average long-term crop area sown, wheat accounts for 56 percent and barley 19 percent, while oats, sorghum, oilseeds and pulses make up most of the rest.

 

All wheat crop farms averaged a yield of 1.0 tonnes a hectare in both 2006-07 and 2007-08, while yield for all grain crops averaged 0.9 tonne/hectare in 2006-07 and 1.2 tonnes a hectare in 2007-08, it reported.

 

The price received for wheat in 2007-08 averaged A$366 (US$285)/tonne, up from A$287 (US$223.4)/tonne in 2006-07.

 

Abare didn't update its forecast for grains production this crop year ending March 31, 2010. It will do this in a quarterly Crop Report scheduled for issue June 16.

 

In early March, Abare forecast new crop wheat production at 22.1 million tonnes, up from an actual 21.4 million tonnes last crop year.

 

After an annual domestic demand of about six million tonnes is met, the remaining output is available for export, making Australia a major supplier to the global trade.

 

Abare put new crop barley output at 7.3 million tonnes, versus an actual 6.8 million tonnes last crop year.