THE odds are stacked against Australian farmers.
Unpredictable weather, the high Australian dollar ($A) and competition from the mining boom means Australian farmers are under constant pressure to remain in the black.
The recent Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Regional Outlook conference in York looked at the future of Australian agriculture and the challenges farmers faced.
ABARES Agricultural Commodities and Trade general manager Jammie Penm said the biggest issue was that farmers needed to become more productive using the same amount of land.
"As an economist ABARES believes the best way for farmers to counteract these issues is to increase productivity," Mr Penm said.
"Farmers want to decrease their cost of inputs and increase their outputs and in turn take home more pay."
He said a number of factors would determine if all farmers would actually work towards improving their productivity.
"Firstly the macroeconmic conditions, such as exchange rates and interest rates, farmers have no control over and they have to go to their bankers to help pay their bills, meaning they have to work harder," he said.
"We know the higher $A is going to reduce farmers' export earnings and they have to work harder but none of us can impact that.
"If the $A is high farmers have to take it and if it is low they still have to take it."
He said external factors such as terms of trade also impact farmers' ability to be profitable.
"We cannot change the world price, we cannot change their tastes, we can only go with the flow," he said.
"But the third factor is something you can control.
"Farm-level factors such as taking on technologies and changing your farming enterprise mix is something farmers can control."
Mr Penm said farmers needed an innovative environment in order to make the changes to become more productive.
"We separate that into two groups," he said.
"One we call enablers such as technologies to help improve farming productivity but at the same time you need incentives.
"So we need enablers to increase productivity and incentives to take up those technologies."
Mr Penm admitted there were many farmers who were already at their maximum frontiers in terms of productivity and there was nothing more they could do but said the gap was widening between them and the lower level farmers who were not reaching their full potential.
He said there were two options.
Either more funding needed to be put into research and development to raise the bar even higher for farmers in terms of productivity or incentives needed to be provided for lower farmers to build their operation and lift the overall production of farming.
Mr Penm said ABARES had found the farmers who were lagging behind in reaching those frontiers were taking longer to catch up, so he believed incentives needed to be provided for those farmers to catch up.
"There is also the issue of policy changes which creates uncertainty for farmers," he said
"What we really want to do is remove the uncertainty so that farmers can plan and also uptake those technologies."
Mr Penm said issues such as population growth and volatility in the world share market would slow economic growth this year, which was good news for farmers in terms of where the debt levels had happened.
"Most of the debt is in the Organisation for Economic Co-operation and Development (OECD) countries but for our major export destinations such as Asia, we think economic growth will still remain strong within the foreseeable future," he said.
"So that is good news for our farming community because we export about 60 per cent of our farm production to overseas markets.
"So that will help to provide some cushions in terms of the impact, or the slowing down of world economic growth."
He said the high $A would continue to have major impact on Australia's farming exports but predicted it wouldn't go down anytime soon.
"The strong appetite for mineral resources from China, India and Asia should see the Australian economy stay high and that should support the high $A," he said.
"The debt crisis in the USA will not go away in a hurry so the value of its currency will not be strong in the foreseeable future.
"So it is really not good news for our export-oriented industries such as agriculture."
Mr Penm said seasonal conditions were playing even more of a role on Australian farming properties with major floods in eastern Australia along with Cyclone Yasi and the drought in WA.
"The drought took away about $950 million in production, the floods reduced agriculture production by about another $1 billion and Cyclone Yasi significantly affected the production of the banana industry," he said.
ABARES estimates Cyclone Yasi affected the industry by about another $300m.
"So that just demonstrates the impact seasonal conditions can have," Mr Penm said.
Mr Penm said if climate change was real and farmers believed some scientists in that these extreme events would become a more regular occurrence then there needed to be an insurance policy to ensure the farming sector could bounce back.
"Even though there were issues with severe seasonal conditions it didn't really dampen our farm production exports significantly," he said.
"Commodity prices, we expect, will remain relatively favourable at least in the short term but there are issues in terms of resources competition because of the mining boom.
"The other point is we think productivity growth is the insurance policy for the future and that's the only thing seriously that a farmer or a community can do.
"ABARES believes now is the time for more expenditure into research and development and we should recognise policy reform can create uncertainty if it is not done quickly and doesn't provide a clear indication for the future."
