A longitudinal examination of business performance indicators for drought-affected farms
Frequent severe droughts can financially cripple dryland farm businesses and farmers need effective business strategies to survive. This study analysed the economic performance of 123 farms in a rainfed agricultural region of Australia from 2004 to 2009, a period that included severe droughts in 2006 and 2007. The business indicators examined were business equity, operating profit/ha, return on capital, and the debt to income ratio and the droughts altered these indicators for many of the farms surveyed. Over the study period the equity position of just over 60% of farms declined, although 55% of these had more than 80% equity in the business initially and were able to absorb a short term decline in equity caused by the drought. In addition, 9% of farms had levels of equity below 80% at the start of the investigation, but actually improved their equity position by the end of the study. Strong links were found between wheat yield and the business indicators. Mostly this was due to the crop dominant nature of the farm businesses where wheat was by far the main crop. However, farms that were able to capitalise on favourable conditions in other years were better placed to enhance or recover their financial position. Farms that cropped a higher proportion of their farm area were at an advantage. Structural indicators, including the percentage of area cropped, had a small but significant effect on the debt to income ratio, the return on capital and operating profit. Farm diversity also favourably lessened the debt to income ratio. Other factors, including farm size did not influence the outcome of any business indicator. Farms that remained resilient, despite the serious droughts were those that cropped more than 50% of their farm area, were prudent in their expenditure, maintained some enterprise diversity and often generated wheat yields in each year that were near the yield potential for that year.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sheng, Yu & Zhao, Shiji & Nossal, Katarina, 2011. "Productivity and farm size in Australian agriculture: reinvestigating the returns to scale," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100711, Australian Agricultural and Resource Economics Society.
- Kingwell, Ross S., 2011. "Managing complexity in modern farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), March.
- Productivity Commission, 2005. "Trends in Australian Agriculture," Research Papers 0502, Productivity Commission, Government of Australia.
- Kingwell, Ross S. & Farré, Imma, 2009. "Climate change impacts on investment in crop sowing machinery," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(2), June.
- Anonymous, 2005. "Trends in Australian Agriculture," Commission Research Papers 31903, Productivity Commission.
- Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
- Ross Kingwell, 2011. "Managing complexity in modern farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), pages 12-34, 01.
- Kingwell, Ross S., 2011. "Revenue volatility faced by Australian wheat farmers," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100572, Australian Agricultural and Resource Economics Society.
- Irwin, Scott H. & Good, Darrel L., 2009. "Market Instability in a New Era of Corn, Soybean, and Wheat Prices," Choices, Agricultural and Applied Economics Association, vol. 24(1).
- Westhoff, Patrick C., 2008. "Farm Commodity Prices: Why the Boom and What Happens Now?," Choices, Agricultural and Applied Economics Association, vol. 23(2).
- Ben Edwards & Matthew Gray & Boyd Hunter, 2009. "A Sunburnt Country: The Economic and Financial Impact of Drought on Rural and Regional Families in Australia in an Era of Climate Change," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 12(1), pages 108-131, March.
- Stephens, David J., 1998. "Objective criteria for estimating the severity of drought in the wheat cropping areas of Australia," Agricultural Systems, Elsevier, vol. 57(3), pages 333-350, July.
- von Braun, Joachim & Torero, Maximo, 2009. "Exploring the Price Spike," Choices, Agricultural and Applied Economics Association, vol. 24(1).
When requesting a correction, please mention this item's handle: RePEc:eee:agisys:v:106:y:2012:i:1:p:94-101. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.