ABS report indicates significant change in farming

The Australian Bureau urea of Statistics released a report this week highlighting some significant changes in agriculture of the past 50 years. You can find the report at http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features10Dec+2012. The conclusions I came to after reviewing the report include:\n1. Consolidation, succession and exit strategies are key and growing issues. Almost 300 farmers have left the land each month over the past 30 years resulting in a 40% drop in numbers. The median age of farmers is increasing. Since 1981, the proportion of farmers aged 55 years and over increased from 26% to 47%, while the proportion of farmers aged less than 35 years fell from 28% to just 13%.

This is partly due to the fact that farmers are more likely to continue working well beyond the age at which most other workers retire. In 2011, almost a quarter (23%) of farmers were aged 65 years or over, compared with just 3% of people in other occupations. Do you have succession and exit strategy planned? 2. The 80/20 rule and “hobby farms” are alive and well. Per the ABS: 36% of farms are less than 50 ha and another 36% less than 500ha. More than 55% of farmers have operations with a turnover less than $100,000. Extraordinarily there are 135,000 farm businesses in Australia but only 7,700 or 6% with operations turning over more than $1 million. Despite the reduced numbers, agricultural exports have risen 5% per annum over the past 30 years to 32.5 billion and farm production now represents $46 billion per annum.

We consider the statement that 20% of farmers are producing 80% of farm output continues to hold true. 3. Too many farmers earn a wage – they do not run businesses. In 2011, half (50%) of farmers worked 49 hours or more a week. Only 17% of other workers put in such long hours. Despite working such long hours, the average weekly disposable income of farmers in 2009-10 ($568) was considerably lower than that of people working in other occupations ($921). Farm businesses should focus on benchmark business returns, not remuneration.\n4. Most farmers continue to be asset rich and cash poor. The average equivalised net worth (taking into account both assets and liabilities) of farming households in 2009-10 was $1.3 million, much higher than the average across other households ($393,000). The bulk of farming households (71%) were in the top 20% of the wealth distribution.

The high levels of wealth explain why, despite relatively low income, only a fraction (5%) of farming households are classified as having low economic resources, compared with a fifth (21%) of other households. A focus on return on assets will lead to increased profits, increased return on the higher value of wealth farmers hold and increased cash remuneration. These statistics will counter arguments for future government assistance to the sector.\n5. There is growing recognition that education is key and becoming more important With the operation of farm businesses becoming increasingly complex, many farmers are coming to see themselves less as traditional farmers and more as managers with the same skills and responsibilities as any business manager. Over the three decades to 2011, for instance, the proportion of Australian farmers with non-school (higher) qualifications more than doubled, from 15% to 38%. Agriculture is trending with other industries in this regard, but off a lower base. 6. I continue to love been part of rural and regional Australia People in farming families are typically known for having a greater sense of connectedness to their local community than many others. This is reflected in the comparison of volunteering rates with people in farming families more than twice as likely as those in other families to do voluntary work for an organisation or group (39% compared with 19%) in the 12 months to August 2011. I see an extraordinary productivity story here in terms of the increased farm output by a significantly reduced number of farmers, at a time when the press, business and politicians are calling for increased productivity in Australia.

Some will view this report as more of the same information and continuing trends. However, I see it as a call to action for farmers to make changes to stay in the game, or to develop plans to exit their businesses. There is still much work to be done.\nWe understands the difficulties of these processes and have worked with businesses to achieve solutions. Please give a us call if you like to discuss further on 02 6885 5788. Summary written by Peter Debus, Director, principlefocus NSW