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How drought affects the financial characteristics of Australian farm businesses

How drought affects the financial characteristics of Australian farm businesses The financial performance of 240 farms in a drought‐affected agricultural region of Australia is analysed. The decadal study period included some years of widespread drought, as well as years with only subregional droughts or no drought. Some droughts created larger adverse financial impacts than others. Mostly, the more droughts farms experienced, the worse was their financial performance relative to farms within the same quantile of farm performance. Despite the incidence of drought, by the end of the decade, almost all the farm businesses were wealthier from increasing their farm size and becoming more crop dominant. Unexpectedly, consecutive years of drought had a significant positive effect on the operating profit per hectare and retained profit per hectare of farms in a majority of their respective quantiles. Many farms that experienced consecutive drought were forced to make structural changes, shifting away from livestock production towards additional cropping. These structural changes boosted farm performance over the decade. The incidence of drought affected some measures of farm performance differently whilst others were affected similarly. Understanding these metrics of farm performance and the structural changes underway in an agricultural region helps form a more complete view of drought impacts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

How drought affects the financial characteristics of Australian farm businesses

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References (54)

Publisher
Wiley
Copyright
Copyright © 2017 Australian Agricultural and Resource Economics Society Inc.
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/1467-8489.12195
Publisher site
See Article on Publisher Site

Abstract

The financial performance of 240 farms in a drought‐affected agricultural region of Australia is analysed. The decadal study period included some years of widespread drought, as well as years with only subregional droughts or no drought. Some droughts created larger adverse financial impacts than others. Mostly, the more droughts farms experienced, the worse was their financial performance relative to farms within the same quantile of farm performance. Despite the incidence of drought, by the end of the decade, almost all the farm businesses were wealthier from increasing their farm size and becoming more crop dominant. Unexpectedly, consecutive years of drought had a significant positive effect on the operating profit per hectare and retained profit per hectare of farms in a majority of their respective quantiles. Many farms that experienced consecutive drought were forced to make structural changes, shifting away from livestock production towards additional cropping. These structural changes boosted farm performance over the decade. The incidence of drought affected some measures of farm performance differently whilst others were affected similarly. Understanding these metrics of farm performance and the structural changes underway in an agricultural region helps form a more complete view of drought impacts.

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Jul 1, 2017

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