Graeme McConnell, Dean Nalder and Richard Bator at tjhe release fo the 10th edition of Planfarm Bankwest Benchmark.ADAPTABILITY appears to be the difference between WA’s top 25 per cent of broadacre farmers and the rest.
And last season helped prove it, according to the 2015-2016 Planfarm Bankwest Benchmarks.
The Benchmarks data sets released last Friday, show the top 25pc of WA farmers spent an average of $4 a hectare more on chemicals and fertiliser last year than the average farmer, but overall, their financial costs averaged $1 a hectare less.
The data showed they also reaped $55 more a hectare in operating profits than the average farmer.
The top group’s operating surplus per millimetre of growing-season rainfall was $1.74 per effective hectare, compared to the State average of 93 cents.
“Being adaptable and controlling operating costs rather than chasing higher yields, appears the key to profitability,” Planfarm consultant Graeme McConnell told a business breakfast for about 80 agribusiness guests at Bankwest headquarters to launch the 10th annual Benchmarks.
“A year of contrasts”, which reflected 2015, demonstrated the adaptability.
“Farmers in the normally much drier north-east Wheatbelt regions, through Southern Cross, Merredin, Bencubbin, Wubin, Caron to Mullewa, did much better financially than farmers in the normally medium and high rainfall regions last year,” Mr McConnell said.
“While low rainfall regions had extremely good summer rains and much higher than normal rainfall across the growing season, they still received less rainfall in total than the much drier than normal medium and high rainfall regions.
“There is no year in agriculture where everyone has a good season and last year was no exception.
“Low rainfall areas did more with less rain.
“My thinking is, as an industry there is probably some room for high-rainfall farmers (to be) thinking more like low-rainfall farmers in these tough years.
“So when you have a tough start what do you do to manage your enterprises better?
“Do you drop cropping percentages, do you change your enterprise mix, do you take canola out of the rotation or all of those things, to actually improve your water efficiency.
“Last year those high-rainfall zones should have done better.”
According to Mr McConnell, the top 25pc of farms generated “a fantastic cash flow return on capital” of 8.3pc, compared to the average of 4.3pc.
“That same trend comes through irrespective of the (rainfall) region,” he said.
“The top 25pc always double the return on capital.
“Good farmers in every region are still able to capitalise on the returns that they are getting, or are able to maximise those returns.
“In (low rainfall) areas where farmers were not chasing higher yields last year, they were rewarded with lower operating costs levels.”
Mr McConnell pointed out the six-year data set showed yields having less of an affect on return on capital.
The average wheat yield difference between the top 25pc and the average farmer was only 0.1-0.2 tonne a hectare.
But the enterprise mix did make a difference last year, with farmers having legumes in their rotation or running more livestock, not achieving the best return on capital despite good wool and meat prices.
“Farmers with better returns on capital had more cereals in their rotations,” he said.
“It was as simple as that.
“They have had much higher operating costs, but also much higher profits.”
One “good news story” from last year was in stabilising farm equity, helped in part by low interest rates and debt-reduction strategies.
“The average farmer now owns 81pc of their total farm assets, up from 80pc and well up from those really tough years of 2008, 2009, 2010 and 2012,” he said.
“We are starting to get some really positive things happening here and a much more stable industry than we’ve seen for a long time.
“About 30pc of farms in the State in every region are very close to operating without debt.
“That’s a much higher number even than last year.
“As well, some farm businesses that had been ‘marginal’ in previous years, had recovered because of the underlying strength of the farm sector.
“And the number of businesses on the bones of their backsides has decreased.”
The average farm’s ability to service debt had also improved with the ratio of $1 debt to $1 income now below one to one.
“What it’s saying is the agriculture industry is now pretty conservatively geared,” Mr McConnell said.
“One of the messages we’ve been trying to get out there is if you’re an average farmer there is pretty much some proof (that) to get up to the top 25pc, it doesn’t matter which region you are in, you just have to concentrate on what you’re doing and the changes you have to make aren’t necessarily that big.
“One of the things I think that is becoming really obvious the more years we run this long-term data set, is you have got to be able to adapt to the season.
“Being adaptable you can cope with most seasons and I think that’s one of the efficiencies we see in the top 25pc – always better than the average in every region because they’ve done that little bit more to prepare and they are managing their seasons.”
The Planfarm Bankwest Benchmarks is a comprehensive annual farm business analysis survey comprising information compiled from Planfarm, Bankwest, Bedbrook Johnston Williams, Business Ag and Ag Asset clients.
“It is a reliable indication of broadacre farm performance comprising 532 broadacre farms surveyed throughout the South West land division,” Bankwest rural and regional banking State manager Richard Bator said.
“Data from the survey provides farmers with the information they need to improve the performance of their business.”
Agriculture and Food Minister Dean Nalder officially launched the 2015-16 Benchmarks.
In his address he reiterated his commitment to rebuilding the Department of Agriculture and Food as an advocate across government for agriculture and to ensuring increased business acumen was involved in its decision-making.