Adaptive capacity and adaptive strategies of broadacre farms experiencing climate change
Adaptation Research Grants Program
Executive summary from final report:
Unfolding change in climate, and its associated variability, poses challenges for broadacre dryland farm businesses in regions such as south-western Australia. The Western Australian grainbelt has experienced a 20 percent decline in rainfall over the last several decades, more than any other wheat-growing region in Australia. Average temperatures in the region have increased, with a disproportionate increase in the frequency of hot days during grain filling, and yet frost risk at flowering has increased. If these mostly drier, warmer conditions are the portend of southern Australia’s future production environment, then learning about how Western Australian farm businesses are responding to their warmer, drier environment may have relevance for other regions projected to experience similar change in their climate.
This research traces the performance of 249 grainbelt farms in Western Australia over the period 2002 to 2011. This decade’s worth of observations about farm performance is analysed to assess how successfully these businesses have managed a period of warmer and drier conditions amidst volatile market conditions. Traditional metrics of farm performance are reported; return on capital, operating surplus, business equity and the debt to income ratio. In addition, farms are classified into four performance categories; growing, strong, secure and less secure businesses. Farms are also grouped by enterprise type (crop specialists, mixed enterprise and sheep specialists) and sub-region. Drawing on the farm business datasets, each farm’s productivity and its main components are estimated. Complementing the farm business datasets is a comprehensive set of socio-managerial data derived from responses to a detailed questionnaire.
Analysis of the data revealed the following key findings:
- Almost two-thirds (64%) of the sample farms are classed as businesses that are growing or strong. The less secure group of farms at some potential financial risk formed 15% of the sample of farms. The shares of farm types in the sample were 73%, 22% and 5% for mixed enterprise, crop dominant and livestock dominant farms respectively.
- A large proportion (38%) of crop farms and mixed enterprise farms are classed as growing. By contrast only 23% of livestock farms are classed as growing.
- The region with the smallest proportion of less secure farms is the northern agricultural region (L1&M1). The region with the smallest proportion of farms that are growing or strong was the M4 and L3 regions that experienced many low-yielding years due to drought and frost during the study period.
- Although the study region is experiencing a warming, drying trend, the combination of seasonal and price conditions during the study period favoured crop production, especially in the northern region (L1&M1) and southern coastal region (M5).
- Farmers’ dependence on wheat-growing as a principal source of farm income appears to be a sensible adaptation strategy in many regions. Moreover, the biological prospects for wheat yield in the region generally appear very sound in the face of its changing climate.
- Over the study period farm profitability improved, supported by productivity growth, in spite of no lasting improvement in the terms of trade. Productivity improvement has allowed a majority of farm businesses to prosper during this period of climatic challenge and market volatility.
- A concerning trend was a significant increase in the debt to income ratio, and an associated decline in farm equity (as a percentage) during the study period.
- Farms improved their productivity, not so much by investing in new technologies that may have shifted outwards their production possibilities, but rather through better use of existing technologies, including technologies that offered scale economies.
- The change in total factor productivity for growing farms is double that for less secure farms and farm profitability has increased greatly for growing farms whereas the less secure farms have displayed no growth in profitability.
- Improvement in technical efficiency is far greater for growing farms than less secure farms. The practical implication of this finding is that throughout the study period, growing farms have improved their productivity through better use of existing technologies, including technologies that offer scale economies.
- Because growing farms rely on improving their technical efficiency and utilising scale efficiencies it is therefore not surprising that many growing farms are in northern regions where large crop-dominant farms operate; underpinned by economies of scale.
- The change in total factor productivity for crop farms is treble that for sheep farms and there is a strong positive change in farm profitability for crop farms, whereas sheep farms display no growth in profitability.
- Both crop farms and sheep farms have beneficial change in technical efficiency as their main driver of total factor productivity growth. For crop farms their main component of improved technical efficiency is best practice use of existing technology.
- Growing and strong farms, when compared to less secure farms, on average make greater use of leasing, contractors, superannuation funds, succession planning, Farm Management Deposits and off-farm assets. They also on average adopt and make greater use of farm business software, marketing strategies, decision support tools, precision technology, electronic paddock recording and GPS technology.
- Growing farms, when compared to less secure or secure farms, on average display a greater quality of commitment to the maintenance of their cropping gear. They aslo on average are more involved in their local community and express more care regarding their work-life balance.
- Growing or strong businesses typically display a greater commitment to training and/or are additionally blessed with a breadth and depth of experience and family support to engage in farming. This finding implies a potentially beneficial role for continued productivity-enhancing research, complemented by education and extension activity to support farm management and boost farm performance.
Because the farm data come from businesses that employed a farm management consultant, there remains a question over how fully representative are these farms of all grainbelt farms. With that caveat, the broad conclusion of this study is that as long as broadacre farmers in south-western Australia firstly, have on-going access to improved crop varieties and technologies that support profitable grain production, and secondly that farmers continue to have access to farm management and business education, then most farmers are likely to be able to adapt to projected climate change in the next few decades, provided that the climate change is sufficiently gradual. The forecast biologically robust performance of wheat in the study region, in particular, should help underpin the profitability of crop production.
Provided that farmers’ terms of trade does not become unduly adverse, and that farmers sensibly manage farm debt, then it seems highly likely that farmers who continue to rely mostly on wheat production, and practise sound farm management, will persist as financially sound businesses in many parts of the study region, even in the face of projected climate change.
View the research final report.