WA farm equity in top shape

28 Aug, 2015 02:00 AM

THE latest Planfarm Bankwest Benchmarks survey reveals WA's farm businesses are in strong financial shape, buoyed by good seasons, higher farm equity levels and stable land values.

Planfarm consultant Graeme McConnell said the data collected from the State's largest agricultural survey, Planfarm Bankwest Benchmarks, indicates average farm equity is at 80 per cent, which is a turnaround for the grain belt after a run of tough seasons.

The survey is a comprehensive annual farm business analysis compiled from Planfarm, Bankwest, Bedbrook Johnston Williams, Business Ag and Ag Asset clients.

It provides a broad summary of information collected from 566 farm businesses throughout WA's broadacre farming regions.

The data compares the top 25pc of WA's farm businesses against the average performers over a one year period, and also over the past six year period.

Mr McConnell said a high level of management skill was consistently required in order to maintain a ranking in the top 25pc of farm businesses.

"The achievement of the top 25pc is significant when you consider that those operators generate double the profit of the average performers," he said.

"The average farm business is still generating very good returns, where the bottom 25pc hover around break even.

"Interestingly, for two regions last year - the northern high and medium rainfall regions - the six-year average wheat price achieved by the top 25pc was less than what was achieved by the region's average.

"We found that some of the top 25pc of performers were outstanding in terms of production, but were perhaps less effective marketers of their grain."

The Planfarm Bankwest Benchmarks survey is split into two sections: a single year analysis which aims to highlight farm performance over the past year and a long-term performance analysis which examines the highest performing farms over the past six years.

Some of the key findings from the survey found the 2014-2015 season produced above average results for most zones.

The 2014 State average crop yield results were higher, with wheat, barley, canola and lupin yields all finishing above 10-year State averages.

Grain pricing remained solid through harvest, allowing decile five or higher prices to be achieved, which continued well into the post-harvest period.

The average operating profit was $184/hectare and the top 25pc of the survey group achieved $318/ha.

An average return on capital reached 5pc compared to the the long-term average of just under 4pc, and the average debt to income ratio improved to 1:1.

The survey found average farm equity is at 80pc and continues to improve, returning to a level that is indicative of a strong financial position for the whole WA grain belt.

Bankwest rural and regional banking state manager John Sgambelluri said the research allowed farmers to better understand their businesses and identify how they could improve their performance, challenge industry norms and help lift the agricultural sector's profile.

"With average farm equity at 80pc (net of liquid assets) and continuing to improve to a level that is indicative of a strong financial position, we are starting to see some of the concerns we had through 2009-2011 being resolved," Mr Sgambelluri said.

"Add to this that land values have not yet shown large increases, and we're at a very positive point in WA agriculture.

"The 2014 season reminded us that it is rare for the whole State to achieve an outstanding result in a single year.

"The best performing regions were located in a diagonal band through the Central Wheatbelt, stretching from Northam to Jerramungup. The southern regions generally experienced a very good season, while the north was below average.

"The net effect over the State was an average season in terms of profitability - a little better than average when you consider total State grain receivals of 14.5mmt."

Agriculture and Food Minister Ken Baston said yields on broadacre crops were above 10-year averages.

"This certainly gives the sector renewed confidence," Mr Baston said.

"It's great to see such positive results, following on from a strong 2013-14 season, in most of our grain-growing regions.



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