WA farmers enjoy record-level incomes

A graph of broadacre farm profit from the 2018-19 Planfarm Benchmarks.
A graph of broadacre farm profit from the 2018-19 Planfarm Benchmarks.

WESTERN Australian broadacre farmers, on average, enjoyed their highest income on record last season, thanks to a rare combination of good commodity prices and high production yields.

According to Planfarm Benchmarks for 2018-19 - the largest survey of WA broadacre farming operations based on data from 450 businesses and released Monday - the average operation profit was $324 per hectare, the highest farm income on record.

It was generated from average income of $711/ha after deducting average operating costs of $387/ha.

The top 25 per cent of farm businesses made an operating profit of $525/ha from an income of $979/ha and, as in previous years, some of the best results were recorded in low rainfall areas in the northern Wheatbelt.

According to Benchmark presenters, Planfarm managing director and Benchmarks author Graeme McConnell and farm management consultant Carter Johnson, the results proved "good managers make the right decisions at the right time" irrespective of the season and were more flexible in handling the changing conditions.

Critical to profitability, farmers achieved an historic water use efficiency target of 15 kilograms of wheat per millimetre of effective rainfall in 2018-19.

This is an "encouraging long-term trend" when compared to the 10-year average of 11.3kg/mm, the Benchmarks pointed out.

Again, some farmers in the medium rainfall areas of the northern Wheatbelt did relatively better than farmers in some higher rainfall areas, with water use efficiency of between 16.3kg/mm and 17.1kg/mm.

Farmers in the centre of the Great Southern did best with wheat yields of up to 23kg/mm of rainfall.

This high water usage efficiency coupled with decile nine grain prices that surged to near record levels in the middle of the financial year drove farm profitability, according to Benchmarks.

The average farm business achieved an average wheat price of $342 a tonne in 2018-19, $63/t higher than in the previous year.

There was also more wheat and barley produced at the higher prices, with wheat and barley yields for the top 25pc of farmers last year more than 54pc above the 10-year average.

While wheat continued to be the most profitable crop again last season - producing a gross income of $836/ha on the average farm - barley was closing the gap at $827/ha, while canola trailed at $697/ha, the Benchmarks data showed.

Strong sheep and wool prices which continued to show growth for the fourth consecutive year, also helped farm incomes despite productivity retreating slightly through a lambing percentage of 87pc and an average wool cut of 4kg per head.

Average sheep sales price was $121 per head and average wool income $48 per head.

The percentage of farm income derived from livestock was down on previous seasons simply because cropping performed exceptionally well and generated such high returns last season, Benchmarks pointed out.

The average broadacre farm allocated 28pc of its area to livestock in 2018-19.

Over the past 10 years farm income levels have grown at a faster rate than debt levels producing a debt-to-income ratio for the average farm business of 0.62:1, the lowest it has probably ever been, Mr McConnell said.

The 2018-19 results further strengthened WA broadacre farming's financial position with the average equity level as of February this year sitting at 85.2pc, the highest it has been since 2000, he said.

More than 60pc of the farm businesses have an equity percentage above 80pc and 23pc are owned outright with an equity percentage of 100pc.

At 12.3pc, the average farm return on capital was the highest for more than 20 years.

"WA broadacre farms are in a strong position after an incredible season in 2018-19," McConnell said.

"Despite challenging early weather conditions at the start of the season, it was one of the most successful years on record for WA's broadacre farms with above average grain productivity combined with decile nine and above grain prices," he said.

"The excellent long-term profitability outlook has increased the confidence in the broadacre farming sector which is now in an incredibly strong position with high prices and profitability, coupled with increasing land values and low interest rates.

"We find that the most successful businesses are those making sound decisions during good seasons," he said.

Murray Siegert, a fifth generation farmer who runs a cropping only enterprise with his wife Fiona and two of his three sons at Goomalling, also gave his view of the season at the Benchmarks launch.

He explained that his family, which had moved from South Australia and started farming at Wongan Hills in 1950, bought land in good years like last year to allow future generations of family members to continue farming and that the property he now farmed had been a family acquisition in 1990.