A shift in Australia's climate over the past two decades has caused increasing financial pain for farmers grappling with hotter and drier weather.
New research from the Federal Government's agriculture forecaster found farm profits fell by about 22 per cent between 2000 and 2019, compared with 1950 to 1999.
The study used Bureau of Meteorology and CSIRO figures showing an average temperature rise of about one degree since 1950.
In recent decades there has been a trend toward lower winter rainfall, particularly in Australia's south-west and south-east.
Australian Bureau of Agricultural and Resource Economics and Sciences senior economist Neal Hughes said hotter and drier conditions had reduced profits on cropping and livestock farms.
“These effects have been most pronounced in the cropping sector, reducing average profits by 35 per cent, or $70 900 per year for a typical cropping farm,” Dr Hughes said.
“At a national level this amounts to an average loss in production of broadacre crops of eight per cent or around $1.1 billion a year.”
Beef farms have been less affected, with a reduction in average profits of five per cent, but some regions — like south-west Queensland — have been harder hit than others.
Overall broadacre farming has taken a hit in all states and territories except the Northern Territory.
The chance of cropping farms making less than two per cent return has doubled since 2000, laying bare the increased risk farmers are exposed to.
The study suggests financial pain would have been worse without farmers getting better at managing dry conditions.
“While recent trends in rainfall have been driven at least in part by climate change, there is still significant uncertainty over long-term future rainfall,” Dr Hughes said.
“The implications of climate change projections for agriculture is an important area for further work.”
The report pointed to global climate models predicting a general decline in winter rainfall across southern Australia and more time in drought.
But the magnitude of these changes isn't clear.
ABARES executive director Steve Hatfield-Dodds said the results would have important implications for how farmers and governments respond to drought risk.
“Governments face a dilemma because providing relief to farmers in times of drought risks slowing industry adjustment and innovation in the longer-term,” Dr Hatfield-Dodds said.
He said research and development for long-term drought resilience along with further development of weather insurance markets were key options to tackle climate risks.