New research from Commonwealth Bank shows Australian farmers prefer a proactive approach to farm profitability that includes focusing on product quality over cost management and actively adjusting farm management strategy to meet the needs of the market.
The research is part of CommBank’s bi-annual Agri Insights survey, which also shows farmers across almost every sector are likely to increase investment in their operations this year. The Agri Insights Index now sits at 10.3 points, the highest result since it was launched a year ago.
Farmers in the 35 to 44 year age bracket are the most driven to try new innovations, with almost half of that group reporting they are usually among the first in their farming region to try out new ideas. Women are slightly more likely than men to choose more innovative practices.
The survey reveals that most farmers use a combination of sales approaches to get the best return for their product, with a smaller number preferring to stay with a tried and true method that has served them well in the past.
Geoff Wearne, Executive General Manager Regional and Agribusiness Banking, Commonwealth Bank, says the results indicate a good balance between proactive management and risk mitigation.
“In any industry, you need a mix of early adopters and those who take a more conservative management approach. Innovation is essential to keeping the industry globally competitive and sustainable, but a measured approach helps manage risk. What Agri Insights has revealed is a healthy mix of both in Australian agribusiness.
“Farmers are focused on improving production outcomes, largely through programs of continual crop and livestock improvement. We’re also seeing a trend towards more flexible product marketing, although the degree varies by sector,” says Mr Wearne.
According to the survey, most sectors of the industry will grow production over the coming year. Dairy and prime lamb producers are the most likely to say they will expand operations, and beef intentions have recovered strongly, with six per cent of producers saying they will expand production, a 15 per cent improvement over this time last year.
Cotton is the only sector likely to experience reduced production, with 10 per cent of growers saying they will decrease their scale of operation this year. This still represents a strong improvement over the October 2014 results, when 51 per cent of growers said they would cut back.
“The sound results in the latest survey reflect improved seasonal conditions, stronger commodity prices in global markets and a weaker Australian dollar, all of which are driving positive agribusiness intentions for the next 12 months.
“Dairy intentions are buoyed by a steep increase in the world dairy price index since the start of the year, coupled with a bullish outlook for 2015 thanks to solid demand from Asian markets and strong investment from China. Likewise, strong global demand is driving livestock intentions, with expected tighter supply and higher prices also contributing to intentions around flock and herd rebuilding,” says Mr Wearne.
Agri Insights key findings
- 69 per cent of surveyed farmers say they use a combination of methods to sell product to the right market at the right time, while 31 per cent sell their produce the same way each year, taking the price on offer.
- Women are somewhat more willing to lead the way in trying new products or approaches (42 per cent of women versus 38 per cent of men) and they are also more likely than men to be prepared to adjust their practices in response to the market (64 per cent versus 60 per cent).
- 69 per cent say maximising production and quality is most important to profitability while 31 per cent say managing costs is most important.
- 20 per cent of farmers are looking to increase investment in farm technology and innovation, 31 per cent intend to increase investment in fixed infrastructure and 16 per cent intend to increase investment in plant and equipment.
Agri Insights surveyed 1,600 farmers, about 14 aspects of farm operation, covering physical aspects (including production scale and land size), financial investment intentions and people aspects (regarding people working in and for the farm business).
For more details about Agri Insights, see the full report here.
About the Commonwealth Bank Agri Insights report
- Agri Insights asks respondents if they intend to increase, decrease or maintain their level of investment across a range of measures in the coming 12 months. A ‘net change’ measurement is used to evaluate the likely overall impact of farmers’ intentions.
- Questions are divided into three categories: physical (land, plant & equipment, farm infrastructure, commodities), financial (farm inputs, off-farm employment, off-farm investment, technology) and people (education & training, contractors, advisers, employees, family members and the farmers’ personal involvement in the farm business).
- Physical, Financial and People indices are calculated by averaging the net change for all variables within each category. These indices are then averaged to calculate the overall Agri Insights Index.
- The research was conducted among 1,600 Australian farmers during January and February 2015. Fieldwork was executed by Fairfax Agricultural Research and Marketing.