6.3 Conceptual model
6.3.3 Socio-economic reference modes of system behaviour The socio-economic variables used in this conceptual model of the WA
agricultural region were wheat yield, farmer terms of trade, the number of
farms between 1900 and 2000 (Figure 6.3 (a), (b), and (c) respectively), and farmer age, as discussed below.
Wheat yield (economic production target)
The gross value of agricultural commodities produced in Western Australia in 1998–9 was $4.3 billion with a significant proportion, $1.6 billion (37%), of the gross value of production obtained from wheat (Australian Bureau of Statistics, 2003). The productivity of Australia’s grain farms has been rising by an average of 3.2% a year for several decades. This high sustained rate has kept the farms financially viable despite concomitant falls in farmer terms of trade (Passioura, 2002), substantial extension of cropping into more marginal lands, and increasing areas of soil salinity as discussed in Chapter 2. The trends for wheat yield for Australia and Western Australia between 1900 and 2000 (Hamblin and Kyneur, 1993; Passioura, 2002) are shown in Figure 6.3 (a).
For agronomic reasons wheat productivity has increased at different rates and increased rapidly from the early 1980s (Hamblin and Kyneur, 1993). The rates for Australia have not been steady but came largely during three well separated decades; the 1900s, 1950s and 1990s (Figure 6.3 (a)) (Passioura, 2002). In the last decade the rates have reached their highest through a set of complex factors in agronomy and genetic improvement. However, despite these increases Australia had the lowest rate of increase in wheat yield between 1950 and 1990 compared with its competitors on the world market (Hamblin and Kyneur, 1993).
Farmer terms of trade
The farmer terms of trade (prices of agricultural commodities in comparison to the price of farm inputs) for Australia are shown Figure 6.3 (b) (National Land and Water Resources Audit, 2002). These national figures are taken as representative of the Western Australian position because most of the wheat produced is an example of a standardised undifferentiated raw material, discussed further in Chapter 7. Since the 1960s there has been a declining trend although punctuated with years with better terms of trades caused by combinations of good climatic seasons and high wheat prices. Because of the declining terms of trade, large numbers of farmers in broadacre agriculture in Australia had a zero or negative profit at full equity on the basis of a five- year average to 1996–7 (National Land and Water Resources Audit, 2002).
This declining trend has made it increasingly difficult for small and marginal agricultural enterprises to maintain their livelihoods solely by engaging in agricultural activities (Barr and Cary, 2000; Caryet al., 2002; Tonts and Black, 2002). With low or zero profit there is little opportunity to adopt sustainable
0 50 100 150 200 250
1900 1925 1950 1975 2000
Farmer terms of trade
(b)
Year (a)
Year 0.0
0.5 1.0 1.5 2.0
1900 1925 1950 1975 2000
Wheat yield (t/ha)
0 5 10 15 20 25
1900 1925 1950 1975 2000
Year
No of farm establishments (’000)
(c)
Australia Western Australia
Fig. 6.3. Socio-economic reference modes. (a) Trends in wheat yields in Australia and Western Australia between 1900 and 1994. Source: Hamblin and Kyneur (1993); Passioura (2002). (b) Trend in Australian farmer terms of trade between 1960 and 2000. Farmer terms of trade: the ratio of the index of prices received by farmers to the index of prices paid by farmers. Reference year 1997/1998= 100. Source: National Land and Water Resources Audit (2002). (c) Trend in the numbers of farms in the agricultural region of Western Australia between 1900 and 2000.Sources:1900–76 – Burvill (1979), 1977–94 – Australian Bureau of Statistics, 1995 and 2000 – ABARE (2002).
land practices that may involve land use change and would be costly to adopt in the short term. The declining terms of trade have also influenced the economic need to clear more land for production to gain economies of scale.
The number of broadacre farms
The definition of a farm is a matter of interpretation. In this book the definition was taken from the primary data source, which was the Australian Bureau of Agriculture and Resource Economics (ABARE) surveys designed on the basis of a framework drawn from the Business Register maintained by the Australian Bureau of Statistics (ABS). A farm establishment is defined as an agricultural operation with an Estimated Value of Agricultural Output (EVAO) above a certain threshold. The EVAO varies over time and for the 1999–2000 survey was $22 500.
The number of farm establishments in the WA agricultural region rose to a maximum of approximately 23 000 in 1968. Since then the number of establishments declined sharply to approximately 9000 in 2000 shown in Figure 6.3 (c). In 2003 there were just over 8000 farming enterprises with an annual decline of around 7%. In recent times a lack of large areas of native vegetation available for conversion to cropland has prevented continuous growth by way of clearing more land. Consequently the need for efficiencies of scale has come from farm consolidation (Mackenzie, 2004). Some of the large corporate family farms in Western Australia now cover areas of as much as 80 000 acres. Although the lifestyle of some farmers with small enterprises became less economically viable, farm adjustments and restructuring did not always follow the neoclassical course of farm exits and property amalgama- tion (Barr, 2000), and the decisions are classed as being boundedly rational (Walker et al., 2002), that is, made with imperfect knowledge and context specific in which emotions are involved with the decision-making process.
The extent to which emotions are involved with problem solving is considered to be a non-trivial component and this may take on particular significance with decisions involving family farms (Barr, 2000).
Farmer median age
On many family-run farms the main adjustment was the abandonment of expectations of intergenerational transfer. Coupled with this was a deferral of farm exit in response to lack of perceived alternatives available to broad- acre operators. Consequently the number of older farmers has increased. In Western Australia the mean age of farmers increased from 48 to 52 years between 1990 and 2000 (ABARE, 2001). A similar trend was also recorded
for changes in farmer age throughout Australia (Barr, 2000). Barr (2000) suggested that this trend cannot continue and anticipated there will be a major restructure in farming enterprises when older farmers exit the industry.