Farm Table says:
What is the problem?
Understanding the relationship between productivity and profitability.
What did the research involve?
• One million hectares
• Area has shown marked climate variability since the mid-1970s
• Data came from 67 farms, some with incomplete data series for the period 1998–2008.
The data comprise over 209 descriptors of each farm, including detailed information on physical inputs and outputs of crops grown; livestock types, livestock numbers, purchases and sales (including wool sales); financial items and aggregates such as expenditure on casual labour, fertilisers, fuel, chemicals, plant depreciation, repairs, commodity income, assets, liabilities and equity.
The effect on farm profitability and productivity, under varying rainfall conditions, of changes in technology, technical, mix and scale efficiencies and the farmer’s terms of trade are examined.
The sample of farms was split into three rainfall groups – high medium, low.
What were the key findings?
Growth in productivity is found to be the main contributor to profitability.
Gains in efficiency and technical change are identified as jointly and similarly important.
However, across environments, efficiency gains play an increasingly important role in influencing productivity as growing season rainfall increases.
It is concluded that R, D& E that delivers further improvement in technical efficiency and technical change is needed to support the profitability of farms across the study region.
Overall, the results indicate that productivity growth is similarly supported by technical change and efficiency gains. Hence, to support farm profitability, priority should be placed on R, D& E that delivers a combination of efficiency gains and further technical change.