Boom in farming offers lure to invest
WA’s broadacre farmers are wiping away debt and dispelling any lingering doubts about the value of investing in the industry.
The results of the most comprehensive annual survey of farm performance in WA shows equity has increased to an average of 81 per cent and about 30 per cent of farmers are close to having no debt.
The Planfarm Bankwest Benchmarks analysis released yesterday was based on the financial records of 532 farm businesses in the Wheatbelt.
It found the average farm business made a profit of $690,000 on turnover of $2.1 million in 2015 for a return on capital from production of 4.7 per cent. The top 25 per cent of farmers had a return on capital of 10.2 per cent.
Planfarm consultant Graeme McConnell said people had been running down agriculture for too long and it was time to recognise the strength in the sector.
Mr McConnell said well-run farms could achieve better than 10 per cent return on capital and few other asset classes matched that performance.
“There is a really good news story in the equity situation,” he said. “It is a much more stable industry than we have seen for some time.”
Mr McConnell said the number of farmers with equity levels below 50 per cent was decreasing as they got back on their feet.
The analysis, based on data from Bankwest and four big farm consultancy firms, also highlighted the increasing size of farms. The average broadacre farm now covers 4300ha.
Mr McConnell said improvements in farm machinery and technology meant optimum farm size might have reached 6000ha. Farmers were likely to need two sets of equipment beyond that size.
“There are only 15 per cent of farms that are less than 2000ha and it wasn’t that long ago when 2000ha was considered a really good size farm,” Mr McConnell said.
Bankwest rural manager Richard Bator said the strength of farm businesses was showing in increased investment in farm size and equipment.
Mr Bator said 2015 was a season of contrasts with usually low-rainfall regions getting average to high rainfall and higher-rainfall regions receiving low to lowest-on-record falls.
The financial data showed farmers were moving into a phase of paying and managing tax liabilities after making on average operating profits of $157/ha.
Agriculture Minister Dean Nalder launched the report with a pledge that the State Government would step up its effort to expandthe sector.
Mr Nalder said the Government had “let things slip too far” in recent decades. He said the Department of Agriculture and Food WA was being rebuilt and would have great commercial acumen in the future.
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