The real value of agricultural production increased over the three years to 2015-16, at an average rate of 5.3 per cent a year.
This period of solid growth coincided with strong demand for Australia’s exports, favourable global market prices for livestock, a depreciating exchange rate and subdued growth in input costs.
Poor seasonal conditions early in the period detrimentally affected crop production and returns to producers.
However, lower crop production was more than offset by increased returns from livestock production.
This was the result of higher slaughter rates, as producers responded to reduced pasture availability caused by dry conditions.
Returns to producers continued to increase in 2015-16 as a result of a rise in crop production nationally and ongoing high cattle turn-off in major cattle-producing regions of Queensland.
These developments lent additional support to Australia’s real net farm cash income, which had been rising since 2009-10.
This followed a period of declining income from 2001-02 to 2008-09 as farmers contended with drought, low availability of irrigation water and rising input costs.
Real net farm cash income is estimated to have been $25.3billion in 2015-16, well above the 20-year average to 2014-15 of $15.4billion (in 2015-16 dollars).
However, income growth at the industry level was more varied.
For example, the dairy industry has experienced more difficult conditions in recent years.
Prices paid by farmers for inputs include costs for materials, services, labour, marketing and overheads.
Over the eight years from 2008-09 to 2015-16, real prices paid by farmers declined by an average of 2.1 per cent a year.
Lower input costs have benefited farmers by reducing the cost of production.
The decline in real prices paid by farmers was principally the result of a decline in interest paid, which is about one-tenth of total farm costs.
The decline in interest rates and reduced bank lending following the global financial crisis, and more recently the strong increase in farm income, have reduced the burden of servicing debt and increased the rate of debt repayment.
—Kirk Zammit, ABARES